CASH 2018 Special Proxy Statement

CRESTMARK BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 – SUBORDINATED DEBT AND OTHER BORROWINGS (Continued) The contractual payments on the note payable are as follows: 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 714,286 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714,286 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714,286 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714,286 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,142,856 $5,000,000 NOTE 14 – STOCK OPTIONS The Corporation has two stock-based compensation plans. Under the employees’ 1998 Stock Option Plan, the Corporation may grant options to key employees for up to 180,000 shares of common stock. Under the 1998 Stock Option Plan for Directors, the Corporation is authorized to grant options to directors for up to 70,000 shares of common stock. Under the Director plan, all of the options are vested two years after the date of grant. Under the Employee plan, options are vested over a 5 year period with 40% of the options vesting two years after the date of grant and an additional 20% vesting in each subsequent year. All options expire 10 years after the date of the grant. Under both plans, the exercise price of each option equals the market price of the Corporation’s common stock on the date of grant. The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black- Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Corporation’s common stock. The Corporation uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. Upon exercise, shares will be issued from the Corporation’s authorized, but unissued shares. The fair value of options granted was determined using the following weighted-average assumptions as of grant date. 2017 2016 2015 Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . 2.20% 2.20% 2.00% Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 years 10 years 10 years Expected stock price volatility . . . . . . . . . . . . . . . . . . 0.25 0.25 0.25 Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.00% 5.00% 5.00% Weighted average fair value of options granted . . . . . $ 16.66 $ 14.43 $ 13.14 F-31