CHFC 2017 Annual Report

programs. The Wealth Management department earns revenue largely from fees based on the market value of those assets under management, which can fluctuate as the market fluctuates. The Wealth Management department had assets under custodial and management arrangements of $5.13 billion at December 31, 2017, $4.41 billion at December 31, 2016 and $3.71 billion at December 31, 2015. The Wealth Management department also sells investment products (largely annuity products and mutual funds) through its Chemical Financial Advisors program. Customer assets within the Chemical Financial Advisors program were $1.31 billion at December 31, 2017, $1.15 billion at December 31, 2016 and $0.87 billion at December 31, 2015. Deposit Products We offer a full range of deposit services that are typically available from most banks and savings institutions, including checking accounts, commercial accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit. Transaction accounts and time deposits are tailored to and offered at rates competitive with those offered in our primary market areas. In addition, we offer certain retirement account services. We solicit accounts from individuals, businesses, associations, organizations and governmental authorities. We believe that our significant branch network will assist us in continuing to attract deposits from local customers in our market areas. Employees At December 31, 2017, we had approximately 3,000 full-time equivalent employees. Competition The business of banking is highly competitive. The principal methods of competition for financial services are price (interest rates paid on deposits, interest rates charged on loans and fees charged for services) and service (convenience and quality of services rendered to customers). In addition to competition from other commercial banks, we face significant competition from non-bank financial institutions, including savings and loan associations, credit unions, finance companies, insurance companies and investment firms. Credit unions and finance companies are particularly significant competitors in the consumer loan market. The financial services industry has become more competitive as technology advances have lowered barriers to entry, enabling more companies, including nonbank companies, to provide financial services. Technological advancesmay diminish the importance of depository institutions and other financial institutions. Mergers and acquisitions have also led to increased concentration in the banking industry, placing added competitive pressure on our core banking products and services as we see competitors enter some of our markets or offer similar products. We also compete for deposits with a broad range of other types of investments, including mutual funds and annuities. The growth of our deposits can be impacted by competition from other investment products, such as mutual funds and various annuity products. These investment products are sold by a wide spectrum of organizations, such as brokerage and insurance companies, as well as by financial institutions. In response to the competition for other investment products, we, through our Chemical Financial Advisors program, offer a wide array of mutual funds, annuity products and marketable securities through an alliance with an independent, registered broker/dealer.We also compete with credit unions inmost of our markets. These institutions are challenging competitors, as credit unions are exempt from federal income taxes, allowing them to potentially offer higher deposit rates. Mergers, Acquisitions, Consolidations and Divestitures Our current strategy for growth includes strengthening our presence in core markets, expanding into contiguous markets and broadening our product offerings, while taking into account the integration and other risks of growth. We evaluate strategic acquisition opportunities and conduct due diligence activities in connection with possible transactions. As a result, discussions, and in some cases, negotiations and transactions may take place and future acquisitions involving cash, debt or equity securities may occur, including future acquisitions that may extend beyond contiguous markets. These generally involve payment of a premium over book value and current market price, and therefore, dilution of book value per share will likely occur with any future transaction. For more information, see the information under the heading "Mergers, Acquisitions and Branch Closings" included in Management's Discussion andAnalysis of Financial Condition and Results of Operations, which is here incorporated by reference. Availability of Information We file reports with the Securities and Exchange Commission (SEC). Those reports include the annual report on Form 10- K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements. The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet 8