Stock-Based Compensation Plans

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement, Noncash Expense [Abstract]

In May 2022, the Company’s shareholders approved the 2022 Stock Incentive Plan (“the 2022 Plan”) which provides for the issuance of up to 1,200,000 shares of common stock plus any shares of common stock that were available for awards under the 2015 Stock Incentive Plan (“the 2015 Plan”) as of the effective date of the 2022 Plan. The 2022 Plan replaced the 2015 Plan, and similarly, the 2015 Plan replaced the 2007 Stock Incentive Plan (“the 2007 Plan”) and the 2007 Plan replaced the 1997 Stock Incentive Plan (“the 1997 Plan”). The 2022 Plan, 2015 Plan, 2007 Plan and 1997 Plan are collectively referred to as “the Plans.” The 2022 Plan has substantially similar terms to the predecessor plans. 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 2022 Plan. All grants made after the approval of the 2022 Plan are made pursuant to the 2022 Plan. As of September 30, 2022, approximately 1,597,000 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 2022 and 2021 consisted of a combination of performance-based stock awards with a performance condition metric, performance-based stock awards with a market condition metric and time-vested restricted shares, and in 2020 consisted of a combination of performance-based stock awards and performance-based cash awards (both with a performance condition metric) 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. Performance-based stock awards with a market condition metric are contingent on the total shareholder return performance over a three-year period starting at the beginning of each calendar year relative to the KBW Regional Bank Index. 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 with a performance condition metric is determined based on the average of the high and low trading prices on the grant date. The fair value of performance stock awards with a market condition metric is estimated using a Monte Carlo simulation model and the fair value of stock options is estimated using a Black-Scholes option-pricing model. The Monte Carlo simulation model and the Black-Scholes option-pricing model require the input of highly subjective assumptions and are sensitive to changes in the award's expected life and the price volatility of the underlying stock, which can materially affect the fair value estimates. Management periodically reviews and adjusts the assumptions used to calculate the fair value of such awards when granted. No options have been 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 with a performance metric, 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 $9.0 million in the third quarter of 2022 and $3.2 million in the third quarter of 2021, and $23.9 million and $9.4 million in the nine month periods ended September 30, 2022 and 2021, respectively.

A summary of the Company’s stock option activity for the nine months ended September 30, 2022 and September 30, 2021 is presented below:


Stock Options	Common Shares	Weighted Average Strike Price		Remaining Contractual Term (1)	Intrinsic Value (2) (in thousands)
Outstanding at January 1, 2022	193,447	$	41.62
Granted	—	—
Exercised	(88,355)	42.30
Forfeited or canceled	(1,430)	40.87
Outstanding at September 30, 2022	103,662	$	41.04	1.0	$	4,199
Exercisable at September 30, 2022	103,662	$	41.04	1.0	$	4,199


Stock Options	Common Shares	Weighted Average Strike Price		Remaining Contractual Term (1)	Intrinsic Value (2) (in thousands)
Outstanding at January 1, 2021	520,663	$	42.47

Granted	—	—
Exercised	(245,286)	43.05
Forfeited or canceled	(590)	46.86
Outstanding at September 30, 2021	274,787	$	41.95	1.4	$	10,557
Exercisable at September 30, 2021	273,238	$	41.92	1.4	$	10,506

(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, 2022 and September 30, 2021, was $4.9 million and $7.9 million, respectively. Cash received from option exercises under the Plans for the nine months ended September 30, 2022 and September 30, 2021 was $3.7 million and $10.6 million, respectively.

A summary of the Plans’ restricted share activity for the nine months ended September 30, 2022 and September 30, 2021 is presented below:


	Nine months ended September 30, 2022			Nine months ended September 30, 2021
Restricted Shares	Common Shares	Weighted Average Grant-Date Fair Value		Common Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1	476,813	$	61.33	234,794	$	59.02
Granted	223,559	95.98		268,429	63.22
Vested and issued	(61,333)	63.85		(13,120)	72.01
Forfeited or canceled	(18,632)	75.26		(12,624)	63.55
Outstanding at September 30	620,407	$	73.15	477,479	$	60.90
Vested, but deferred, at September 30	96,554	$	52.94	95,215	$	52.39

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, 2022 and September 30, 2021 is presented below:


	Nine months ended September 30, 2022			Nine months ended September 30, 2021
Performance-based Stock	Common Shares	Weighted Average Grant-Date Fair Value		Common Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1	557,255	$	62.94	482,608	$	71.15
Granted	160,463	97.15		208,732	58.97

Vested and issued	—	—		—	—
Forfeited or canceled	(172,001)	71.51		(132,998)	86.51
Outstanding at September 30	545,717	$	70.30	558,342	$	62.94
Vested, but deferred, at September 30	35,561	$	44.21	35,040	$	43.53