UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

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Wintrust Financial Corporation

(Name of Registrant as Specified In Its Charter)

 

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WINTRUST FINANCIAL CORPORATION

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON MAY 27, 2010

 

To the Shareholders of Wintrust Financial Corporation:

 

You are cordially invited to attend the 2010 Annual Meeting of Shareholders of Wintrust Financial Corporation to be held at the Deer Path Inn, 255 East Illinois Road, Lake Forest, IL 60045, on Thursday, May 27, 2010, at 10:00 a.m. local time, for the following purposes:

 

1. To elect the thirteen nominees for director named in this Proxy Statement to hold office until the 2011 Annual Meeting of Shareholders;

 

2. To consider an advisory (non-binding) proposal approving the Company’s 2009 executive compensation as described in the Company’s accompanying Proxy Statement for the 2010 Annual Meeting of Shareholders;

 

3. To ratify the appointment of Ernst & Young LLP to serve as the independent registered public accounting firm for the year 2010; and

 

4. To transact such other business as may properly come before the meeting and any adjournment thereof.

 

The Record Date for determining shareholders entitled to notice of, and to vote at, the Annual Meeting was the close of business on April, 1, 2010. We encourage you to attend the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we urge you to vote by either completing your proxy card and returning it in the enclosed postage-paid envelope or by Internet or telephone voting. The instructions printed on your proxy card describe how to use these convenient services.

 

By order of the Board of Directors,

 

David A. Dykstra

Secretary

 

April 28, 2010

 

 

 

 

 

TABLE OF CONTENTS

 

WINTRUST FINANCIAL CORPORATION

727 North Bank Lane
Lake Forest, Illinois 60045

 

PROXY STATEMENT
FOR THE 2010 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 27, 2010

 

These proxy materials are furnished in connection with the solicitation by the Board of Directors (the “Board” with individual members of the Board being referred to herein as a “Director”) of Wintrust Financial Corporation, an Illinois corporation (“Wintrust” or the “Company”), of proxies to be used at the 2010 Annual Meeting of Shareholders of the Company and at any adjournment of such meeting (the “Annual Meeting”). This Proxy Statement (this “Proxy Statement”), together with the Notice of Annual Meeting and proxy card, is first being mailed to shareholders on or about April 28, 2010.

 

What is the purpose of the Annual Meeting?

 

At the Annual Meeting, shareholders will act upon the matters described in the Notice of Annual Meeting that accompanies this Proxy Statement, including the election of the thirteen nominees for Director named in this Proxy Statement, an advisory (non-binding) proposal approving the Company’s 2009 executive compensation as described in this Proxy Statement, and the ratification of the Audit Committee’s selection of Ernst & Young LLP as Wintrust’s independent registered public accounting firm for 2010.

 

Who may vote at the Annual Meeting?

 

Only record holders of the Company’s common stock as of the close of business on April 1, 2010 (the “Record Date”), will be entitled to vote at the meeting. On the Record Date, the Company had outstanding 31,029,143 shares of common stock. Each outstanding share of common stock entitles the holder to one vote.

 

What constitutes a quorum?

 

The Annual Meeting will be held only if a quorum is present. A quorum will be present if a majority of the shares of Company common stock issued and outstanding on the Record Date are represented, in person or by proxy, at the Annual Meeting. Shares represented by properly completed proxy cards either marked “abstain” or “withhold authority,” or returned without voting instructions are counted as present for the purpose of determining whether a quorum is present at the Annual Meeting. Also, if shares are held by brokers who are prohibited from exercising discretionary authority for beneficial owners who have not given voting instructions (“broker non-votes”), those shares will be counted as present for the purpose of determining whether a quorum is present at the Annual Meeting.

 

How do I submit my vote?

 

If you are a shareholder of record, you can vote by:

 

 

The deadline for voting by telephone or on the Internet is 11:59 p.m. Central Time on May 25, 2010.

 

What do I do if I hold my shares through a broker, bank or other nominee?

 

If you hold your shares through a broker, bank or other nominee, that institution will instruct you as to how your shares may be voted by proxy, including whether telephone or Internet voting options are available. If you hold

your shares through a broker, bank or other nominee and would like to vote in person at the Annual Meeting, you must first obtain a proxy issued in your name from the institution that holds your shares.

 

Can I change my vote after I return my proxy card?

 

Yes. If you are a shareholder of record, you may change your vote by:

 

 

If you vote other than by phone or Internet, you may change your vote at any time before the actual vote. If you vote by phone or Internet, you may change your vote if you do so prior to 11:59 p.m. Central Time on May 25, 2010. If you hold your shares through an institution, that institution will instruct you as to how your vote may be changed.

 

Who will count the votes?

 

The Company’s tabulator, Illinois Stock Transfer Company, will count the votes.

 

Will my vote be kept confidential?

 

Yes. As a matter of policy, shareholder proxies, ballots and tabulations that identify individual shareholders are kept secret and are available only to the Company, its tabulator and inspectors of election, who are required to acknowledge their obligation to keep your votes confidential.

 

Who pays to prepare, mail and solicit the proxies?

 

The Company pays all of the costs of preparing, mailing and soliciting proxies. The Company asks brokers, banks, voting trustees and other nominees and fiduciaries to forward proxy materials to the beneficial owners and to obtain authority to execute proxies. The Company will reimburse the brokers, banks, voting trustees and other nominees and fiduciaries upon request. In addition to solicitation by mail, telephone, facsimile, Internet or personal contact by its officers and employees, the Company has retained the services of Morrow & Co., LLC, 470 West Avenue, Stamford, Connecticut 06902, to solicit proxies for a fee of $3,500 plus expenses.

 

What are my voting choices when voting for the election of Directors?

 

With respect to each Director nominee, shareholders may:

 

(a) Vote FOR (in favor of) such nominee; or

 

(b) WITHHOLD authority to vote for such nominee.

 

What are my voting choices when voting on the advisory (non-binding) proposal approving the Company’s 2009 executive compensation as described in this Proxy Statement?

 

Shareholders may:

 

(a) Vote FOR the proposal;

 

(b) Vote AGAINST the proposal; or

 

(c) ABSTAIN from voting on the proposal.

 

What are my voting choices when voting on the ratification of the Audit Committee’s selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2010?

 

Shareholders may:

 

(a) Vote FOR the ratification;

 

(b) Vote AGAINST the ratification; or

 

(c) ABSTAIN from voting on the ratification.

What are the Board’s recommendations?

 

The Board recommends a vote:

 

 

How will my shares be voted if I sign, date and return my proxy card?

 

If you sign, date and return your proxy card and indicate how you would like your shares voted, your shares will be voted as you have instructed. If you sign, date and return your proxy card but do not indicate how you would like your shares voted, your proxy will be voted:

 

 

With respect to any other business that may properly come before the meeting, or any adjournment of the meeting, that is submitted to a vote of the shareholders, including whether or not to adjourn the meeting, your shares will be voted in accordance with the best judgment of the persons voting the proxies.

 

How will broker non-votes be treated?

 

A broker non-vote occurs when a broker who holds its customer’s shares in street name submits proxies for such shares, but indicates that it does not have authority to vote on a particular matter. Generally, this occurs when brokers have not received any instructions from their customers. In these cases, the brokers, as the holders of record, are permitted to vote on “routine” matters only, but not on other matters. In this Proxy Statement, brokers would be permitted to vote on the ratification of the appointment of Ernst & Young LLP and to vote on the advisory (non-binding) proposal approving the Company’s 2009 executive compensation without receiving instructions from their customers, but not on the proposal to elect directors as described in this Proxy Statement. We will treat broker non-votes as present to determine whether or not we have a quorum at the Annual Meeting, but they will not be treated as entitled to vote on the proposals, if any, for which the broker indicates it does not have discretionary authority.

 

What vote is required to elect Directors at the Annual Meeting?

 

Election as a Director of the Company requires that a nominee receive the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting, in person or by proxy, and entitled to vote thereon. Accordingly, instructions to withhold authority will have the same effect as a vote against such nominee.

 

What vote is required to approve the advisory (non-binding) proposal approving the Company’s 2009 executive compensation as described in this Proxy Statement?

 

The approval of the advisory (non-binding) proposal on the Company’s 2009 executive compensation described in this Proxy Statement requires the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting, in person or by proxy, and entitled to vote thereon. Abstentions will have the same effect as a vote against the proposal.

 

What vote is required to ratify the Audit Committee’s selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2010?

 

Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010 requires the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting, in person or by proxy, and entitled to vote thereon. Abstentions will have the same effect as a vote against ratification.

What if other matters come up during the Annual Meeting?

 

If any matters other than those referred to in the Notice of Annual Meeting properly come before the Annual Meeting, the individuals named in the accompanying form of proxy will vote the proxies held by them in accordance with their best judgment. The Company is not aware of any business other than the items referred to in the Notice of Annual Meeting that may be considered at the Annual Meeting.

 

Your vote is important.  Because many shareholders cannot personally attend the Annual Meeting, it is necessary that a large number be represented by proxy. Whether or not you plan to attend the meeting in person, prompt voting will be appreciated. Registered shareholders can vote their shares via the Internet or by using a toll-free telephone number. Instructions for using these convenient services are provided on the proxy card. Of course, you may still vote your shares on the proxy card. To do so, we ask that you complete, sign, date and return the enclosed proxy card promptly in the postage-paid envelope.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Shareholders to be Held on May 27, 2010:

 

This Proxy Statement and the 2009 Annual Report on Form 10-K are Available at:
https://materials.proxyvote.com/97650W

 

The Company’s Board of Directors is comprised of 13 Directors, each serving a term that will expire at this year’s Annual Meeting. At the Annual Meeting, you will elect 13 individuals to serve on the Board of Directors until the next Annual Meeting. The Board of Directors, acting pursuant to the recommendation of the Nominating and Corporate Governance Committee, has nominated each Director standing for election. All of the nominees currently serve as Directors. Each nominee has indicated a willingness to serve, and the Board of Directors has no reason to believe that any of the nominees will not be available for election. However, if any of the nominees is not available for election, proxies may be voted for the election of other persons selected by the Board of Directors. Proxies cannot, however, be voted for a greater number of persons than the number of nominees named. Shareholders of the Company have no cumulative voting rights with respect to the election of Directors.

 

The following sections set forth the names of the Director nominees, their ages, a brief description of their recent business experience, including recent occupation and employment, certain directorships held by each, certain experiences, qualifications, attributes and skills, and the year in which they became Directors of the Company. Director positions in the Company’s subsidiaries are included in the biographical information set forth below.

 

The Company’s main operating subsidiaries include Advantage Bank, Barrington Bank, Beverly Bank, Crystal Lake Bank, First Insurance Funding, Hinsdale Bank, Lake Forest Bank, Libertyville Bank, North Shore Bank, Northbrook Bank, Old Plank Trail Community Bank, State Bank of The Lakes, St. Charles Bank, Tricom, Town Bank, Village Bank, Wayne Hummer Asset Management Company, Wayne Hummer Investments, Wayne Hummer Trust Company, Wheaton Bank, Wintrust Information Technology Services and Wintrust Mortgage Company.

