Mercantile Bank Corporation (NASDAQ:MBWM) Files An 8-K Other EventsItem 8.01Other Events.
Impact of the Tax Cuts and Jobs Act on Deferred Tax Assets
On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) became law. The Act introduces tax reform that reduces the current corporate federal income tax rate from 35% to 21%, among other changes. The rate reduction is effective January 1, 2018.
Mercantile Bank Corporation (the "Company") has determined that the Act requires a revaluation of its net deferred tax asset. Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates are enacted, like the Act, deferred tax assets and liabilities are adjusted through income tax expense.
The Company estimates that, based on current information, the Act’s impact will be to reduce the value of the Company’s net deferred tax asset that is affected by the rate change by approximately $1.3 million, which will be recorded as additional income tax expense during the fourth quarter of 2017. The estimated impact is a reduction of fourth quarter 2017 earnings and year-end 2017 tangible book value by approximately $0.08 per share.
The Company’s revaluation of its net deferred tax asset and other relevant details remain subject to modifications and updates as information and analysis regarding the Act and other relevant factors emerge.
About Mercantile Bank Corporation (NASDAQ:MBWM)
Mercantile Bank Corporation is a bank holding company. The Company owns the Mercantile Bank of Michigan (the Bank). The Bank is a state banking company. The bank, through its approximately 50 office locations, provides commercial banking services primarily to small- to medium-sized businesses and retail banking services in and around the West and Central portions of Michigan. The Bank makes secured and unsecured commercial, construction, mortgage and consumer loans, and accepts checking, savings and time deposits. The Bank owns approximately 50 automated teller machines (ATM). Its bank also enables customers to conduct certain loan and deposit transactions by personal computer and through mobile applications. Courier service is provided to certain commercial customers, and safe deposit facilities are available at its office locations. Mercantile Insurance Center, Inc. (insurance company) is a subsidiary of the Bank, which offers insurance products.