CASH 2018 Special Proxy Statement

CRESTMARK BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Corporation recognizes interest and/or penalties related to income tax matters in income tax expense. Loan Commitment and Related Financial Instruments: Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Comprehensive Income: Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, net of income tax expense and foreign currency translation adjustments, net of income tax (expense) benefit, which are also recognized as separate components of equity. Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the consolidated financial statements. Canadian Activity: The Corporation engages in cross-border activity by serving clients in Canada, resulting in transactions being originated and settled in Canadian dollars instead of US dollars. At year-end 2017 and 2016, approximately $5,413,000 and $5,417,000 (US) of the Corporation’s loans, leases and factoring receivables were originated in and will be settled with Canadian dollars. In addition, at year-end 2017 and 2016, the Corporation had approximately $1,776,000 and $3,390,000 (US) on deposit in a Canadian financial institution in Canadian dollars. These transactions subject the Corporation to foreign currency risk. Earnings per Share: Basic earnings per share is net income divided by the weighted average number of common shares outstanding during the period. ESOP shares are considered outstanding for this computation unless unearned. Diluted earnings per share includes dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and stock dividends through the date of issuances of the financial statements. Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the bank to the holding company or by the holding company to shareholders. Reclassifications: Certain prior year amounts have been reclassified to conform to the current year presentation. Reclassifications had no effect on prior year net income or equity. NOTE 2 – ACQUISITION On May 11, 2017, the Corporation, through Crestmark Equipment Finance, Inc. (“CEF”), completed the acquisition of substantially all of the assets and certain liabilities of Allstate Capital, LLC (“Allstate”) from its members. The assets acquired by CEF in the Allstate acquisition include the Allstate trade name, operating platform, and other assets. Allstate engages in the business of originating transactions which involve the financing or leasing of personal property. All Allstate employees became CEF employees. F-14