 

Nominees to Serve as Directors until the 2010 Annual Meeting of Shareholders

 

Peter D. Crist (58), Director since 1996.  Mr. Crist has served as the Company’s Chairman since 2008. Mr. Crist founded CristïKolder Associates, an executive recruitment firm which focuses on CEO and director searches, in 2003 and has served since inception as its Chairman and Chief Executive Officer since then. From December 1999 to January 2003, Mr. Crist served as Vice Chairman of Korn/Ferry International (NYSE), the largest executive search firm in the world. Previously, he was President of Crist Partners, Ltd., an executive search firm he founded in 1995 and sold to Korn/Ferry International in 1999. Immediately prior thereto he was Co-Head of North America and the Managing Director of the Chicago office of Russell Reynolds Associates, Inc., the largest executive search firm in the Midwest, where he was employed for more than 18 years. He also serves as a director and chairman of the compensation committee of Northwestern Memorial Hospital and as a director of Northwestern Memorial HealthCare. Mr. Crist is a Director of Hinsdale Bank.

 

Mr. Crist’s experience assisting companies with executive searches provides him with insight into the attraction and retention of Company personnel, an important concern of the Company. In addition, Mr. Crist’s experience as chief executive of several large, Chicago-based businesses provides him with insight into the management and operational challenges and opportunities facing the Company in its markets. He also brings experience as a member of the compensation committee of Northwestern Memorial Hospital. In addition, Mr. Crist’s experience as a director of a Hinsdale Bank gives him valuable insight into the Company’s banking operations.

 

Bruce K. Crowther (58), Director since 1998.  Mr. Crowther has served as President and Chief Executive Officer of Northwest Community Healthcare, Northwest Community Hospital and certain of its affiliates since January 1992. Prior to that time he served as Executive Vice President and Chief Operating Officer from 1989 to 1991. He is a Fellow of the American College of Healthcare Executives. Mr. Crowther is the past Chairman of the board of directors of the Illinois Hospital Association as well as a member of the board of directors of the Max McGraw Wildlife Foundation. Mr. Crowther is a Director of Barrington Bank.

 

Mr. Crowther’s experience as President and Chief Executive officer of Northwest Community Healthcare, Northwest Community Hospital and certain of its affiliates provides him with insight into the challenges of leading a large and complex organization in the greater Chicago area and an understanding of the operation and management of a large business. In addition, Mr. Crowther’s experience as a director of Barrington Bank gives him valuable insight into the Company’s banking operations.

Joseph F. Damico (56), Director since 2005.  Mr. Damico is founding partner and serves as an operating principal of RoundTable Healthcare Partners, an operating-oriented private equity firm focused on the healthcare industry. Mr. Damico has more than 30 years of healthcare industry operating experience, previously as Executive Vice President of Cardinal Health, Inc. and President & COO of Allegiance Corporation. Mr. Damico also held senior management positions at Baxter International Inc. and American Hospital Supply and serves as a Director of Northwestern Memorial Hospital. Mr. Damico is an advisory Director of Libertyville Bank.

 

Mr. Damico’s experience in senior leadership positions with Cardinal Health, Allegiance, Baxter International, and American Hospital Supply provides him with knowledge of the issues faced by large and complex businesses. In addition, his experience as operating principal of RoundTable Healthcare Partners provides him with insight into issues faced by entrepreneurial companies. His experience as a corporate director also provides him with knowledge of the operations of various boards of directors. Mr. Damico’s experience as an advisory director of Libertyville Bank gives him valuable insight into the Company’s banking operations.

 

Bert A. Getz, Jr. (42), Director since 2001.  Mr. Getz joined Globe Corporation in 1991 and serves as Director and Co-Chief Executive Officer. He is also President of Globe Development Corporation (a wholly-owned real estate development subsidiary of Globe Corporation), an Officer and Director of Globe Management Company, and Chairman of the Investment Committee for Globe Investment Company, LP. Additionally, Mr. Getz is a Director of the Globe Foundation, the National Historical Fire Foundation and Children’s Memorial Hospital, and is a Trustee of the Chicago Zoological Society at Brookfield Zoo, The Lawrenceville School and North Shore Country Day School. Mr. Getz serves as a Director of Libertyville Bank, Wayne Hummer Asset Management Company, Wayne Hummer Investments and Wayne Hummer Trust Company.

 

Mr. Getz’s experience in real estate investment and development, through Globe Corporation and its affiliates, provides him with knowledge of the real estate market in the Chicago area, which affects numerous aspects of the Company’s business, particularly the Company’s lending operations. In addition, Mr. Getz’s experience as a real estate developer provides insight into the operation of credit-intensive businesses. His experience as a director of various corporate and non-profit boards provide him with knowledge of the concerns of various constituencies of the Company. As a result of his financial experience, Mr. Getz qualifies as a financial expert for purposes of rules governing audit committees. In addition, Mr. Getz’s experience as a director of Libertyville Bank and the Wayne Hummer Companies gives him valuable insight into the Company’s banking, brokerage and investment advisory operations.

 

H. Patrick Hackett, Jr. (58), Director since 2008.  Mr. Hackett is the Chief Executive Officer of HHS Co., a real estate development and management company located in the Chicago area. Previously, he served as the President and Chief Executive Officer of RREEF Capital, Inc. and as Principal of The RREEF Funds, an international commercial real estate investment management firm. Mr. Hackett taught real estate finance at the Kellogg Graduate School of Management for 15 years when he also served on the real estate advisory boards of Kellogg and the Massachusetts Institute of Technology. He serves on the boards of First Industrial Realty Trust, Inc. and is a director of North Shore Bank.

 

Mr. Hackett’s experience as Chief Executive Officer of HHS Co. provides him with knowledge of the real estate market in the Chicago area, a market which impacts not only the value of collateral pledged to the Company, but also affects demand for the Company’s lending products. In addition, Mr. Hackett’s 25 years of experience reviewing and analyzing commercial real estate investments for registered investment advisors provides knowledge of financial analysis and modeling of commercial real estate transactions as well as the investment committee process. Mr. Hackett’s experience as a director of North Shore Bank gives him valuable insight into the Company’s banking operations.

 

Scott K. Heitmann (61), Director since 2008.  Mr. Heitmann, retired for the past four years, has over 30 years of experience in the banking industry, including his service as Vice Chairman of LaSalle Bank Corporation and President, Chairman and Chief Executive Officer of Standard Federal Bank from 1997 to 2005. He served as the President and Chief Executive Officer of LaSalle Community Bank Group and LaSalle Bank FSB from 1988 to 1996. Mr. Heitmann currently serves as Vice-Chairman of The Illinois Chapter of The Nature Conservancy, and as an Advisory Director of Boys Hope Girls Hope of Illinois. Mr. Heitmann has previously served as a director of LaSalle Bank Corporation, Standard Federal Bank and the Federal Home Loan Bank of Chicago. Mr. Heitmann is a

Director of North Shore Bank, Wayne Hummer Asset Management Company, Wayne Hummer Investments and Wayne Hummer Trust Company.

 

Mr. Heitmann’s experience in the banking industry, including service in executive leadership roles at LaSalle Bank and Standard Federal Bank, provide him with knowledge of the financial services business, generally, and the business of community banking, in particular. His experience as a former bank lender also provides insight into the Company’s community banking business. In addition, his experience with LaSalle Bank’s various predecessors provides him with insight into the opportunities and challenges posed to a growth-oriented Chicago-based community bank. As a result of his financial experience, Mr. Heitmann qualifies as a financial expert for purposes of rules governing audit committees. Mr. Heitmann’s experience as a director of North Shore Bank and the Wayne Hummer Companies gives him valuable insight into the Company’s banking, brokerage and investment advisory operations.

 

Charles H. James III (51), Director since 2008.  Mr. James is the Chairman and Chief Executive Officer of C.H. James & Co., an investment holding company with interests in wholesale food distribution businesses, and is Managing Owner of C.H. James Restaurant Holdings LLC, which owns quick service restaurants. Mr. James graduated from Morehouse College and obtained an MBA from the Wharton School at the University of Pennsylvania. Mr. James also serves on the board of directors of Summit Housing Partners, Morehouse College, and the Children’s Memorial Hospital.

 

Mr. James’s experience as Chairman and Chief Executive Officer of C.H. James & Co. and Managing Owner of C.H. James Restaurant Holdings provides him with knowledge of businesses engaged in both wholesale distribution and consumer sales, each an important segment of the Company’s customer base. As a chief executive, Mr. James also brings substantial operational and management experience to the Board.

 

Albin F. Moschner (57), Director since 1996.  Mr. Moschner is currently Executive Vice President and Chief Operating Officer of Leap Wireless. He joined Leap in 2004 as the Chief Marketing Officer. In the eight years prior to joining Leap Wireless, Mr. Moschner held executive positions in both early stage and corporate, internet and telecommunications companies as President of Verizon Card Services, President and Chief Executive Officer of One Point Services and Vice-Chairman of Diba, Inc. Mr. Moschner also served as Director, Chief Operating Officer and President and Chief Executive Officer of Zenith Electronics, Glenview, Illinois, from 1991 to 1996.

 

Mr. Moschner’s experience as President and Chief Executive Officer of Zenith Electronics provides him with insight into the management of a public company. Mr. Moschner’s experience in the telecommunications industry also provides him with insight into the challenges and opportunities of businesses undergoing secular change. As a result of his financial experience, Mr. Moschner qualifies as a financial expert for purposes of rules governing audit committees.

 

Thomas J. Neis (61), Director since 1999.  Mr. Neis is the owner of Neis Insurance Agency, Inc., QR Insurance Agency and Pachini Insurance Agency and is an independent insurance agent with these companies. Mr. Neis also owns Parr Insurance Brokerage Inc., marketing insurance products to insurance agencies. Through QR Insurance Agency he provides insurance consulting for banking and financial institutions. Mr. Neis is a member of the Board of Trustees of Illinois Wesleyan University, where he serves on its Audit, Investment and Business Affairs committees. In addition, Mr. Neis is a member of the university’s national alumni board and has served as president of the university’s Chicago Alumni Board for the past five years. He also founded and chaired the Crystal Lake Sister City organization with Holtzgerlingen, Germany and has been active in several other charitable and fraternal organizations. Mr. Neis is a Director of Crystal Lake Bank.

 

Mr. Neis has experience in the insurance industry, which, through FIFC and the Company’s premium finance receivable financing business, impacts a substantial and growing portion of the Company’s business. Through his insurance businesses, Mr. Neis also has experience operating in an industry with multiple layers of regulation. In addition, Mr. Neis’ experience as a director of Crystal Lake Bank gives him valuable insight into the Company’s banking operations.

 

Christopher J. Perry (54), Director since 2009.  Mr. Perry is currently a partner at CIVC Partners LLC, a private equity investment firm which he joined in 1994 after leading Continental Bank’s Mezzanine Investments and Structured Finance groups. Prior to joining Continental in 1985, he served as a Vice President in the Corporate Finance Department of the Northern Trust Company. He has been in the financial services industry for the past

25 years. During his time at CIVC Partners he has served on the boards of over a dozen public and private companies. He presently serves as director of The Brickman Group, Ltd. He also serves as chairman of the Board of Trustees for Cristo Rey Jesuit High School and serves on the Executive Committee of Loyola Academy. Mr. Perry previously served as a director of Wintrust from 2001 to 2002. An affiliate of CIVC Partners LLC owns all of Wintrust’s 8.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series A, as described under “Related Party Transactions.”

