CHFC 2017 Annual Report

Investment Securities The Corporation elected to early adopt ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): PremiumAmortization on Purchased Callable Debt Securities ("ASU 2017-08") during the second quarter of 2017. The guidance in ASU 2017-08 shortens the amortization period for certain callable debt securities that are held at a premium to the earliest call date. Debt securities held at a discount will continue to be amortized as a yield adjustment over the life of the instrument. The early adoption of ASU 2017-08 in the second quarter of 2017 did not have a material impact on the Consolidated Financial Statements. Accumulated Other Comprehensive Income (Loss) The Corporation elected to early adopt ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects fromAccumulated Other Comprehensive Income ("ASU 2018-02") during the fourth quarter 2017. In February 2018, the FASB issued ASU 2018-02, which requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date and permitted early adoption. The Corporation elected to early adopt ASU 2018-02 during the fourth quarter of 2017 and an election was made to reclassify the income tax effects of the Tax Cuts and JobsAct from accumulated other comprehensive income to retained earnings. The early adoption of ASU 2018-02, resulted in a $4.5 million reclassification from accumulated other comprehensive income to retained earnings related to the income tax effects of the Tax Cuts and Jobs Act. Chemical Financial Corporation Notes to Consolidated Financial Statements December 31, 2017 95 Note 2: Mergers and Acquisitions Merger with Talmer Bancorp, Inc. On August 31, 2016, the Corporation completed the merger with Talmer for total consideration of $1.61 billion. As a result of the merger, the Corporation issued 32.1 million shares of its common stock based on an exchange ratio where each Talmer shareholder received 0.4725 shares of the Corporation's common stock, and $1.61 in cash, for each share of Talmer common stock. In conjunction with the merger, the Corporation entered into and drew on a $125.0 million credit facility, which is described in more detail in Note 15. The proceeds from the credit facility were used to pay off the Corporation's $25.0 million line-of-credit and a $37.5 million line-of-credit of Talmer, with the remaining proceeds used to partially fund the cash portion of the merger consideration. The Corporation incurred $8.5 million and $61.1 million of merger and acquisition-related transaction expenses during the years ended December 31, 2017 and 2016, respectively. As a result of the merger, Talmer Bank and Trust became a wholly-owned subsidiary of the Corporation. Talmer Bank and Trust was consolidated with and into Chemical Bank during the fourth quarter of 2016.