Contract analysis

I. Introduction and Identification

1. My name is Patricia Navarrete. I am commonly known by colleagues and associates as "Trish." I am the Chief Financial Officer of Belmont Ridge Bank National Association ("BRB" or the "Bank"). My business address is 200 Park Avenue South, 38th Floor, New York, New York 10003.

2. I make this declaration voluntarily, of my own personal knowledge, in support of BRB's Wells Submission filed with the Staff of the Division of Enforcement (the "Staff") of the United States Securities and Exchange Commission (the "Commission" or "SEC"). Except where otherwise indicated, the statements made herein are based on my personal knowledge, my review of relevant corporate records maintained by BRB in the

3. I am over eighteen (18) years of age and am competent to testify to the matters set forth in this declaration. I make this declaration under penalty of perjury under the laws of the United States of America.

II. Professional Background and Role at BRB

4. I have more than twenty-eight years of experience in banking, financial services, and corporate finance. I received a Bachelor of Science degree in Economics from the University of Pennsylvania in 1994 and a Master of Business Administration degree from the Columbia Business School in 1998. I am a Certified Public Accountant licensed in the State of New York, although my license has been in inactive status since 2

5. Prior to joining BRB, I spent twelve years at Meridian National Bancshares, Inc., a publicly traded bank holding company, where I held positions of increasing responsibility including Vice President of Financial Planning and Analysis, Senior Vice President and Treasurer, and ultimately Deputy Chief Financial Officer. Before my tenure at Meridian National, I worked for approximately eight years at Severin Beck CPAs

6. I joined BRB in September 2016 as Senior Vice President and Deputy Chief Financial Officer. In that capacity, I oversaw BRB's treasury operations, capital planning, and financial-planning functions and worked closely with BRB's then-CFO in the preparation of SEC filings. On March 1, 2019, the Board of Directors of BRB appointed me Chief Financial Officer, succeeding my predecessor who retired. I have served contin

7. As Chief Financial Officer, my responsibilities include oversight of BRB's financial reporting function, including the preparation and filing of annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the Commission. I am also responsible for overseeing treasury and liquidity management, capital planning and stress testing, investor relations, and the Bank's budgeting and

8. I have direct supervisory responsibility over Raymond Hu, BRB's Chief Accounting Officer, who reports to me and is responsible for the day-to-day management of BRB's accounting policies, general ledger, and the technical accounting aspects of BRB's SEC filings. Mr. Hu and I work together closely on all matters relating to BRB's financial statements, including the determination of the allowance for credit losses ("

9. In my capacity as CFO, I report to BRB's Chief Executive Officer, Marcus R. Ellingham. I regularly present financial results, strategic forecasts, and material accounting matters to the Board of Directors' Audit Committee, which is chaired by Gwendolyn Prescott, an independent director with extensive public-company audit committee experience. I typically present to the Audit Committee at least quarterly, and more

10. BRB is a national banking association chartered under the laws of the United States, holding Office of the Comptroller of the Currency ("OCC") Charter No. 24891. BRB's common stock is listed on the Nasdaq Global Select Market under the ticker symbol "BRDG." As of December 31, 2022, BRB had total consolidated assets of approximately $38.2 billion, total deposits of approximately $29.6 billion, total shareholders'

III. Overview of BridgeFin Division and Loan Portfolio

11. BridgeFin is a digital-first consumer and small-business lending platform operated as an internal division of BRB. BridgeFin is not a separate legal entity; it is a business division within BRB's organizational structure, and all loans originated through the BridgeFin platform are assets of, and are booked on the consolidated balance sheet of, BRB. BridgeFin was launched in the third quarter of 2020, following ap

12. BridgeFin is headed by Naveen Chakravarti, who holds the title of Senior Vice President and Division Head. Mr. Chakravarti reports to BRB's Chief Operating Officer and coordinates regularly with the Chief Risk Officer, the Chief Accounting Officer, and me on matters relating to BridgeFin's loan origination volume, credit performance, and financial-reporting implications.

13. Through the BridgeFin platform, BRB originates two primary loan products: (a) unsecured personal loans to individual consumers, with an average loan size of approximately $18,400 during fiscal year 2022, and (b) small-business microloans to sole proprietors and small businesses, with an average loan size of approximately $42,000 during fiscal year 2022. Both products are underwritten through a proprietary artific

14. During fiscal year 2022, BridgeFin originated approximately $2.87 billion in new loans. As of December 31, 2022, the outstanding loan balance attributable to the BridgeFin portfolio was approximately $4.1 billion, representing approximately 10.7% of BRB's total consolidated assets. As reported in BRB's fiscal year 2022 Annual Report on Form 10-K, filed with the Commission on February 28, 2023, the BridgeFin portf

IV. Allowance for Credit Losses — Good-Faith Basis for ACL Estimates

15. BRB's reported ACL for the BridgeFin loan portfolio as of December 31, 2022, was $143.5 million. This amount represented approximately 3.50% of the $4.1 billion in outstanding BridgeFin loans as of that date. The ACL is an estimate of the expected lifetime credit losses on the BridgeFin portfolio, determined in accordance with CECL (ASC 326).