 

Mr. Perry’s role as a partner of CIVC Partners gives him insight into a broad range of privately held companies across a number of industries, including financial services. In addition, his experience as a leader at CIVC, Continental Bank’s Mezzanine Investments Group and Structured Finance Group gives him insight into complex capital structures, financial instruments and all aspects of transactions. Mr. Perry’s over two decades of experience in the financial services industry have given him considerable experience in many aspects of the industry during several credit and economic cycles.

 

Hollis W. Rademacher (74), Director since 1996.  Mr. Rademacher is self-employed as a business consultant and private investor. From 1957 to 1993, Mr. Rademacher held various positions, including Officer in Charge, U.S. Banking Department and Chief Credit Officer of Continental Bank, N.A., Chicago, Illinois, and from 1988 to 1993 held the position of Chief Financial Officer. Mr. Rademacher is a director of Schawk, Inc. (NYSE), provider of prepress graphics for the packaging industry, First Mercury Financial Corp. (NYSE), a holding company for insurance agents, underwriters, advisors and carriers specializing in excess and surplus lines, as well as several other private business enterprises. Mr. Rademacher currently serves as a Director of each of the Company’s main operating subsidiaries except for Beverly Bank, Old Plank Trail Community Bank, St. Charles Bank, Town Bank, Wheaton Bank, Wintrust Information Technology Services, Wayne Hummer Asset Management Company, Wayne Hummer Investments, Wayne Hummer Trust Company and Wintrust Mortgage Corporation.

 

Mr. Rademacher’s experience as a credit officer and chief financial officer of Continental Bank provide insight into the credit decision-making process, one of the Company’s core competencies. In addition, as noted above, Mr. Rademacher is a member of the board of most of the Company’s bank subsidiaries for which, in most cases, he serves as chair of such bank’s credit or risk management committee. As such, Mr. Rademacher has substantial experience with the Company’s banking business, including the management of the risks of that business. In addition, Mr. Rademacher’s experience as director of various publicly-traded companies provides him with knowledge of board operations. In addition, Mr. Rademacher’s prior experience as a director of the Wayne Hummer Companies gives him valuable insight into the Company’s brokerage, investment advisory, and trust services operations.

 

Ingrid S. Stafford (56), Director since 1998.  Ms. Stafford has held various positions since 1977 with Northwestern University, where she is currently Associate Vice President for Financial Operations and Treasurer. Ms. Stafford is a trustee of the Board of Pensions of the Evangelical Lutheran Church in America, where she serves on its Executive, Finance and Nominating Committees and is Chair of its Audit Committee. She also serves on the investment committee of Wittenberg University and the investment and audit committees of the Evanston Community Foundation. She is an emeritus director of Wittenberg University where she served from 1993 to 2006, including serving as Board Chair from 2001-2005. Ms. Stafford is a Director of North Shore Bank.

 

Mr. Stafford’s experience as Associate Vice President for Financial Operations and Treasurer of Northwestern University provides experience with the management of the liquidity, financial reporting, risk and audit management of a large organization. She serves in a management support role to its Board of Trustees’ Audit, Budget and Investment Committees. In addition, as a member of the investment committees of Wittenberg University and the Evanston Community Foundation, she has experience with investment strategy and asset allocation. She also has concurrent experience as an audit committee member of the Board of Pensions of the Evangelical Lutheran Church in America and the Evanston Community Foundation. As a result of her financial experience, Mr. Stafford qualifies as a financial expert for purposes of rules governing audit committees. In addition, Ms. Stafford’s experience as a director of North Shore Bank gives her valuable insight into the Company’s banking operations.

 

Edward J. Wehmer (56), Director since 1996.  Since May 1998, Mr. Wehmer has served as President and Chief Executive Officer of the Company. Prior to May 1998, he served as President and Chief Operating Officer of the Company since its formation in 1996. He served as the President of Lake Forest Bank from 1991 to 1998. He serves as an Advisory Director of each of the Company’s main operating subsidiaries. Mr. Wehmer is a certified

public accountant and earlier in his career spent seven years with the accounting firm of Ernst & Young LLP specializing in the banking field and particularly in the area of bank mergers and acquisitions. Mr. Wehmer serves on the board of directors of Stepan Company (NYSE), a chemical manufacturing and distribution company. He also serves as a director of Northwestern Lake Forest Hospital, on the audit committee of Northwestern Memorial Health Care, as a trustee for Children’s Memorial Hospital and Foundation, as a member of the advisory board of the Farmer School of Business of Miami University, and on the Finance Board and the School Board of the Archdiocese of Chicago.

 

Mr. Wehmer is the only member of the Board who is also a manager of the Company. As such, he provides the views of the management of the Company and substantial insight into the operations of the Company. As an employee of the Company since its inception, he also provides historical context for the Board’s discussions.

 

Required Vote

 

Election as a Director of the Company requires that a nominee receive the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting, in person or by proxy, and entitled to vote thereon. Accordingly, instructions to withhold authority will have the same effect as a vote against such nominee.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR NAMED ABOVE.

 

Background of the Proposal

 

The Emergency Economic Stabilization Act of 2008, as amended, or the EESA, requires that we, as a participant in the United States Department of the Treasury’s Capital Purchase Program, permit a separate and non-binding shareholder vote to approve the compensation of our executive officers as described in this Proxy Statement.

 

Executive Compensation

 

The Company believes that its compensation policies and procedures, which are reviewed and approved by the Compensation Committee, encourage a culture of pay for performance and are strongly aligned with the long-term interests of shareholders. As more fully set forth under “Executive Compensation — Compensation Discussion and Analysis,” the Compensation Committee has taken a number of actions in recent years to further strengthen the Company’s compensation philosophy and objectives. As always, the Compensation Committee will continue to review all elements of the executive compensation program and take any steps it deems necessary to continue to fulfill the objectives of the program.

 

Shareholders are encouraged to carefully review the “Executive Compensation” section of this Proxy Statement for a detailed discussion of the Company’s executive compensation program.

 

As required by the EESA and the guidance provided by the SEC, the Board of Directors has authorized a shareholder vote on the Company’s 2009 executive compensation as reflected in the Compensation Discussion and Analysis, the disclosures regarding named executive officer compensation provided in the various tables included in this Proxy Statement, the accompanying narrative disclosures and the other compensation information provided in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives the Company’s shareholders the opportunity to endorse or not endorse the Company’s executive pay program and policies through the following resolution:

 

“Resolved, that the shareholders of Wintrust Financial Corporation approve the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the compensation tables and any related material disclosed in this Proxy Statement for the 2010 Annual Meeting of Shareholders.”

 

Required Vote

 

The approval of the advisory (non-binding) proposal on our 2009 executive compensation described in this Proxy Statement requires the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting, in person or by proxy, and entitled to vote thereon. Abstentions will have the same effect as a vote against the proposal. Because this shareholder vote is advisory, it will not be binding on the Board of Directors. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

 

THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE “FOR”
APPROVAL OF THE ADVISORY PROPOSAL ON 2009 EXECUTIVE COMPENSATION
AS DESCRIBED IN THIS PROXY STATEMENT

 

 

Board of Directors

 

Overview

 

The Board provides oversight with respect to our overall performance, strategic direction and key corporate policies. It approves major initiatives, advises on key financial and business objectives, and monitors progress with respect to these matters. Members of the Board are kept informed of our business by various reports and documents provided to them on a regular basis, including operating and financial reports made at Board and Committee meetings by the Chief Executive Officer and other officers. The Board has six standing committees, the principal

responsibilities of which are described below. Additionally, the independent Directors meet in regularly scheduled executive sessions, without management present, at each meeting of the Board.

 

The Board met six times in 2009. Each member of the Board attended more than 75% of the total number of meetings of the Board and the committees on which he or she served. We encourage, but do not require, our Board members to attend annual meetings of shareholders. All of our Board members then in office attended our 2009 Annual Meeting of Shareholders.

 

Board Leadership Structure

 

The Board has a non-executive Chairman. This position is independent from management. The Chairman presides over the Board meetings as well as meetings of the independent directors. The Chief Executive Officer is a member of the Board and participates in its meetings. The Board believes that this leadership structure is appropriate for the Company at this time because it allows for independent oversight of management, increases management accountability and encourages an objective evaluation of management’s performance relative to compensation. In addition, the Board recognizes that acting as chairman of the Board during the current economic times is a particularly time-intensive responsibility. Separating these roles allows Mr. Wehmer to focus solely on his duties as Chief Executive Officer, which the Board believes better serves the Company. Separation of the roles of Chairman and Chief Executive Officer also promotes risk management, enhances the independence of the Board from management, and mitigates potential conflicts of interest between the Board and management.

 

The Board’s Role in Risk Oversight

 

Our Board of directors has an active and ongoing role in the management of the risks of our business. This role has two fundamental elements: (1) ensuring that management of the Company has implemented an appropriate system to manage risks by identifying, assessing, mitigating, monitoring and communicating about risks; and (2) providing effective risk oversight through the Board and its committees.

 

The Board believes the first element of its risk oversight role is fulfilled through the Company’s extensive risk assessment and management program designed to identify, monitor, report and control the Company’s risks, which are broken down into various categories deemed relevant to the Company and its business operations. The Enterprise Risk Management Program is administered by the Company’s Executive Vice President — Risk Management who provides reports to the Board, the Audit Committee, the Risk Management Committee and other committees of the Board as needed.

 

The second element of the Board’s oversight role is fulfilled primarily by the full Board regularly receiving written and oral reports from management on the status of each category of Company risk and on the Company’s overall risks, as well as any material changes or developments in any risk profiles or experiences. The Board also periodically receives reports regarding regulatory priorities and reviews regulatory examination reports of the Company, to remain informed on issues and observations raised by regulatory authorities regarding the risk categories of the Company.

 

In addition to the full Board’s direct oversight, the Board’s committees provide oversight of various risks created by the Company’s operations. The Audit Committee provides oversight of monitoring of risk, generally, and oversight of financial, reporting and regulatory risk, in particular. The Risk Management committee monitors, among other things, credit, interest rate, liquidity, market and legal risks. The Finance Committee provides oversight of risks related to strategic transactions and the Company’s liquidity. The Nominating and Corporate Governance Committee also provides risk oversight, particularly relating to risk relating to the Company’s board and governance. Finally, the Compensation Committee provides oversight of risks related to the Company’s compensation of its employees. For more information regarding risk in the context of compensation, see the Compensation Committee Report on page 30 of this Proxy Statement.

 

Director Independence

 

A Director is independent if the Board affirmatively determines that he or she has no material relationship with the Company and otherwise satisfies the independence requirements of the Nasdaq listing standards. A Director is “independent” under the Nasdaq listing standards if the Board affirmatively determines that the Director has no material relationship with us directly or as a partner, shareholder or officer of an organization that has a relationship

with us. Direct or indirect ownership of even a significant amount of our stock by a Director who is otherwise independent will not, by itself, bar an independence finding as to such Director.

 

The Board has reviewed the independence of our current non-employee Directors and nominees and found that each of them are independent under the applicable Nasdaq listing standards. Accordingly, more than 90% of the members of the Board are independent, including the Chairman of the Board.

