Contract analysis

I. PURPOSE AND EXECUTIVE SUMMARY This memorandum advises Belmont Ridge Bank National Association ("BRB," OCC Charter No. 48271, FDIC Certificate No. 31845) on the logistics, procedures, and related considerations for the timely payment of the $14,500,000 civil money penalty (the "CMP") assessed pursuant to Consent Order No. OCC-2025-003 (the "Consent Order"), issued by the Office of the Comptroller of the Currency (t

II. PAYMENT AMOUNT AND DEADLINE CALCULATION A. CMP Amount The CMP assessed under the Consent Order is $14,500,000 (fourteen million five hundred thousand dollars). This amount was assessed under the OCC's statutory authority pursuant to 12 U.S.C. § 1818(i)(2), which empowers the Comptroller of the Currency to impose civil money penalties against insured depository institutions and institution-affiliated parties for,

1. The OCC's typical enforcement convention is to expect payment on or before the stated calendar day. When that day falls on a non-business day, the OCC generally expects that the payment will have been transmitted and settled prior to the weekend or holiday.

2. Fedwire Funds Service, the Federal Reserve's real-time gross settlement system through which large-value wire transfers are processed, operates only on business days. The Fedwire operating hours are generally 9:00 PM Eastern Time (prior day) through 7:00 PM Eastern Time, Monday through Friday, excluding Federal Reserve holidays. Wires initiated after the Fedwire cutoff time on Friday, March 14, 2025, would not set

3. Even if a technical argument could be made that payment on Monday, March 17, 2025 (the next business day) satisfies the Consent Order, relying on such an argument introduces unnecessary risk and could be perceived negatively by the OCC. Recommendation: Based on the foregoing analysis, C&H strongly recommends that BRB initiate the wire transfer on or before Thursday, March 13, 2025, with Friday, March 14, 2025 as t

III. PAYMENT METHOD AND WIRE TRANSFER INSTRUCTIONS A. Payment Method The CMP must be paid by wire transfer to the United States Treasury. This is the standard payment method for CMPs imposed by the OCC, and the Consent Order specifies wire transfer as the required payment mechanism. BRB should initiate the wire transfer through its Federal Reserve Bank account (maintained at the Federal Reserve Bank of New York) or,

IV. ACCOUNTING AND FINANCIAL REPORTING TREATMENT A. Expense Recognition The CMP of $14,500,000 should be recorded as a regulatory penalty expense in BRB's financial statements. The appropriate accounting treatment is governed by ASC 450 (Contingencies), which requires that a loss contingency be accrued when (i) it is probable that a liability has been incurred as of the financial reporting date and (ii) the amount of

V. FEDERAL TAX TREATMENT A. Non-Deductibility Under 26 U.S.C. § 162(f) The $14,500,000 CMP is a penalty paid to a government entity — specifically, to the United States Treasury, as directed by the OCC — for violations of law. The federal income tax treatment of such payments is governed by 26 U.S.C. § 162(f), which was substantially amended by the Tax Cuts and Jobs Act of 2017 (Pub. L. No. 115-97, § 13306) and is im

Section 162(f)(2)(A) provides a limited exception to the general rule of non-deductibility for amounts that constitute restitution (including remediation of property) or amounts paid to come into compliance with a law that was violated, or amounts paid pursuant to a court order that are not penalties. To qualify for this exception, the court order or settlement agreement must specifically identify the amount as resti

VI. CONFIRMATION AND DOCUMENTATION PROCEDURES WITH THE OCC Maintaining a clear and well-documented record of the CMP payment process is essential for demonstrating compliance with the Consent Order. C&H recommends the following procedures for pre-payment notification, wire confirmation, post-payment confirmation, and OCC acknowledgment. A. Pre-Payment Notification C&H recommends that BRB send a written notice to the

VII. INTERNAL APPROVAL AND AUTHORIZATION PROCEDURES A. Board Authorization The Board Resolution currently under development — which is expected to be adopted by the Board of Directors of BRB no later than February 28, 2025 — should expressly authorize the payment of the $14,500,000 CMP, in addition to acknowledging the Consent Order and authorizing the $42,500,000 remediation budget. C&H recommends that the Board Res

1. Gregory Nardone, General Counsel & Corporate Secretary — Provides legal authorization and confirms that the CMP payment is required under the Consent Order, that the payment amount is correct, and that the wire instructions have been verified with the OCC. Signs off on the legal authorization memorandum.

2. Samantha Reeves, Chief Financial Officer — Provides funding authorization, confirms the accounting treatment and period of recognition, verifies that the originating account has sufficient immediately available funds, and approves the wire execution. Signs off on the wire transfer authorization form.

3. Diane Whitford, Chief Executive Officer — Provides executive authorization for the payment, confirming that the Board Resolution (or Audit Committee authorization) has been obtained or that the payment is within delegated authority. Signs off on the executive authorization.

4. Thomas Ikeda, BSA Officer — Provides acknowledgment of the CMP payment for BSA/AML compliance records, confirming that the payment relates to the BSA/AML-related Consent Order and that it has been noted in the BSA compliance documentation. This acknowledgment is for record-keeping purposes and does not constitute a separate approval authority. Each signatory should execute the relevant authorization or acknowledgm

VIII. ACTION ITEMS AND TIMELINE SUMMARY The following table summarizes the key action items, responsible parties, and target dates for the CMP payment process: C&H will monitor the timeline and provide reminders as key dates approach. BRB should designate a single point of contact within the Treasury operations team to coordinate with C&H on the wire transfer logistics.

IX. CONCLUSION Timely payment of the $14,500,000 civil money penalty by March 16, 2025 is a mandatory and non-negotiable obligation under Consent Order No. OCC-2025-003. Failure to remit the full penalty amount within the prescribed timeframe could expose BRB to additional civil money penalties under 12 U.S.C. § 1818(i)(2), adverse supervisory action by the OCC, potential referral to the Department of Justice, and si