CHFC 2018 Annual Report

may not capture or fully express the risks we face, may suggest that we have sufficient capitalization when we do not, or may lead us to misjudge the business and economic environment in which we will operate. If our models fail to produce reliable results on an ongoing basis, we may not make appropriate risk management, capital planning, or other business or financial decisions. Strategies that we employ to manage and govern the risks associated with our use of models may not be effective or fully reliable, and as a result, we may realize losses or other lapses. Also, information that we provide to the public or regulators based on poorly designed models could be inaccurate or misleading. Banking regulators continue to focus on the models used by banks and bank holding companies in their businesses. Some of our decisions that the regulators evaluate, including distributions to our shareholders, could be affected adversely due to their perception that the quality of the models used to generate the relevant information is insufficient. Accordingly, the failure or inadequacy of a model may result in increased regulatory scrutiny on us or may result in an enforcement action or proceeding against us by one of our regulators. Our ability to maintain our reputation is critical to the success of our business, including our ability to attract and retain customer relationships, and failure to do so may materially adversely affect our performance. The reputation of Chemical Bank is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation. Damage to our reputation could undermine the confidence of our current and potential clients in our ability to provide financial services. Such damage could also impair the confidence of our investors, counterparties and business partners, and ultimately affect our ability to effect transactions or maintain or hire qualifiedmanagement and personnel. Maintenance of our reputation depends not only on our success in controlling and mitigating the various risks described herein, but also on our success in identifying and appropriately addressing issues that may arise in areas such as potential conflicts of interest, anti-money laundering, client personal information and privacy issues, record-keeping, regulatory investigations and any litigation that may arise from the failure or perceived failure of us to comply with legal and regulatory requirements. If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating resultsmay bematerially adversely affected. Further, negative public opinion can expose us to litigation and regulatory action, which would adversely affect our business, financial condition and results of operations. Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact our business. Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. Although management has established disaster recovery policies and procedures, the occurrence of any such event in the future could have a material adverse effect on our business, financial condition and results of operations. Risks Related to Our Common Stock Investments in our common stock involve risk. The market price of our common stock may fluctuate significantly in response to a number of factors, including, among other things: • Variations in quarterly or annual results of operations • Changes in dividends paid per share • Deterioration in asset quality, including declining real estate values • Changes in interest rates • Changes in tax laws • Significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by, or involving, Chemical or its competitors • Failure to integrate acquisitions or realize anticipated benefits from acquisitions • Regulatory actions, including changes to regulatory capital levels, the components of regulatory capital and how regulatory capital is calculated • New regulations that limit or significantly change Chemical's ability to continue to offer existing banking products • Volatility of stock market prices and volumes • Issuance of additional shares of common stock or other debt or equity securities of Chemical • Changes in market valuations of similar companies • Uncertainties, disruptions and fluctuations in the credit and financial markets, either nationally or globally 30