 

Code of Ethics

 

The Board of Directors has adopted a Code of Ethics applicable to all officers, Directors and employees, which is available on the Company’s website at www.wintrust.com by choosing “About Wintrust” and then choosing “Corporate Governance.” To assist in enforcement of the Code of Ethics, we maintain Wintrust’s Ethicspoint, a toll- free hotline and Internet-based service through which confidential complaints may be made by employees regarding illegal or fraudulent activity; questionable accounting, internal controls or auditing matters; conflicts of interest, dishonest or unethical conduct; disclosures in the Company’s reports filed with the Securities and Exchange Commission (“SEC”), bank regulatory filings and other public disclosures that are not full, fair, accurate, timely or understandable; violations of Wintrust’s Code of Ethics; and/or any other violations of laws, rules or regulations. Any complaints submitted through this process are presented to the Audit Committee on a regular, periodic basis.

 

Committee Membership

 

The following table summarizes the current membership of the Board and each of its committees:

 

 

 

 

The Nominating and Corporate Governance Committee has proposed, and the Board has agreed, that pending his re-election, Peter D. Crist will continue to serve as Chairman of the Board of Directors following the Annual Meeting. In addition, the Nominating and Corporate Governance Committee has proposed, and the Board has agreed, that the membership of each of the committees of the Board, assuming that each Director nominee is elected, will remain the same following the Annual Meeting.

 

Nominating and Corporate Governance Committee

 

The Board has established the Nominating and Corporate Governance Committee (the “Nominating Committee”) which is responsible for:

 

 

 

The Board has adopted a Nominating Committee Charter, a copy of which is available at www.wintrust.com by choosing “About Wintrust” and then choosing “Corporate Governance.”

 

The Nominating Committee consists of four Directors, and the Board has determined that each of them is independent under the applicable Nasdaq listing standards. During 2009, the Nominating Committee met three times.

 

Nomination of Directors

 

The Nominating Committee seeks nominees from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity and, in doing so, considers a wide range of factors in evaluating the suitability of director candidates, including general understanding of finance and other disciplines relevant to the success of a publicly-traded company in today’s business environment, understanding of our business and education and professional background. The following personal characteristics are considered minimum qualifications for Board membership under the corporate governance guidelines approved by the Board: integrity and accountability, the ability to provide informed judgments on a wide range of issues, financial literacy, a history of achievements that reflects high standards for themselves and others, and willingness to raise tough questions in a manner that encourages open discussion. In addition, no person is to be nominated for election to the Board if he or she will attain the age of 76 before such election. Under the corporate governance guidelines adopted by the Board, Directors are expected to maintain a minimum ownership stake in the Company and to limit board service at other companies to no more than four other public company boards.

 

The Nominating Committee does not have any single method for identifying director candidates but will consider candidates suggested by a wide range of sources.

 

The Nominating Committee will consider director candidates recommended by our shareholders if such recommendations are timely received. Any such recommendation must comply with the procedures set forth in the Company’s By-Laws (see “Shareholder Proposals”). Recommendations must be received in writing at the principal executive offices of the Company and addressed to the Wintrust Financial Corporation Nominating and Corporate Governance Committee, c/o Corporate Secretary, 727 North Bank Lane, Lake Forest, IL 60045. Under the existing provisions of the By-laws, if the 2011 Annual Meeting is held on May 26, 2011, the deadline for such notice is March 27, 2011. Any such recommendation should include:

 

 

Once the Nominating Committee receives the recommendation, it may request additional information from the candidate about the candidate’s independence, qualifications and other information that would assist the Nominating Committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in our Proxy Statement, if nominated. The Nominating Committee will apply the same standards in considering director candidates recommended by shareholders as it applies to other candidates.

 

The Nominating Committee also evaluates the performance of individual Directors and assesses the effectiveness of committees and the Board as a whole. The effectiveness of the nomination process is evaluated by the Board each year as part of its self-evaluation process and by the Nominating Committee as it evaluates and identifies director candidates.

 

Both the Board and the Nominating Committee believe that each of Wintrust’s directors possess the outstanding characteristics and qualifications necessary for service as a director. Accordingly, upon the nomination of the Board, in 2010, all 13 of the director nominees are Directors standing for re-election.

 

Audit Committee

 

The Board has established an Audit Committee for the purpose of overseeing our accounting and financial reporting processes and the audits of our financial statements. In addition, the Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to:

 

 

The Board has adopted an Audit Committee Charter, a copy of which is available at www.wintrust.com by choosing “About Wintrust” and then choosing “Corporate Governance.”

 

The Audit Committee has established a policy to pre-approve all audit and non-audit services provided by the independent registered public accounting firm and all accounting firms. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year. Once pre-approved, the services and pre-approved amounts are monitored against actual charges incurred and modified if appropriate.

 

To serve on the Audit Committee, Directors must meet financial competency standards and heightened independence standards set forth by the SEC and Nasdaq. In particular, each Audit Committee member:

 

 

Furthermore, at least one member of the Audit Committee must be a financial expert.

 

The Audit Committee consists of six Directors, and the Board has determined that each of them is independent under the applicable Nasdaq listing standards and meets the financial competency and heightened independence standards set forth above. The Board has determined that Ms. Stafford, Mr. Getz, Mr. Heitmann and Mr. Moschner qualify as financial experts. During 2009, the Audit Committee met six times.

 

Compensation Committee

 

The Board has established a Compensation Committee which is responsible for:

 

 

 

The Compensation Committee’s authority is set forth in a charter adopted by our Board, a copy of which is available at www.wintrust.com by choosing “About Wintrust” and then choosing “Corporate Governance.”

 

The Compensation Committee consists of four Directors, and the Board has determined that each of them is independent under the applicable Nasdaq listing standards. During 2009, the Compensation Committee met 11 times.

 

Risk Management Committee

 

The Board has established a Risk Management Committee which is responsible for:

 

 

The Risk Management Committee’s authority is set forth in a charter adopted by our Board, a copy of which is available at www.wintrust.com by choosing “About Wintrust” and then choosing “Corporate Governance.”

 

The Risk Management Committee consists of six Directors, and the Board has determined that each of these Directors, except for Mr. Perry has no material relationship with us and each is otherwise independent under the applicable Nasdaq listing standards. See “Related Party Transactions” for additional information regarding Mr. Perry’s material relationship with the Company. During 2009, the Risk Management Committee met four times.

 

Finance Committee

 

The Board established a new committee in 2009, the Finance Committee, to provide guidance to management regarding strategic opportunities and related financing transactions. In addition, the Finance Committee assists the Board in fulfilling its responsibilities with respect to:

 

 

 

The Finance Committee’s authority is set forth in a charter adopted by our Board, a copy of which is available at www.wintrust.com by choosing “About Wintrust” and then choosing “Corporate Governance.”

 

The Finance Committee consists of four Directors, and the Board has determined that each of these Directors, except for Mr. Perry, has no material relationship with us and each is otherwise independent under the applicable Nasdaq listing standards. See “Related Party Transactions” for additional information regarding Mr. Perry’s material relationship with the Company. During 2009, the Finance Committee met three times.

 

Executive Committee

 

The Board has established an Executive Committee which is authorized to exercise certain powers of the Board, and meets as needed, usually in situations where it is not feasible to take action by the full Board. The Executive Committee’s authority is set forth in a charter adopted by our Board.

 

The Executive Committee consists of seven Directors, and the Board has determined that each of these Directors, except for Mr. Wehmer, is independent under the Nasdaq listing standards. During 2009, the Executive Committee met two times.

 

Shareholder Communications

 

Any shareholder who desires to contact the non-employee Directors or the other members of our Board may do so by writing to: Wintrust Financial Corporation, Board of Directors, c/o the Secretary of the Company, Wintrust Financial Corporation, 727 North Bank Lane, Lake Forest, Illinois 60045. Copies of written communications received at this address will be provided to the Board, the applicable committee chair or the non-employee Directors as a group unless such communications are considered, in consultation with the non-employee Directors, to be improper for submission to the intended recipient(s). All communications will be forwarded to the Chair of the Nominating Committee unless the communication is specifically addressed to another member of the Board, in which case, the communication will be forwarded to that Director. Other interested parties may also use this procedure for communicating with the Board, individual Directors or any group of Directors. Shareholders also may obtain a copy of any of the documents posted to the website free of charge by calling (847) 615-4096 and requesting a copy. Information contained on Wintrust’s website is not deemed to be a part of this Proxy Statement.

 

Certain information regarding those persons serving as the Company’s executive officers is set forth below.

 

Edward J. Wehmer (56) — President and Chief Executive Officer — Mr. Wehmer serves as the Company’s President and performs the functions of the Chief Executive Officer. Accordingly, he is responsible for overseeing the execution of the Company’s day-to-day operations and strategic initiatives. See the description above under “Election of Directors” for additional biographical information.

 

David A. Dykstra (49) — Senior Executive Vice President and Chief Operating Officer, Secretary and Treasurer — Mr. Dykstra joined the Company in 1995 and currently serves as the Company’s Chief Operating Officer overseeing all treasury, financial, audit, compliance and human resources affairs of the Company. Prior to 2002, Mr. Dykstra served as the Company’s Chief Financial Officer. Since January 2006, Mr. Dykstra also serves as a Regional Market Head overseeing Crystal Lake Bank, State Bank of the Lakes and Town Bank. Prior thereto, Mr. Dykstra was employed from 1990 to 1995 by River Forest Bancorp, Inc., Chicago, Illinois, most recently holding the position of Senior Vice President and Chief Financial Officer. Prior to his association with River Forest Bancorp, Mr. Dykstra spent seven years with KPMG LLP, most recently holding the position of Audit Manager in

the banking practice. Mr. Dykstra is a Director of Crystal Lake Bank, First Insurance Funding, Old Plank Trail Community Bank, State Bank of the Lakes, Town Bank, Tricom, Wayne Hummer Asset Management Company, Wayne Hummer Investments, Wayne Hummer Trust Company, Wintrust Information Technology Services and Wintrust Mortgage Corporation.

 

James H. Bishop (66) — Executive Vice President — Regional Market Head — Since January 2006, Mr. Bishop has served as a Regional Market Head overseeing Advantage Bank, Barrington Bank and Village Bank. Mr. Bishop originally joined the Company in 1996 and served as the Chief Executive Officer of Barrington Bank until February 2003. Prior to his association with the Company, Mr. Bishop served as a Senior Vice President of First Chicago/NBD and was a Regional Manager for that organization’s suburban locations in the North and Northwest suburbs of Chicago. Mr. Bishop is a Director of Advantage Bank, Barrington Bank, Village Bank, and Wintrust Information Technology Services.

 

Lloyd M. Bowden (56) — Executive Vice President — Technology — Mr. Bowden serves as Executive Vice President — Technology for the Company and as President of Wintrust Information Technology Services. He is responsible for planning, implementing and maintaining all aspects of the subsidiary banks’ internal data processing systems and technology designed to service the subsidiary banks’ customer base. Mr. Bowden joined the Company in April 1996 to serve as the Director of Technology with responsibility for implementing technological improvements to enhance customer service capabilities and operational efficiencies. Prior thereto, he was employed by Electronic Data Systems, Inc. in various capacities since 1982, most recently in an executive management position with the Banking Services Division and previously in the Banking Group of the Management Consulting Division. Mr. Bowden is a Director of Wintrust Information Technology Services.

