CASH 2018 Special Proxy Statement

Net interest income increased $16.7 million to $82.7 million for the year ended December 31, 2017 as compared to $66.0 million for the year ended December 31, 2016. The overall increase in net interest income was primarily due to a higher volume and yield on interest-earning assets. Factoring receivables interest income increased $8.1 million or 23.1% to $43.0 million for the year ended December 31, 2017 from $34.9 million for the same period ended December 31, 2016. In addition, commercial and consumer loans increased $7.7 million or 24.7% to $39.0 million from $31.3 million. Crestmark management believes these increases are the result of efforts by Crestmark over the period in question to expand its factoring and lending businesses, including investments in personnel, and improved economic conditions for Crestmark’s customer base. These increases were offset by a 30 basis point increase in the cost of interest-bearing liabilities primarily due to increased volume and rates associated with originated and brokered certificates of deposit. Net Interest Income and Margin Analysis (dollars in thousands) Years Ended December 31, 2016 2015 Change From 2015 to 2016 Assets: Average Balance Interest Yield/ Rate % Average Balance Interest Yield/ Rate % Total Change Change Due to Volume Change Due to Rate Cash and cash equivalents . . . . . . . . . . . . . . $ 64,317 $ 118 0.18% $ 53,645 $ 48 0.09% $ 70 $ 20 $ 50 Securities available for sale (2) . . . . . . . . . . . 21,736 362 1.67% 22,376 386 1.73% (24) (11) (13) Commercial and consumer loans (1) . . . . . . . 292,548 31,276 10.69% 263,323 28,620 10.87% 2,656 3,124 (468) Factoring receivables (1) . . . . . . . . . . . . . . . . 229,669 34,949 15.22% 220,745 34,283 15.53% 666 1,358 (692) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,203 7,216 8.00% 64,272 6,223 9.68% 993 2,074 (1,081) Total interest-earning assets . . . . . . . . . . . . 698,473 73,921 10.58% 624,361 69,560 11.14% 4,361 6,565 (2,204) Non interest-earning assets . . . . . . . . . . . . . $143,734 $122,618 Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . $842,207 $746,979 Liabilities and Shareholders’ Equity Certificates of deposits - originated . . . . . . . $537,299 $ 5,513 1.03% $509,283 $ 4,294 0.84% $1,219 $ 287 $ 932 Certificates of deposits - brokered . . . . . . . . 155,502 1,314 0.85% 120,713 787 0.65% 527 294 233 Federal funds purchased . . . . . . . . . . . . . . . 352 6 1.70% 301 2 0.66% 4 1 3 Subordinated debt . . . . . . . . . . . . . . . . . . . . 4,046 155 3.83% 4,101 143 3.49% 12 (2) 14 Non-recourse notes payable . . . . . . . . . . . . . 24,383 861 3.53% 17,715 696 3.93% 165 235 (70) Other borrowings . . . . . . . . . . . . . . . . . . . . . — 103 — 92 11 — 11 Total interest-bearing liabilities . . . . . . . . . . 721,582 7,952 1.10% 652,113 6,014 0.92% 1,938 816 1,122 Other liabilities . . . . . . . . . . . . . . . . . . . . . . 33,606 16,214 Shareholders’ equity . . . . . . . . . . . . . . . . . . 87,019 78,652 Total liabilities & shareholders equity . . . . . $842,207 $746,979 Net interest income/interest rate spread . . . . $65,969 9.48% $63,546 10.22% $2,423 $5,749 $(3,326) Net interest margin (3) . . . . . . . . . . . . . . . . . 9.44% 10.18% Notes: (1) For the purpose of the computation of loans and factoring receivables, nonaccrual loans and leases are included in the average balances outstanding. (2) Tax-exempt interest income is insignificant. (3) Net interest margin is computed taking net interest income divided by average interest earning assets. Net interest income increased $2.5 million to $66.0 million for the year ended December 31, 2016 as compared to $63.5 million for the year ended December 31, 2015. The overall increase in net interest income was primarily due to a higher volume of interest-earning assets, particularly commercial and consumer loans, factoring receivables and leases, offset in part by a decrease in yield of 0.56% on interest-earning assets and an 18 basis point increase in the cost of interest-bearing liabilities. In addition, due to competitive factors within the industry, lease yield decreased from 9.68% to 8.00% from 2015 to 2016. 114