CHFC 2018 Proxy Statement

The TRSUs 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 two-and-a-half year performance period of July 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%. The total shareholder return measure will be measured on a relative basis compared to the KBW NASDAQ Regional Banking Index measured from July 2017 to December 2019, 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 and maximum performance levels will be interpolated to determine the amount of payment based on relative achievement of the corporate goals. September 1, 2017 Equity Awards to Mr. Provost and Mr. Torgow Under the terms of their September 1, 2017 employment agreements, Mr. Provost and Mr. Torgow each received 23,000 fully- vested shares of our common stock in September 2017. In connection with these awards, Mr. Provost and Mr. Torgow voluntarily agreed to forgo the additional salary and annual bonus otherwise due to them under their 2016 service agreements due to the shared belief that this would immediately better align the executives’ interests with those of our shareholders by increasing their stock ownership in the Corporation in lieu of additional cash salary payments, and thus further incent each executive to intently focus on future growth and the execution of our strategic plan. The September stock awards replaced nearly all of the cash compensation payable toMr. Provost andMr. Torgow for July 1, 2017 through June 30, 2018 under the terms of their prior employment agreements. Results of 2015 PRSU Awards Tied to 2017 Performance For the 2015 through 2017 performance period, payouts of PRSUs were dependent on performance relative to two goals: adjusted diluted earnings per share and adjusted efficiency ratio. Each of these goals was subject to a payout range from 0% of target for below threshold performance, to 50% of target for threshold performance, to 100% of target for target performance to 150% of target for maximum performance. The Compensation Committee determined that payouts with respect to the performance goals were earned at 150% of target for the 2015-2017 performance period, based on performance as indicated below. Measure Weighting Performance Goals Actual Achievement Threshold Target Maximum Result Funding Weighted 2017 Adjusted Diluted EPS (1) 65% $2.80 $2.90 $2.96 $3.12 150% 97.5% 2017 Adjusted Efficiency Ratio (2) 35% 59% 55% 53% 51.90% 150% 52.5% Payout Funding -- 50% 100% 150% -- -- 150% (1) Adjusted to exclude merger and restructuring expenses, net gain on the sale of branches and the change in fair value in loan servicing rights (2) The adjusted efficiency ratio excludes merger and restructuring expenses, losses on sales of investment securities in the fourth quarter of 2017 as part of our treasury and tax management objectives, the revaluation of net deferred tax assets, amortization of intangibles, impairment of income tax credits, the net interest income fully tax equivalent adjustment, the change in fair value on loan servicing rights, and losses/gains from sale of investment securities and closed branch locations. Payout settlement of earned shares will occur on or before March 15, 2018. Mr. Rathbun and Mr. Ramaker were our only named executive officers that received PRSUs for the 2015-2017 performance period. Mr. Rathbun’s target grant was 1,055 units resulting in a payout of 1,583 shares. Mr. Ramaker's target grant was 13,525 units resulting in a payout of 20,288 shares. UnderMr. Ramaker’s release agreement related to his retirement, we agreed to vest this award as if he had remained an employee through the end of the performance period. 2018 Long-Term Incentive Plan Changes The Compensation Committee met in February 2018 and, in consultation with Aon, decided to make certain changes to our 2018 long-term incentive program. In an effort to more efficiently manage our equity pool for stock compensation, and in recognition of the declining use of stock options in the general marketplace, the Compensation Committee has decided to discontinue the practice of granting stock options in 2018. Instead, long-term incentive compensation to our executive officers in 2018 will be comprised of 60% PRSUs and 40% TRSUs, unless otherwise determined under a separate employment or other agreement. For 2018, the vesting schedule for TRSUs will be 20% per year for five years starting on the first anniversary of the date of grant. 37