CASH 2018 Special Proxy Statement

CRESTMARK BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Corporation, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Corporation does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Premises, leasehold Improvements and Equipment: Land is carried at cost. Building, leasehold improvements and equipment are stated at cost less accumulated depreciation. Depreciation is computed over the asset useful lives on a straight-line basis, or over the terms of the lease, if shorter, for leasehold improvements. Goodwill: Goodwill resulting from business combinations represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill acquired in a business combination and determined to have an indefinite useful life is not amortized, but tested for impairment at least annually. The Corporation performed its impairment evaluation as of September 30, 2017. If the impaired fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. No goodwill impairment was recognized during the years ended December 31, 2017, 2016 or 2015. Long-Term Assets: Leasehold improvements and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value. Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. Stock-Based Compensation: Compensation cost is recognized for stock options issued to employees, based on the fair value of these options at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options. Compensation cost is recognized over the required service period, generally defined as the vesting period. For options with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire option. In 2016, the Corporation adopted ASU 2016-09 which amended existing guidance to simplify the accounting for share-based payment award transactions, including: (a) recording the income tax consequences of share based award transactions in current period tax expense as opposed to capital; (b) classification of awards as either equity or liabilities; (c) classification on the statement of cash flows; and (d) policy election to estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. The amendments are effective for annual periods beginning after December 15, 2017, however early adoption is permitted. Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. F-13