CASH 2018 Special Proxy Statement

Securities The following table sets forth the amortized cost and fair value of Crestmark’s securities, by type of security, for the dates indicated below: At December 31, 2017 2016 2015 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Available for sale U.S. treasury and federal agency . . . . . . . . . . . $24,888 $24,579 $16,841 $16,664 $18,423 $18,365 Municipal bonds . . . . . . . . . . . . . . . . . . . . . . . . 386 388 478 480 1,632 1,666 Mortgage backed securities: residential . . . . . . 1,111 1,120 1,309 1,326 1,532 1,557 Other securities . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 1,877 2,000 1,877 2,000 1,908 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,385 $27,964 $20,628 $20,347 $23,587 $23,496 Crestmark maintains a diversified securities portfolio, which includes obligations of U.S. treasury and federal agency, municipal bonds, residential mortgage-backed securities, and corporate securities. Crestmark regularly evaluates asset/liability management needs and attempts to maintain a portfolio structure that provides sufficient liquidity and cash flow. Crestmark believes that the unrealized losses on securities available for sale are temporary in nature and are expected to be recovered within a reasonable time period. Crestmark has the ability to hold securities with unrealized losses to maturity or until such time as the unrealized losses reverse. The portfolio of securities available for sale is reviewed quarterly for impairment in value. In performing this review, Crestmark management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) the impact of changes in market interest rates on the market value of the security and (4) an assessment of whether Crestmark intends to sell, or it is more likely than not that Crestmark will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. For securities that do not meet these recovery criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income (loss). Available for sale investment securities totaled approximately 2% of Crestmark’s total assets at December 31, 2017. Crestmark management believes that the maturities of those investment securities is not material to the balance sheet nor significant to an understanding of Crestmark’s financial condition. Loan Portfolio Loans are the largest component of Crestmark’s interest-earning assets. The proper management of credit and market risk inherent in the loan portfolio is critical to Crestmark’s financial well-being. To control these risks, Crestmark has adopted strict underwriting standards which include established and authorized credit limits, attentive portfolio management, use of lock box arrangements, verification of receivables and inventory, and in many instances, Crestmark receiving and controlling the borrowers’ cash receipts. Crestmark also monitors and limits loan concentrations to specific industries. While Crestmark’s customers are diversified with respect to industry, as of December 31, 2017 approximately 35% of loans, leases and receivables were to customers in the truck transportation, merchant wholesalers and durable goods, administrative support services, and support activities for transportation. There were no concentrations greater than 10% of total loans that are not disclosed as a separate category in the following table. The following portfolio segments have been identified: Commercial loans: Crestmark’s commercial loans are primarily asset-based lending agreements secured by debtor’s short-term assets such as inventory, accounts receivable, and work-in-process. Commercial loans may also be secured by real estate and equipment. 118