CASH 2018 Annual Report

46 Each of the Federal Reserve and OCC has primary reviewing responsibility for the applications or notices required to be submitted to it by savings associations relating to a proposed distribution. The Federal Reserve may disapprove of a notice, and the OCC may disapprove of a notice or deny an application, if: • the savings association would be undercapitalized, significantly undercapitalized or critically undercapitalized following the distribution; • the proposed distribution raises safety and soundness concerns; or • the proposed distribution violates a prohibition contained in any statute, regulation, enforcement action or agreement between the savings association (or its holding company, in the case of the Federal Reserve) and the entity’s primary federal regulator, or a condition imposed on the savings association (or its holding company, in the case of the Federal Reserve) in an application or notice approved by the entity’s primary federal regulator. Under current regulations, the Bank is not permitted to pay dividends on its stock if its regulatory capital would fall below the amount required for the liquidation account established to provide a limited priority claim to the assets of the Bank to qualifying depositors at March 31, 1992, who continue to maintain deposits at the Bank after its conversion from a federal mutual savings and loan association to a federal stock savings bank pursuant to its Plan of Conversion adopted August 21, 1991. During the fiscal year ended September 30, 2018, the Bank paid cash dividends in the amount of $45.3 million to the Company during the fourth quarter of fiscal 2018, a portion of which was used to fund the Crestmark Acquisition and other related expenses. The Company does not currently anticipate that it will need dividends from the Bank in order to fund dividends to the Company’s stockholders. Qualified Thrift Lender Test All savings associations, including the Bank, are required to meet a qualified thrift lender (“QTL”) test to avoid certain restrictions on their operations. This test requires a savings association to have at least 65% of its portfolio assets (as defined by regulation) in qualified thrift investments (primarily residential mortgages and related investments, including certain MBS) on a monthly average for nine out of every 12 months on a rolling basis or meet the requirements for a domestic building and loan association under the Internal Revenue Code. Under either test, the required assets primarily consist of residential housing related to loans and investments. At September 30, 2018, the Bank met the QTL test and has at all times since its inception and expects to do so for the foreseeable future. Any savings association that fails to meet the QTL test must convert to a national bank charter, unless it qualifies as a QTL within one year and thereafter remains a QTL, or limits its new investments and activities to those permissible for both a savings association and a national bank. In addition, the association is subject to national bank limits for payment of dividends and branching authority. If such association has not requalified or converted to a national bank within three years after the failure to meet the QTL test, it must divest all investments and cease all activities not permissible for a national bank or federal savings association. If the NB Election Proposed Rule is adopted as proposed, and if the Bank determines to avail itself of this election, the Bank would no longer be subject to QTL requirements upon the election’s effectiveness, which would be 60 days after submission of such election to the OCC. Community Reinvestment Act Under the CRA, the Bank is evaluated periodically by its primary federal banking regulator to determine if it is meeting its continuing and affirmative obligations consistent with its safe and sound operation, to help meet the credit needs of its assessment areas, including low- and moderate-income neighborhoods. The Bank received a “Satisfactory” rating during its most recent Performance Evaluation dated January 3, 2017. A copy of the Bank’s most recent Performance Evaluation is available as part of its Public File. It is expected that CRA regulations will be addressed by the federal regulators in the near term as the OCC released for public comment in August 2018 a proposal requesting information relating to modernizing the CRA.