 

John A. Carstens (54) — Executive Vice President and Regional Market Head — Since July 2007, Mr. Carstens has served as a Regional Market Head overseeing Libertyville Bank and Wheaton Bank. Mr. Carstens originally joined the Company in May, 1995 and is Chairman and Chief Executive Officer of Libertyville Bank. Prior to joining the Company, from 1990 until May 1995, he was President and Chief Operating Officer of American National Bank of Libertyville. From 1979 until 1990, Mr. Carstens held commercial banking officer positions with American National Bank of Chicago, a wholly-owned subsidiary of First Chicago Corporation, now known as JP Morgan/Chase. Mr. Carstens is a Director of Libertyville Bank, Wheaton Bank and Wintrust Information Technology Services.

 

Timothy S. Crane (48) — Executive Vice President and Market Head — Mr. Crane joined the Company in August 2008 and is the Regional Market Head overseeing Lake Forest Bank, Northbrook Bank, North Shore Community Bank and St. Charles Bank. Prior to joining the Company, Mr. Crane served as President and Head of Retail Banking of Harris Bank in Chicago where he was employed for 24 years. Mr. Crane is a director of Lake Forest Bank, Northbrook Bank, North Shore Community Bank, St. Charles Bank and Wintrust Information Technology Services.

 

John S. Fleshood (47) — Executive Vice President — Risk Management — Mr. Fleshood joined the Company in August 2005 and manages the overall risk management process for the Company including audit, business continuity and information security functions. Between January 2006 and December 2009, Mr. Fleshood served as a Regional Market Head overseeing St. Charles Bank and Wintrust Mortgage Corporation. Previously, Mr. Fleshood served as Senior Vice President and Chief Financial Officer of the Chicago affiliate of Fifth Third Bank, an Ohio banking corporation, a commercial bank offering a full range of banking services to consumer, business and financial customers, from July 2001 to August 2005. Prior to that, Mr. Fleshood served as Vice President and Manager of the Treasury Division of Fifth Third Bank, Cincinnati, Ohio. Mr. Fleshood is a Director of St. Charles Bank, Wintrust Information Technology Services, Barrington Bank and Wintrust Mortgage Corporation.

 

Leona A. Gleason (60) — Executive Vice President and Chief Administrative Officer — Ms. Gleason joined the Company in January, 2010 and oversees certain administrative affairs of the Company including Human Resources, Compliance, Community Reinvestment Act, Bank Secrecy Act and Anti-Money Laundering. From 1996 to 2009, Ms. Gleason was Executive Vice President at FBOP Corporation, a $19 billion privately held bank holding company. She had primary responsibility for Human Resources, Training, Compliance, Community Reinvestment Act, Bank Secrecy Act, Risk Management, Operations and Information Technology. Ms. Gleason also served as executive officer of certain subsidiaries of FBOP Corporation, which subsidiaries were taken into

receivership by the Federal Deposit Insurance Corporation on October 30, 2009. Prior to her association with FBOP, from 1977 to 1996, Ms. Gleason was Senior Vice President at Corus Bankshares, Inc. where she managed Retail Banking, Operations, Information Technology, Compliance and Human Resources and from 1972 to 1977 was Vice President at Boulevard Bank.

 

Richard B. Murphy (50) — Executive Vice President and Chief Credit Officer — Since January 2002, Mr. Murphy has served as the Company’s Chief Credit Officer and is responsible for coordinating all the credit functions of the Company. Since January 2006, Mr. Murphy serves as Regional Market Head overseeing Old Plank Trail Community Bank. Mr. Murphy served as the President of Hinsdale Bank from 1996 until December of 2005. From 1993 until his promotion to President of Hinsdale Bank, Mr. Murphy served as the Executive Vice President and Senior Lender of Hinsdale Bank. Prior to his association with the Company, Mr. Murphy served as President of the First State Bank of Calumet City. Mr. Murphy is a Director of Beverly Bank, Hinsdale Bank, Old Plank Trail Community Bank, St. Charles Bank and Wintrust Information Technology Services. Mr. Murphy is married to the sister of Mr. Wehmer’s wife.

 

David L. Stoehr (50) — Executive Vice President and Chief Financial Officer — Mr. Stoehr joined the Company in January 2002 and manages all financial and accounting affairs of the Company, including internal and external financial reporting. Previously, Mr. Stoehr was Senior Vice President/Reporting & Analysis at Firstar/U.S. Bancorp, Director of Finance/Controller of Associated Banc-Corp with primary responsibility for financial accounting and reporting, business unit financial management and data warehouse design and implementation. Prior to his association with Associated Banc-Corp, Mr. Stoehr was Assistant Vice President/Balance Sheet Management at Huntington Bancshares, Inc., Columbus, Ohio, from 1993 to 1995 and Financial Reporting Officer at Valley Bancorporation, Appleton, Wisconsin, from 1983 to 1993. Mr. Stoehr is a Director of Beverly Bank, Old Plank Trail Community Bank and Wintrust Information Technology Services.

 

Compensation Discussion & Analysis

 

This Compensation Discussion and Analysis section reviews our compensation program for our five named executive officers (“NEOs”), which include our principal executive officer, principal financial officer and the three other most highly-compensated executive officers.

 

Executive Summary

 

During 2009, Wintrust’s executive officers implemented a number of steps to manage the Company through the volatility and uncertainty which have affected the nation’s financial system. The Compensation Committee of our Board of Directors, or the Committee, noted that pursuant to its long-term strategy of maintaining sound, conservative underwriting, the Company underwrote its credits in a manner that resulted in an acceptable level of problem loans during this turbulent period. While results for 2009 were not at the level that the Company or its shareholders would expect in an ordinary environment, the Committee believes that, particularly when measured against the rest of the banking industry, the Company’s management performed very well during 2009.

 

In that regard, the Committee considered the results of management’s strategic effort to aggressively resolve problem loans, its successful execution of a $600 million securitization of a portion of the Company’s property and casualty premium finance loan portfolio, and the completion of a purchase of a portfolio of approximately $1 billion of life insurance premium finance receivables. The Committee also noted that 2009 was the Company’s thirteenth consecutive year of profitability. As a result of these accomplishments, the Committee approved, consistent with its philosophy of paying for performance, year-end bonuses payable in equity for the Company’s NEOs. These bonuses included, for the first time since 2007, year end bonuses for the Company’s chief executive officer and chief operating officer.

 

During 2009, the Committee also made additional adjustments to the compensation arrangements of the executive officers of the Company as a result of the Company’s participation in the Capital Purchase Program portion of the United State Department of the Treasury’s Troubled Assets Relief Program, or TARP. As previously disclosed, as a participant in TARP, we must limit certain forms of compensation paid to our senior executive officers and most highly compensated employees, are required to adopt certain compensation policies, must limit

the amount of certain federal income tax deductions that we may claim in connection with our compensation expenses, and are subject to certain other limitations.

 

At the time it designed the Company’s 2009 compensation program for executive officers, the Committee adjusted the target composition of the Company’s executive officer compensation to provide for a relatively greater portion of variable, as opposed to fixed, compensation. Following the adoption of that compensation program, in June 2009, Treasury published additional regulations further restricting our ability to pay compensation to our executives. These new regulations, among other things, prohibit us from paying bonuses to certain of our senior executive officers and employees (including the executive officers named in this Proxy Statement) unless such bonuses are paid in restricted stock and do not exceed more than one third of annual compensation, an amount less than the level of incentive compensation contemplated by the executive compensation program adopted by the Committee for 2009.

 

As a result, in August 2009 the Committee approved adjustments to the base salaries of Wintrust’s executive officers. These adjustments were not intended to increase total annual compensation for the executive officers, but instead only to adjust the mix between fixed and variable compensation paid to them.

 

Our 2009 Compensation Program

 

Overview

 

The Committee has responsibility for developing, implementing and monitoring adherence with the Company’s compensation philosophy, including compensation of our NEOs. In doing so, the Committee is mindful of our unique structure, culture and history as well as the growth focus of our Company and its business. As a holding company that conducts its operations through our subsidiaries, we are focused on providing entrepreneurial-based compensation to the chief executives of each of our business units. As a Company with start-up and growth oriented operations, we are cognizant that to attract and retain the managerial talent necessary to operate and grow our businesses we often have to compensate our executives with a view to the business we expect them to manage, rather than the size of the business they currently manage.

 

The Company’s strategy has been to pay its executives competitive salaries in an effort to attract and retain highly-qualified and well-experienced individuals. However, as the Company continues to mature, the Committee believes that total compensation should be increasingly more heavily weighted toward incentive components rather than base salary. This philosophy is intended to create and foster a pay-for-performance framework within defined risk parameters that drives shareholder value by aligning shareholder and NEO interests.

 

The Committee sets the compensation for all of our executive officers, including our NEOs. The Committee also exercises the authority of the Board with respect to the Company’s employee benefit plans.

 

The Company’s present executive compensation program is the result of a review conducted during 2008 by the Committee in connection with its design of the 2009 compensation program. The Committee conducted the review, which covered the Company’s NEOs as well as certain other members of senior management, with assistance from Towers Perrin, a compensation consultant. Towers Perrin provided expert knowledge of marketplace trends and best practices relating to competitive pay levels. The Committee had the sole authority to hire and fire its own outside compensation consultant and any other advisors it deemed necessary. The role of a compensation consultant is to assist the Committee in analyzing executive compensation packages and to provide the Committee with information regarding market compensation levels, general compensation trends and best practices. The Committee also periodically asks a consultant to opine on the competitiveness of specific pay decisions and actions for the named executive officers, as well as the appropriateness of the design of the Company’s executive compensation programs. The goal of the particular review undertaken by Towers Perrin was to improve the connection between pay and performance in the Company’s compensation program, and to ensure that the compensation program is competitive with those of our peer companies. In connection with its review of 2009 compensation, Towers Perrin was retained by and reported to the Committee and participated in Committee meetings.

 

In providing assistance with the structuring of 2009 executive compensation program, representatives of Towers Perrin delivered multiple presentations to the Committee regarding their review of the Company’s compensation program. The representatives compared the Company’s executive compensation program to best practices and to the executive compensation programs used by comparable financial companies, as described below.

Based on survey data and on proxy disclosures by the comparable financial companies, Towers Perrin reported that the Company’s target base salaries and target total cash compensation were near the competitive median. Annual cash incentive payments were described as being below the median level for senior executive positions, but above the median for more junior executives. Towers Perrin suggested this was caused by Wintrust’s use of uniform target bonus amounts, as a percentage of base salary, for its executive officers, and noted that many companies offer their most senior executives higher target bonus percentages than they offer to junior executives. Such a compensation structure recognizes that senior executives can have a greater effect on a company’s performance, and should therefore have a greater percentage of their total compensation be incentive-based pay. Finally, Towers Perrin reported that Wintrust’s long-term incentive payments were well below the median level, resulting in total direct compensation that was also below the median level.

 

Representatives of Towers Perrin met subsequently with the Committee in 2009 to present their final recommendations regarding the Company’s compensation program. Towers Perrin recommended that Wintrust set target compensation levels within a competitive range of the median for comparable companies, and at levels approaching the 75th percentile and above for executives that demonstrate superior performance. Additionally, they recommended that the Company increase the relative size of target annual bonuses for our senior executive officers and consider referencing group performance, historical performance and investor and analyst expectations when setting performance goals. Previously, the Company’s general practice had been to set a uniform target bonus percentage for the Company’s senior management which was increased annually by a fixed percentage.

