CASH 2018 Special Proxy Statement

Crestmark may not be able to successfully adapt to evolving industry standards and market pressures. Crestmark’s success depends, in part, on the ability to adapt products and services to evolving industry standards. There is increasing pressure to provide financial products and services at lower prices, which may reduce net interest income and non-interest income from fee-based products and services. In addition, the widespread adoption of new technologies could require Crestmark to make substantial capital expenditures to modify or adapt existing products and services or develop new products and services. Crestmark may not be successful in introducing new products and services in response to industry trends or developments, including trends or developments in technology, or those new products may not achieve market acceptance. As a result, Crestmark could lose business, or be forced to price products and services on less advantageous terms to retain or attract clients. As a result, Crestmark’s business, financial condition, or results of operations may be adversely affected. The soundness of other financial institutions could adversely affect Crestmark. Crestmark’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing and counterparty or other relationships. Crestmark has exposure to many different industries and counterparties, and it routinely executes transactions with counterparties in the financial industry. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by Crestmark or by other institutions. Even routine funding transactions expose Crestmark to credit risk in the event of default of its counterparty or client. In addition, Crestmark’s credit risk may be exacerbated when the collateral held by it cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the financial instrument exposure due to Crestmark. There is no assurance that any such losses would not materially and adversely affect Crestmark’s results of operations. The timing and effect of Federal Reserve Board policy normalization remains uncertain. In September 2014, the Federal Reserve Board announced principles it would follow to implement monetary policy normalization, that is, to raise the Federal funds rate and other short-term interest rates to more historically normal levels and to reduce the Federal Reserve’s securities holdings, so as to promote its statutory mandate of maximum employment and price stability. The Federal Open Market Committee (“FOMC”) took the initial step in that process by raising the Federal funds rate by 25 basis points in December 2015, the first such action since December 2008. Subsequently, the FOMC refined the normalization principles and announced greater detail about its planned approach. In September 2017, the FOMC announced the start of gradual reduction in the Federal Reserve’s securities holdings, commencing in October 2017. In each of March, June, and December 2017, the FOMC raised the Federal funds rate by 25 basis points, and announced its intention to continue to raise the Federal funds rate gradually over the next few years. There can be no assurance that these reductions in the Federal Reserve’s securities holdings, and increases in the Federal funds rate, will continue to occur, that they will be gradual if they do occur, or as to the actual impact of those policies on the financial markets, the broader economy, or on Crestmark’s business, financial condition, results of operations, or access to credit. The effect of financial services legislation and regulations remains uncertain. On February 3, 2017, President Trump signed Executive Order 13772, specifying new core principles for regulating the U.S. financial system. Among other things, the President directed the Secretary of the Treasury, in consultation with federal regulatory agencies, to review existing laws and regulations and report on the extent to which they were consistent with the core principles. Beginning in February 2017, Congress passed, and the President signed, more than a dozen resolutions under the Congressional Review Act, repealing various federal regulations, including regulations adopted by the Consumer Financial Protection Bureau (the “CFPB”). Certain bills pending in Congress would, if enacted, repeal or substantially amend various provisions of the Dodd-Frank 25