CHFC 2018 Proxy Statement

target and maximum performance levels will be interpolated to determine the amount of payment based on relative achievement of the corporate goals. February 21, 2017 Equity Awards to All Named Executive Officers The majority of our annual grants of equity to eligible employees were awarded on February 21, 2017. In setting the amount of these awards for our named executive officers and executive officers, the Compensation Committee first determined the aggregate grant date fair value it wished to deliver to each individual, expressed as a percentage of base salary. As it does in setting annual incentive targets, the Compensation Committee considers a variety of factors to set these target equity award percentages, including the terms of each executive officers employment agreement, peer group benchmark data and its assessment of individual retention risk. Target incentive percentages are then multiplied by each executive’s salary on the date of grant to determine the target value of the award. Target long-term incentive awards, expressed as a percentage of each named executive officer’s base salary, for our February 2017 grants were as follows: Mr. Ramaker - 110%, Mr. Klaeser - 80%, Mr. Shafer - 70% and Mr. Rathbun - 70%. Mr. Provost and Mr. Torgow did not receive equity grants in February 2017. For 2017, the Compensation Committee determined that the mix of equity for executive officers, including the participating named executive officers, would generally be 60% PRSUs, 30% Stock Options and 10%TRSUs. The Compensation Committee believed that this mix was the most optimal practice for achieving the objectives of the long-term incentive plan in 2017, and reaffirms its commitment to delivering the majority of executive equity awards in the form of PRSUs in order to hold executives accountable for our long-term financial performance. Under his employment agreement, the mix of equity for Mr. Klaeser’s award was 60% PRSUs and 40% TRSUs. TRSUs granted in February 2017 vest in their entirety on the fifth anniversary of the date of grant. Stock options vest in equal 20% increments on each anniversary of the date of grant over a period of five years. PRSUs are subject to conditional vesting based on the attainment of pre-established corporate goals and continued service through the date our audit opinion is issued at the end of the three-year performance period of January 1, 2017 through December 31, 2019. The corporate goals include 2019 adjusted diluted earnings per share, with a goal weighting of 65%, and relative total shareholder return, with a goal weighting of 35%. Our total shareholder return will be measured from January 2017 to December 2019 on a relative basis compared to the KBW NASDAQ Regional Banking Index, and will compare our total shareholder return performance to the KBW index on the basis of our percentile ranking relative to the index members. The Compensation Committee established threshold, target and maximum performance levels for each selected goal. Payments for achievement of the threshold, target and maximum goals are 50%, 100%and 150%of the target payment, respectively.Actual performance between threshold, target andmaximumperformance levels will be interpolated to determine the amount of payment based on relative achievement of the corporate goals. The Compensation Committee decided to add the relative total shareholder return metric to the goals underlying the PRSU awards in 2017, because it is a measure of shareholder value creation that includes stock price appreciation or depreciation, dividend payments, and the cumulative effect of the reinvestment of dividends. The Compensation Committee believes that using a relative total shareholder return metric is a shareholder-aligned best practice that increases the alignment of executive and shareholder interests. Our relative total shareholder return will be measured on an end-to-end basis over the three-year performance period, calculated using an average of the 20 trading days nearest to January 1, 2017 and December 31, 2019. Under Mr. Ramaker’s release agreement related to his retirement, we agreed to fully-vest these TSRUs and agreed to allow these PRSUs to continue to vest based on the achievement of the performance conditions, even though he will not meet the service requirements. August 9, 2017 Equity Awards to Mr. Shafer OnAugust 9, 2017, theCompensationCommittee awardedMr. Shafer an additional equity award in connectionwith his appointment as Vice Chair and President and Chief Executive Officer of Chemical Bank. This award was intended to supplement the grant he received in February 2017 so that his total equity award for 2017, on a pro-rated basis, would be more commensurate with his new position for the six months in which he served in that role. The Compensation Committee established the target value of this additional grant at $138,913, and delivered it to Mr. Shafer in the form of the standard 2017 mix of equity for executive officers of 60% PRSUs, 30% Stock Options and 10% TRSUs generally used for our February 2017 grants described above. 36