 

Following the review and in consultation with Towers Perrin, the Committee determined to adopt additional compensation philosophies as described below, to modify the target bonus awards for our senior executives and to increase the portion of our NEOs’ compensation that is provided through long-term incentives, such as stock options, restricted stock units and awards under our Cash Incentive and Retention Plan, or CIRP.

 

Compensation Philosophy and Objectives

 

The Committee designed the Company’s compensation program to promote a pay-for-performance philosophy and to be competitive with market practices in order to retain and attract talented executives who can contribute to our long-term success and build value for our shareholders. Accordingly, the Committee strives to create a compensation package for each NEO that is competitive as well as reflective of the performance of both the Company and the individual officer. The Committee recognizes that certain elements of compensation are better suited to reflect different compensation objectives. For example, as base salaries are the only element of compensation that is fixed in amount in advance of the year in which the compensation will be earned, the Committee believes that it is most appropriate to determine base salaries with a focus on the market practices for similarly situated officers at comparable companies as adjusted to reflect the individual officer’s performance during the preceding year. The aspects of individual performance that are evaluated for base salary purposes include non-financial measures such as integrity, quality, leadership, customer satisfaction, innovation and talent management. In contrast, cash bonuses and long-term incentives are better able to reflect the Company’s performance as measured by financial measures such as earnings per share, deposit growth, loan growth, net interest margin, credit quality and return on tangible equity. In addition, cash bonuses and long-term performance measures are also well suited to aid in our goal of retaining executives and also motivating officers to increase shareholder value. The other elements of compensation are set primarily based on market practices and are driven by the Committee’s philosophy that personal benefits including retirement and health and welfare benefits should be available to all employees on a non-discriminatory basis.

 

In connection with the review of the Company’s compensation program, the Committee adopted the following additional compensation philosophies and procedures, which formed the basis of the Company’s compensation program in 2009:

 

Our compensation program must allow us to attract first-rate entrepreneurial talent that reflects our structure.  As a result of our holding company structure, our compensation program takes into consideration the fact that to attract and retain executive officers, whether at the Company or at one of our subsidiaries, talented enough to enable the Company to meet its long-term goals, we must compensate such executive officers based on the size and potential enterprise that we expect such officer to oversee in the future.

Compensation should be performance based.  Our compensation program should encourage and reward excellent performance from the Company’s management team. Accordingly, compensation should depend on the Company’s overall performance, its financial performance, the performance of its subsidiaries and a manager’s attainment of his or her individual management objectives.

 

A significant portion of total compensation should be in the form of long-term incentives.  Long-term incentives, such as stock options, restricted stock units and awards under the Company’s Cash Incentive and Retention Plan, are an important way of aligning management and shareholder interests because they link a manager’s compensation levels to the performance of the Company over a multi-year time horizon. Additionally, long-term incentives can help promote continuity of management by tying compensation to continued service, and can help reduce incentives to take excessive risks by ensuring that managers are incentivized to create lasting value for shareholders.

 

Compensation levels should be competitive to ensure that we attract and retain a highly qualified management team to lead and grow our Company.  The successful operation of our Company requires an experienced and talented management team. To hire and retain such managers, our compensation program must be competitive with those of our peer firms in terms of total compensation and for each element of compensation.

 

Compensation opportunities should be commensurate with an executive’s roles and responsibilities.  Greater levels of compensation should be offered to our executives who are most responsible for the performance of the Company. This helps ensure that compensation levels are perceived as fair, both internally and externally, and reduces the risk that we lose managerial talent to our competitors.

 

Our compensation program for NEOs should be fair, and perceived as such, both internally and externally.  The Committee strives to create a compensation program that will be perceived as fair, both internally and externally. It accomplishes this by comparing the compensation that is provided to our NEOs to comparative group of companies as a means to measure external fairness and to other senior employees of the Company, as a means to measure internal fairness. Shareholders are best served when we can attract and retain talented executives with compensation packages that are competitive but fair. The markets in which the Company operates are very competitive and there is real risk of losing talented executives if our compensation is not competitive.

 

Total compensation expense should be predictable.  While variable compensation is an important component of our pay-for-performance philosophy, overall compensation levels should be consistent and predictable so that management and shareholders will have greater certainty regarding their effects on the Company’s financial performance.

 

Compensation Procedures

 

Role of Management.  The Committee made all 2009 compensation decisions for our executive officers. Our chief executive officer and chief operating officer annually review the performance of each of the Company’s and its subsidiaries’ officers (other than the chief operating officer, whose performance is reviewed by the chief executive officer acting alone, and the chief executive officer, whose performance is reviewed by the Committee). The conclusions reached and the compensation recommendations based on these reviews, including with respect to salary adjustments and incentive award amounts, were presented to the Committee. The Committee exercised its discretion in modifying any recommended adjustment or award.

Following consultation with Towers Perrin, the Committee identified two reference groups of peer financial companies that it used for purposes of benchmarking its compensation practices in connection with the development of the new executive compensation program. These include a group of 15 similarly-sized national banks and a group of eleven Midwestern banks. The reference group of similarly-sized national banks included banks with total assets between $7.4 billion and $11.9 billion as of December 31, 2007, compared to $9.4 billion of assets for Wintrust as of such date. The reference group of Midwestern banks included banks with total assets between $3.7 billion and $21.6 billion as of their respective fiscal year ends. The Committee considered both the national banks reference group and Midwestern banks reference group together as a single peer group.

 

 

Since information regarding compensation for our NEOs other than our chief executive officer and chief financial officer is not generally publicly available for these reference groups, the Committee supplemented its review of these reference groups with additional survey data provided by Towers Perrin. The survey data was compiled by Towers Perrin from four surveys of compensation in the financial services industry, published by executive compensation firms during the spring of 2008. The survey data was adjusted by Towers Perrin to reflect the Company’s asset size, in order to provide an estimated distribution of compensation levels for a financial company with $10 billion in assets. In reviewing this survey data, the Committee considered only the aggregated survey data. The identity of the companies comprising the survey data is not disclosed to, or considered by, the Committee in its decision-making process and thus the Committee does not consider it material. The Committee uses these sources of market data to ensure that the compensation being paid by the Company is competitive with those of its peer companies. In 2009, the Committee sought to set each element of compensation to an amount within a competitive range of the median for similarly situated officers at comparable companies, with compensation at levels approaching the 75th percentile and above for executives that have demonstrated superior performance. However, these benchmarks were not applied rigidly due to the Company’s unique structure and the hybrid nature of certain managerial positions at Wintrust.

 

Committee Process.  As discussed above, the Committee continually reviewed both the Company’s compensation philosophy and the actual compensation being paid by the Company. The Committee met, including in executive sessions without any members of management present, to discuss, evaluate and set executive officer compensation. Other than the Towers Perrin survey it commissioned, the Committee did not engage third party human resource consulting firms in connection with setting executive compensation for 2009.

 

In setting compensation for each of the NEOs, the Committee focused on the total direct compensation received by each executive officer, as well as the amount of each element of compensation in relation to those provided by the peer companies identified below. The Committee acted pursuant to a written charter that had been approved by our Board.

Elements of Compensation

 

This section describes the various elements of our compensation program for NEOs, together with a discussion of various matters relating to those items, including why the Committee choose to include the items in the compensation program. The principal components of compensation for our NEOs were:

 

 

Based on its discussions with Towers Perrin in 2008 and 2009, the Committee determined to establish the following framework for NEO compensation in 2009:

 

 

Salary.  The Company provides NEOs with base salary to compensate them for services rendered during the fiscal year. Base salary for NEOs for any given year is generally fixed by the Committee at its meeting in January. Increases or decreases in base salary on a year-over-year basis are dependent on the Committee’s assessment of the Company and individual performance. The Committee is free to set NEO salary at any level it deems appropriate. In addition, the Committee considers market data, internal pay equity and merit history in evaluating recommendations. As part of this process, the Committee solicits the recommendations of the CEO with respect to NEOs (other than the CEO).

 

At the beginning 2009, in connection with the Committee’s review of 2009 compensation in the context of fixed/variable compensation, the Committee increased base salaries in the aggregate for the named executive officers to a lesser extent than it had in previous years in connection with a relatively greater increase in incentive compensation for the named executive officers. As a result, in January 2009, the Committee increased base salary for the Company’s Chief Financial Officer by $30,000, the Chief Credit Officer by $15,000 and the Executive Vice President — Risk Management by $3,000. The Committee did not increase base salaries for the Company’s Chief Executive Officer or Chief Operating Officer.

 

The Committee conducted a further review of the Company’s compensation program for executive officers in response to the issuance by Treasury, in June 2009, of regulations impacting financial institutions, like the Company, which are participants in Treasury’s Capital Purchase Program. Among other things, the regulations issued by Treasury in June 2009 prohibit the Company from paying bonuses and certain other incentive compensation to certain of our senior executive officers (including the executive officers named in this Proxy Statement) unless such bonuses are paid in restricted stock and do not exceed more than one third of annual compensation. The Committee noted that the regulations generally had the effect of setting a ceiling upon the amount of incentive compensation that could be paid a NEO and, in particular, conflicted with certain of the performance targets set by the Committee for the Company’s NEOs in connection with the design of the 2009 compensation program. In particular, the Committee noted that its 2009 compensation program had aimed to provide bonus and long-term incentive compensation which would represent between 50 and 60 percent of a NEO’s total compensation. As a result, the Committee concluded that if the salary component of executive compensation were left unchanged, the effect would be to substantially reduce the overall compensation of such individual and would increase the risk of key personnel leaving the Company in favor of companies with whom we compete. To mitigate any such risk, in August 2009 the Committee approved adjustments to the base salaries of Wintrust’s executive officers. These

adjustments were not intended to increase total annual compensation for the executive officers, but instead only to adjust the mix between fixed and variable compensation paid to them.

 

 

The Committee believes that it is in the best interest of the Company that the NEOs be compensated partially in stock in order to more closely align their interests with those of the shareholders. In light of this belief and the fact that the Company’s chief executive officer and chief operating officer have received relatively less equity than during previous periods, due in part to the fact that the Committee did not award equity grants for performance during fiscal years 2008 or 2009, the Committee determined to pay one third of the salary increase of the chief executive officer and chief operating officer in the form of salary shares. More specifically, in the case of the Company’s chief executive officer and chief operating officer, $100,000 and $75,000, respectively, of each year’s base salary will be paid in Wintrust’s common stock granted under Wintrust’s 2007 Stock Incentive Plan (the “2007 Plan”). The number of shares of Wintrust common stock granted as of each payroll period end date to the Company’s chief executive officer and chief operating officer will be determined by dividing the amount of base salary payable in stock by the average of the high and low price of Wintrust’s common stock on Nasdaq on the grant date or, if Nasdaq is closed on the grant date, by the Nasdaq average of the high and low price on the immediately preceding date on which Nasdaq is open. The Company’s chief executive officer and chief operating officer may not sell or otherwise transfer the stock they receive in payment of base salary until the later of three years from the date of grant or until Wintrust repays the CPP investment in Wintrust, except upon their death or permanent disability.

 

Bonus.  The Company may award discretionary cash bonuses to executives, although the Company does not maintain a formal cash bonus plan. Cash bonuses are intended to provide officers with an opportunity to receive additional cash compensation through the achievement of specified Company, subsidiary and individual performance goals. Performance-based cash bonuses are included in the package because they permit the Committee to incentivize our NEOs, in any particular year, to pursue particular objectives that the Committee believes are consistent with the overall goals and strategic direction that the Board has set for the Company.

