CHFC 2017 Annual Report

in the form of the tax credits and tax losses that pass through to the Corporation. The carrying value of the investments is reflected in "Interest receivable and other assets" on the Consolidated Statements of Financial Position. The Corporation utilizes the proportional amortization method to account for investments in qualified affordable housing projects and the equity method to account for investments in other tax credit projects. Management analyzes these investments for potential impairment when events or changes in circumstances indicate that it is more-likely-than-not that the carrying amount of the investment will not be realized. An impairment loss is measured as the amount by which the carrying amount of an investment exceeds its fair value. Under the proportional amortization method, the Corporation amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits. Under the equity method, the Corporation's share of the earnings or losses is included in "Other operating expenses" on the Consolidated Statements of Income. The Corporation's unfunded equity contributions relating to investments in qualified affordable housing projects, federal historic tax projects and newmarket projects is recorded in "Interest payable and other liabilities" on the Consolidated Statements of Financial Position. Earnings Per Share The Corporation applies the two-class method of computing earnings per share as the Corporation has unvested restricted stock awards which qualify as participating securities. Under this calculation, all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities and earnings per share is determined according to dividends declared and participating right in undistributed earnings. Accumulated Other Comprehensive Income (Loss) Comprehensive income of the Corporation includes net income and adjustments to shareholders' equity for changes in unrealized gains and losses on investment securities available-for-sale and changes in the net actuarial gain/loss for the Corporation's defined benefit pension and postretirement plans, net of income taxes. The Corporation presents "Comprehensive income" as a component in the Consolidated Statements of Changes in Shareholders' Equity and the components of other comprehensive income separately in the Consolidated Statements of Comprehensive Income. Reclassifications Certain amounts appearing in the Consolidated Financial Statements and notes thereto for prior periods have been reclassified to conform to the current presentation. The reclassification had no effect on net income or shareholders’ equity as previously reported. Adopted Accounting Pronouncements Stock Compensation In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which simplifies the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures and statutory holding requirements, as well as classification on the statement of cash flows. ASU 2016-09 is effective for public companies for interim and annual periods beginning after December 15, 2016 with early adoption permitted for any interim or annual period. If an entity early adopts the amendments, any adjustment should be reflected as of the beginning of the fiscal year. The Corporation elected to early adopt ASU 2016-09 during the fourth quarter of 2016. All quarters during the year ended December 31, 2016 have been adjusted as a result of this adoption. Prior to adoption ofASU 2016-09, all excess tax benefits resulting from the exercise or settlement of share-based payment transactions were recognized in additional-paid-in-capital ("APIC") and accumulated in anAPIC pool, while tax deficiencies were either offset against the APIC pool or recognized in the income statement if no APIC pool was available. The new guidance eliminates additions to theAPIC pool and all excess tax benefits and deficiencies are recognized as an income tax benefit or expense in the income statement prospectively. Accordingly, periods prior to January 1, 2016 have not been adjusted. Chemical Financial Corporation Notes to Consolidated Financial Statements December 31, 2017 94