 

The total targeted bonus that is provided to each NEO in a given year is generally determined by reference to the NEO’s base salary for that year. That is, each year the Committee approves a targeted bonus award for each NEO with a cash value that is determined by multiplying the NEO’s base salary by a percentage that is chosen by the Committee.

 

As part of the review of our compensation program, the Committee determined to restructure the target bonus levels for the NEOs beginning in 2009 so that target bonus levels for the Company’s senior executive officers represent a larger percentage of such executives’ total compensation. The Committee believes that this change will increase the pay-for-performance nature of our compensation program. Below are the threshold, target and maximum bonus awards for our NEOs, expressed as a percentage of base salary:

 

 

In determining the amount of target bonuses, the Committee considers several factors, including:

 

(i) the target bonuses set, and actual bonuses paid, in recent years;

 

(ii) the desire to ensure, as described above, that a substantial portion of total compensation is performance-based; and

(iii) the relative importance, in any given year, of the long and short-term performance goals of the Company.

 

After determining the total targeted bonus percentage for a year, the Committee allocates the potential bonus award between Company-level, subsidiary-level and personal objectives, as well as retaining a discretionary factor. Company and subsidiary-level objectives focus on targeted net income and personal objectives are tailored for each NEO. These performance objectives for bonuses (both cash and equity), are developed through an iterative process. Based on a review of business plans, management, including the NEOs, develops preliminary recommendations for Committee review. The Committee reviews management’s preliminary recommendations and establishes final goals. The Committee strives to ensure that the objectives are consistent with the strategic goals set by the Board, that the goals set are sufficiently ambitious, within defined risk parameters, so as to provide a meaningful incentive and that bonus payments, assuming target levels of performance are attained, will be consistent with the overall NEO compensation program established by the Committee.

 

The final determination of an executive’s actual bonus payment will be based on company and individual performance metrics, including consolidated net income, personal objectives, discretionary factors and, in the case of Mr. Fleshood, the net income of certain subsidiaries. As in years past, the final determination of the Committee could result in no bonus being paid or a bonus in an amount more than the maximum target bonus or less than the low target bonus.

 

For 2009, target bonuses were allocated across the Company-level objective, subsidiary-level objective, personal objectives and the discretionary component as follows, expressed as a percentage of each NEO’s base salary:

 

 

The company-level objective was to achieve consolidated net income of $49.5 million for 2009. Accordingly, based on goals approved by the Committee, our NEOs were eligible to receive the maximum, target or threshold bonus award allocated to the company-level objective:

 

 

Wintrust’s consolidated net income for the year ended December 31, 2009 was $73.1 million. Accordingly, all of our NEOs exceeded the company-level objective.

 

The subsidiary-level objective for Mr. Fleshood was based on attaining net income objectives at subsidiaries for which he served as Market Head. Mr. Fleshood did meet his subsidiary-level objective.

 

Each of our NEOs was eligible to earn a portion of his target bonus award based on satisfaction of certain personal objectives. For the 5% target bonus award allocated to the discretionary factor, the Committee determined that each of our NEOs was eligible to receive 100% of his discretionary bonus.

 

The Committee determined that both the company-level and subsidiary level objectives were fully achieved in 2009 by all NEOs and, accordingly, determined to pay the relevant bonuses thereon. The Committee also determined that our NEOs met some personal and discretionary bonus components. Once the total eligible bonus was determined, the Committee made a final discretionary adjustment in determining the actual bonus payments to our NEOs based on the recommendation of our chief executive officer (other than for the chief executive officer).

The following table sets forth the total eligible bonus amounts and bonuses paid to each of our NEOs. As a result of our participation in the Capital Purchase Program portion of TARP, we may not pay any bonus, retention award or incentive compensation other than restricted stock awards that do not account for more than one-third of an executive’s total annual compensation to any of our NEOs or the ten next most highly-compensated employees. Accordingly, the Compensation Committee determined to pay bonuses in the form of restricted stock units with a grant date of January 28, 2010 and a vesting date on the second anniversary of the date of grant.

 

 

Long-Term Incentive Compensation.  As described above, the Committee believes that a substantial portion of each NEO’s compensation should be in the form of long-term incentive compensation in order to further align the interests of our NEOs and shareholders. Long-term incentive compensation may consist of stock options, RSUs and awards under the CIRP in such proportions as the Committee determines, which determinations are based on achievement of certain levels of return on tangible equity. The Committee was unable to make awards under the stock option plan or the CIRP in 2009 because of restrictions imposed by TARP.

 

The Committee determines equity-based awards in conjunction with its determination of cash bonus awards, described above, to ensure a balance of cash and equity compensation. In making that assessment, the Committee considers factors such as the relative merits of cash and equity as a device for retaining and incentivizing NEOs and the practices of the other companies in the group selected by our compensation consultant. The Committee strives to equally balance cash and equity bonuses. However, the Committee has been unable in the recent past to achieve this desired balance because of insufficient amounts of equity available under the 2007 Plan. The Committee will continue its efforts to achieve the desired balance to the extent possible.

 

Stock options granted under the 2007 Plan may vest on the basis of the satisfaction of performance conditions established by the Committee or on the basis of the passage of time and continued employment, however, in recent years, the Committee has issued awards vesting based on passage of time and continued employment. Except in limited circumstances, under the 2007 Plan no stock option may become fully exercisable until the third anniversary of the award and, to the extent that such an award provides for vesting in installments, such vesting shall occur ratably on the anniversaries of the grant date. Options granted under the 2007 Plan have a seven-year term and options granted under Wintrust’s 1997 Stock Incentive Plan (the “1997 Plan”) have a ten-year term. All options are granted with an exercise price equal to the fair market value of our common stock on the date of grant, and option re-pricing is expressly prohibited by the 2007 Plan terms.

 

In determining the portion of long-term incentive pay that should be composed of stock options, the Committee considers the fact that stock options are the most effective at aligning NEO and shareholder interests, but may result in greater dilution to shareholders for a given award value.

 

Restricted stock units (“RSUs”) convert into shares of our common stock if the recipient is still employed by us on the date that specified restrictions lapse. Restricted stock units granted under the incentive plans may vest on the basis of the satisfaction of performance conditions established by the Committee or on the basis of the passage of time and continued employment. The Committee has granted RSUs that vest on the basis of the passage of time and continued employment with vesting periods ranging up to five years. Recipients of RSUs may not vote the units in shareholder votes, but once their RSUs vest, may in some circumstances receive payments equal to the amount of dividends that would be paid on an equivalent number of shares of common stock.

 

In determining the portion of long-term incentive pay that should be composed of RSUs, the Committee considers the fact that RSUs help facilitate executive stock ownership, and, compared to other forms of long-term incentives, provide a higher level of retention value.

 

Cash Incentive and Retention Plan.  The Cash Incentive and Retention Plan, or the CIRP, allows us to provide equity-like cash compensation to our NEOs and other senior executives. Awards under the CIRP may be earned

pursuant to the achievement of performance criteria established by the Committee and/or continued employment. The performance criteria established by the Committee must relate to one or more of the criteria specified in the Plan, which include: earnings, earnings growth, revenues, stock price, return on assets, return on equity, improvement of financial ratings, achievement of balance sheet or income statement objectives and expenses. These criteria may relate to the Company, a particular line of business or a specific subsidiary of the Company.

 

Awards under the CIRP are an important component of our long-term incentive payments, as they result in less dilution to shareholders than stock options and RSUs, and may be used when the availability of stock options and RSUs is limited.

 

In 2008, the Company made awards under the CIRP to Mr. Wehmer and Mr. Dykstra with respect to the 2008-2012 performance cycle. Under the terms of their awards, Mr. Wehmer and Mr. Dykstra are eligible to receive target awards of $215,000 and $195,000, respectively, based on the achievement of cumulative earnings per share over the five-year performance cycle. Mr. Wehmer’s award also includes a minimum payment equal to Mr. Wehmer’s vested percentage of his target award multiplied by 100% plus the 91-day Treasury bill rate for the period from January 1, 2008 through December 31, 2012, or if earlier, the date as of which the minimum payment amount is being determined. Mr. Wehmer annually vests in 20%. The cumulative earnings per share performance targets for the 2008-2012 performance cycle are set forth in the following table:

 

 

 

 

Under the terms of Mr. Wehmer’s and Mr. Dykstra’s CIRP award agreements, each are entitled to certain payments in the event of termination of employment or a change in control. See the “Potential Payments Upon Termination or Change in Control” section of this Proxy Statement for further information regarding these payments.

 

Perquisites and Other Benefits.  Our NEOs receive various perquisites provided by or paid for by us that we believe are reasonable, competitive and consistent with the Company’s overall compensation philosophy. In 2009, these perquisites included: car allowances or Company-owned automobiles, club dues, life insurance and supplemental long-term disability.

 

We provide these perquisites because many companies in the peer group provide such perquisites to their named executive officers and it is therefore necessary for retention and recruitment purposes that we do the same.

 

The Committee reviews the perquisites provided to its NEOs on a regular basis, in an attempt to ensure that they continue to be appropriate in light of the Committee’s overall goal of designing a compensation program for NEOs that maximize the interests of our shareholders. Attributed costs of the personal benefits described above for the NEOs for the fiscal year ended December 31, 2009 are included in column (i) of the “Summary Compensation Table” below.

Post-Termination Compensation

 

We have entered into employment agreements with each of our NEOs that provide for post-termination compensation. These agreements provide for payments and other benefits if the officer’s employment terminates for a qualifying event or circumstance, such as being terminated without “Cause” or leaving employment for “Constructive Termination,” as these terms are defined in the employment agreements. Additionally, the employment agreements provide for the payment of severance if the officer’s employment is terminated within eighteen months of a “Change-in-Control” (as defined in the agreements) of the Company. As discussed below, however, such severance payments are prohibited under the EESA and therefore will not be made during any period in which any obligation arising from financial assistance under TARP remains outstanding. Additional information regarding the employment agreements, including a definition of key terms and a quantification of benefits that would have been received by our NEOs had termination occurred on December 31, 2009, is found under the heading “Potential Payments upon Termination or Change of Control” on page 36 of this Proxy Statement.

 

The Committee believes that these employment arrangements are an important part of overall compensation for our NEOs and will help to secure the continued employment and dedication of our NEOs, notwithstanding any concern that they might have at such time regarding their own continued employment, prior to or following a change of control. The Committee also believes that these agreements are important as a recruitment and retention device, as all or nearly all of the companies with which we compete for executive talent have similar agreements in place for their senior employees.

 

Additional Compensation Policies

 

Clawback Policy.  The compensation restrictions that are applicable to us as a result of our participation in TARP provide that bonus and incentive compensation paid to the NEOs during the period the Treasury maintains an equity interest in the Company are subject to recovery by Wintrust if the payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric. We have adopted a clawback policy as required under our agreements with the Treasury. The EESA expanded this clawback provision to cover the next 20 most highly compensated employees, and provides for recovery of any bonus, retention award, or incentive compensation based on statements of earnings, revenues, gains, or other criteria that are later found to be materially inaccurate.

 

Impact of Section 162(m).  Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the certain “covered employees.” The “covered employees” generally consist of a company’s chief executive officer or other NEOs (other than the chief financial officer). This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation. As a result of our participation in TARP, we agreed to be subject to amendments to Section 162(m) which limit the deductibility of all compensation, including performance based compensation, to $500,000 per named executive officer with respect to any taxable year during which the Treasury retains its investment in the Company.

 

When our Board of Directors determined to participate in the TARP Program, it was aware of, factored into its analysis and agreed to the potential increased after-tax cost of our executive compensation program that would arise because of the TARP Program’s $500,000 deduction limitation. As a result, while the Committee will remain mindful of the deduction limitation, it has concluded that the $500,000 deduction limitation will not be a significant factor in its decision-making with respect to the compensation of our executive officers.

 

Policy Regarding Excessive or Luxury Expenditures.  Pursuant to the EESA, our Board has adopted a policy designed to eliminate or prevent any excessive or luxury expenditures, including excessive expenditures on entertainment or events, office and facility renovations, aviation or other transportation services. A copy of this policy is available on our website, www.wintrust.com.

 

Practices Regarding the Grant of Options.  The Company has followed a practice of making a majority of all option grants to its NEOs on a single date each year and intends to have a practice of generally making all option grants to its NEOs on a single date each year, its regularly scheduled meeting in January. The January meeting date has historically occurred within two weeks following the issuance of the news release reporting our earnings for the previous fiscal year. The Committee believes that it is appropriate that annual awards be made at a time when material information regarding our performance for the preceding year has been disclosed. The Company does not

otherwise have any program, plan or practice to time annual option grants to its executives in coordination with the release of material non-public information.

 

While the bulk of our option awards to NEOs have historically been made pursuant to our annual grant program, the Committee retained the discretion to make additional awards to NEOs at other times, in connection with the initial hiring of a new officer, for retention purposes or otherwise. We refer to such grants as “ad hoc” awards. The Company does not have any program, plan or practice to time ad hoc awards in coordination with the release of material non-public information.

 

All equity awards made to our NEOs, or any of our other employees or Directors (except for payment of director fees under the Company’s Directors Deferred Fee and Stock Plan), are made pursuant to our 2007 Plan. As noted above, all options under the 2007 Plan were granted with an exercise price equal to the fair market value of our common stock on the date of grant. Fair market value is defined under the 2007 Plan to be the average of the highest and the lowest quoted selling prices on the Nasdaq National Market on the relevant valuation date or, if there were no sales on the valuation date, on the next preceding date on which such selling prices were recorded on the date of grant. Although, for days on which the Nasdaq National Market is closed, we set exercise prices based on the prior day’s stock price, we do not have any program, plan or practice of awarding options and setting the exercise price based on the stock’s price on a date other than the grant date. We do not have a practice of determining the exercise price of option grants by using average prices (or lowest prices) of our common stock in a period preceding, surrounding or following the grant date. While the Incentive Plans permit delegation of the Committee’s authority to grant options in certain circumstances, all grants to NEOs were made by the Committee itself or the full Board and not pursuant to delegated authority.

 

Prohibition on Hedging and Short Selling.  The Company’s executive officers and Directors are prohibited from engaging in selling short our common stock or engaging in hedging or offsetting transactions regarding our common stock.

 

Stock Ownership Policy.  We strongly encourage our executive officers to acquire and own our common shares, but have not adopted a formal written policy on share ownership requirements of our executive officers. We seek to deliver a significant portion of each executive’s compensation in the form of long-term incentives. Such awards, including stock options and restricted stock units that are subject to multi-year vesting requirements, ensure that our executive officers hold a significant portion of their compensation in Wintrust securities. However, insufficient amounts of equity available under the 2007 Plan have prevented the Committee from reaching this goal despite its efforts to do so. The Committee will continue to strive to achieve this goal in the future. For our directors, our corporate governance guidelines provide that Directors should own, within three years of becoming a Director, shares having a value of at least three times the annual retainer fee paid to Directors. Each of our Directors is currently in compliance with these share ownership guidelines.

 

Additional Factors Affecting Compensation

 

Participation in the U.S. Department of the Treasury’s Capital Purchase Program

 

In December 2008, we became a participant in the Capital Purchase Program portion of the United States Department of the Treasury’s Troubled Assets Relief Program, or TARP. As a result, we are subject to certain compensation requirements under the Emergency Economic Stabilization Act of 2008, as amended, and regulations issued by Treasury thereunder (EESA). EESA imposes a number of restrictions affecting our five most highly-compensated senior executive officers, which are the same as our NEOs, and certain of our next most highly compensated employees. The restrictions include the following:

 

 

 

The EESA also prohibits the use of any compensation plan that would encourage the manipulation of our reported earnings to enhance employee compensation, and requires that our chief executive officer and chief financial officer provide annual certifications of our compliance with these provisions. It also requires us to provide annual disclosure to Treasury and the Federal Reserve regarding perquisites paid by the Company.

 

In compliance with Treasury regulations, the Compensation Committee met with the Company’s senior risk officers in March and December 2009 to conduct risk assessments related to the Company’s senior executive officer compensation plans and its other employee compensation plans. As discussed in the Compensation Committee Report set forth following this Compensation Discussion and Analysis section, in each case the Committee concluded that the Company’s incentive plans do not encourage our senior executive officers or employees to take unnecessary and excessive risks that threaten the value of the Company, that the Company’s employee compensation plans do not encourage unnecessary risks, that there was no need to eliminate features of plans encouraging earnings manipulation, and, more generally, that no changes to the plans are required for these purposes.

 

These restrictions have affected our compensation program for executive officers. As described above, our compensation philosophy is to provide executives with a significant component of performance-based pay and long-term incentive compensation. However, our ability to do so is limited, particularly by restrictions placed by EESA upon the proportion of the compensation of an NEO (and the next ten most highly compensated employees) which may be paid as bonus or incentive compensation. To cope with this these restrictions, the Company has increased the fixed portion of affected employees’ compensation. However, given Treasury’s ability to make further changes and issue other regulations pertaining to us, the Committee will require the flexibility to make additional changes to the Company’s compensation program to account for such changes, to ensure that we continue to meet our compensation philosophies objectives.

 

Economic Uncertainty

 

The recent economic downturn and its effects on the Company and the financial system will make it difficult for the Committee to set appropriate company and individual performance criteria for compensation purposes. Additionally, continued economic volatility, and its effects on our Company’s stock price, may cause the value of stock options and restricted stock units that we have awarded to our NEOs to fall below levels that the Committee deems necessary to provide appropriate performance and retention incentives for such officers. Accordingly, our Compensation Committee will continue to exercise discretion in determining compensation for our NEOs to ensure that we continue to meet our compensation philosophies and objectives.

 

The Compensation Committee of the Board of Directors of Wintrust Financial Corporation oversees Wintrust Financial Corporation’s compensation program on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth in this Proxy Statement.

 

In reliance on the review and discussions referred to above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and the Company’s Proxy Statement to be filed in connection with the Company’s 2010 Annual Meeting of Shareholders, each of which will be filed with the Securities and Exchange Commission.

Risk Review

 

In compliance with Treasury regulations, the Compensation Committee met with the Company’s senior risk officers in March and December 2009 to conduct risk assessments related to the Company’s senior executive officer compensation plans and its other employee compensation plans. These assessments focused on three issues: (1) whether the compensation for the senior executive officers of the Company encourages them to take unnecessary and excessive risks that threaten the value of the Company; (2) whether the Company’s employee compensation plans pose unnecessary risks to the Company; and (3) whether there was any need to eliminate any features of these plans to the extent that they encouraged the manipulation of reported earnings of the Company to enhance the compensation of any employee.

 

In connection with these review, the Company’s chief risk officer, its Executive Vice President — Risk Management, met with the Committee to discuss the material features of the compensation plans of the Company’s senior risk officers and the Company’s employees generally, all in the context of risks presented by each to the Company. Among other things, the Company reviewed plans providing for fixed and variable compensation, including commissions compensation arrangements applicable to employees of the Wayne Hummer Companies and Wintrust Mortgage Company.

 

For each of the incentive plans reviewed, the Committee considered, among other things, how the level and structure of compensation compares to the peer group, if there is an appropriate balance between fixed and variable pay, the selection of performance criteria and the relationship between those criteria and the payouts. Based on this review and analysis and input from the Company’s senior risk officers, the Committee concluded that the Company’s incentive plans do not encourage our senior executive officers or employees to take unnecessary and excessive risks that threaten the value of the Company, that the Company’s employee compensation plans do not encourage unnecessary risks, that there was no need to eliminate features of plans encouraging earnings manipulation, and, more generally, that no changes to the plans are required for these purposes.

 

Senior Executive Officer Compensation Plans

 

The Committee and the senior risk officers reviewed the operation of the Company’s 2009 executive compensation program, including the annual bonus program, the long-term incentive compensation program and the CIRP. Following its review, the Committee and the senior risk officers concluded that the SEO compensation plans do not encourage unnecessary and excessive risk-taking that threatens the value of the Company or the manipulation of reported earnings. In making the foregoing determination, the Committee and senior risk officers considered the following:

 

 

 

Based upon these factors and the ability of the Committee to use its discretion to reduce actual incentive payments, the Committee concluded that the SEO compensation plans do not create an incentive for senior executive officers to take excessive risks.

 

Employee Compensation Plans

 

In addition to the compensation plans for the SEOs, the Company maintains various other employee compensation plans, some of which are discretionary in nature as to the amounts to be paid thereunder and some for which the amounts to be paid thereunder is based on a formula, or a combination of these approaches. Each of these plans was reviewed by the Committee as described above. As a result of this review, it was determined that risk management oversight, internal control processes, governance procedures currently in place and the discretionary nature of many of the compensation plans collectively served to ensure that the compensation plans do not encourage excessive risk-taking activities or the manipulation of earnings.

 

Certification

 

The Compensation Committee certifies that (1) it has reviewed with senior risk officers the senior executive officer (SEO) compensation plans and has made all reasonable efforts to ensure that these plans do not encourage SEOs to take unnecessary and excessive risks that threaten the value of the Company, (2) it has reviewed with senior risk officers the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to the Company; and (3) it has reviewed the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of the Company to enhance the compensation of any employee. The foregoing review and report of the Committee’s risk review sets forth the Compensation Committee’s (1) description of each senior executive officer compensation plan and explanation of how each senior executive officer compensation plan does not encourage the senior executive officers to take unnecessary and excessive risks that threaten the value of the Company, (2) identification of the employee compensation plans and explanation of how any unnecessary risks posed by the plans have been limited, and (3) explanation of how the employee compensation plans do not encourage the manipulation of reported earnings to enhance the compensation of any employee.

 

COMPENSATION COMMITTEE

 

ALBIN F. MOSCHNER (Chair)		JOSEPH F. DAMICO
BRUCE K. CROWTHER		CHARLES H. JAMES III

 

The following table summarizes compensation awarded to, earned by or paid to our NEOs for 2009, 2008 and 2007. The section of this Proxy Statement entitled “Compensation Discussion and Analysis” describes in greater detail the information reported in this table and the objectives and factors considered in setting NEO compensation.

 

 

 

 

 

 

 

 

 

The following table sets forth information for each named executive officer with respect to (1) each stock option to purchase common shares that has not been exercised and remained outstanding at December 31, 2009 and (2) each award of restricted stock units that has not vested and remained outstanding at December 31, 2009.