16. The ACL was determined using BRB's CECL model, which employs a vintage-cohort methodology. Under this approach, BridgeFin loans are segmented by origination quarter and by product type (unsecured personal loans versus small-business microloans). For each vintage-product cohort, the model estimates expected lifetime losses based on historical loss experience, adjusted for current conditions and reasonable and supp

17. The model incorporates historical loss data derived from BRB's own loss experience with the BridgeFin portfolio, supplemented where necessary by proxy data from comparable consumer and small-business lending portfolios, given the relatively short operating history of BridgeFin at the time of the fiscal year 2022 reporting date. Current conditions are assessed through analysis of portfolio stratification by credit

18. I personally reviewed and approved the ACL estimate for the BridgeFin portfolio each quarter during fiscal year 2022 (for the periods ended March 31, June 30, September 30, and December 31, 2022) and during the first two quarters of fiscal year 2023 (for the periods ended March 31 and June 30, 2023). In each instance, the ACL estimate was presented to me by Chief Accounting Officer Raymond Hu following the detail

19. The ACL estimate for the BridgeFin portfolio reflected the best professional judgment of BRB's management team. In addition to my own review and approval, the estimate was reviewed and discussed by Mr. Hu (Chief Accounting Officer), Annette Kowalski (Chief Risk Officer), Naveen Chakravarti (SVP & Division Head, BridgeFin), and the members of BRB's cross-functional ACL Committee, which includes senior representati

20. I affirm that BRB's reported ACL for the BridgeFin portfolio as of December 31, 2022, was prepared in good faith and represented a reasonable estimate of expected lifetime credit losses within the range of acceptable outcomes under ASC 326. The estimate was the product of a disciplined, well-documented process that incorporated both quantitative modeling and informed qualitative judgment, and it was consistent wi

21. I am aware that the SEC Staff has expressed a preliminary view that BRB's ACL for the BridgeFin portfolio as of December 31, 2022, should have been approximately $180.8 million, or approximately 4.41% of outstanding BridgeFin loans, rather than the $143.5 million (3.50%) reported by BRB. The difference between these two figures is approximately $37.3 million. BRB respectfully disagrees with the Staff's preliminar

V. Re-Aged / Modified Loans — Treatment and Rationale

22. A central issue in the Staff's investigation concerns BRB's treatment of certain BridgeFin loans that were modified and re-aged during fiscal year 2022 and the first half of fiscal year 2023. Specifically, BRB's CECL model treated 12,847 re-aged or modified BridgeFin loans, with an aggregate outstanding principal balance of approximately $236.4 million, as "current" after modification. Upon the completion of a qu

23. This treatment was based on BRB's established Loan Modification and Re-Aging Policy (the "Modification Policy"), a written policy that was developed in consultation with BRB's risk management team under the leadership of Chief Risk Officer Annette Kowalski. The Modification Policy was initially adopted in the second quarter of 2021 and was revised in the first quarter of 2022 to reflect the evolving composition a

24. The Modification Policy was developed to be consistent with the guidance set forth in the OCC's Comptroller's Handbook on Allowance for Credit Losses, which recognizes that loan modifications may, in appropriate circumstances, reflect improved borrower creditworthiness and warrant re-aging treatment. The Policy also drew upon interagency guidance issued jointly by the federal banking agencies regarding troubled d

25. Under BRB's Modification Policy, a BridgeFin loan was eligible for re-aging and delinquency-clock reset only if the borrower met specific, documented criteria for post-modification performance. These criteria included: (a) the borrower had made at least three consecutive on-time payments after the effective date of the modification; (b) the modification was a "concession" modification involving a reduction in int

26. I believed in good faith, and continue to believe, that BRB's re-aging treatment was appropriate and reflected the economic substance of the modifications at issue. When a borrower who had fallen behind on payments receives a modification, complies with the modified terms, and demonstrates through sustained payment performance that the modification has meaningfully improved the borrower's ability to repay, it is

27. This treatment was disclosed in the MD&A section of BRB's fiscal year 2022 Form 10-K and in subsequent quarterly reports on Form 10-Q. Specifically, the MD&A discussed BRB's loan modification programs, the volume and types of modifications, and the impact of modifications on reported credit-quality metrics. BRB's disclosures were prepared under the supervision of Mr. Hu and were reviewed by me, by our independent

VI. Internal Controls Over Financial Reporting

28. BRB maintains a comprehensive system of internal controls over financial reporting ("ICFR") as required by Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX"). As CFO, I am responsible, together with CEO Marcus R. Ellingham, for establishing and maintaining BRB's ICFR and for evaluating the effectiveness of those controls on a quarterly and annual basis.

29. I certify BRB's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q pursuant to SOX Sections 302 and 906. These certifications attest, among other things, that the reports do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and that the financial

30. BRB has implemented a robust governance framework specifically for the CECL model and the ACL estimation process. The key elements of this framework include the following: (a) Quarterly Model Validation. BRB's Model Risk Management group, which operates independently within the risk management function under the supervision of Chief Risk Officer Annette Kowalski, performs quarterly validation of the CECL model. M

31. BRB's independent auditor, Whitfield Keane LLP (PCAOB Registration No. 2847), with engagement partner Lorraine Dupont, reviewed BRB's ACL methodology and the related ICFR controls as part of the fiscal year 2022 integrated audit. Whitfield Keane did not issue an adverse or qualified opinion on BRB's financial statements or on the effectiveness of BRB's ICFR for fiscal year 2022. Whitfield Keane issued an unqualif

32. Neither internal audit nor Whitfield Keane LLP identified any material weakness or significant deficiency in BRB's ICFR for fiscal year 2022 or for the interim periods of Q1 2023 and Q2 2023. BRB's ICFR was operating effectively during the periods at issue in the Staff's investigation.

VII. Interaction with Independent Auditor

33. BRB's ACL estimates for the BridgeFin portfolio were reviewed by Whitfield Keane LLP as part of the fiscal year 2022 annual audit and the quarterly reviews for Q1, Q2, and Q3 of fiscal year 2023. The ACL for the BridgeFin portfolio was identified by Whitfield Keane as a "critical audit matter" in its audit report for fiscal year 2022, reflecting the significance of the estimate and the degree of auditor judgment

34. Mr. Hu and I had regular and substantive communications with Lorraine Dupont, the Whitfield Keane engagement partner, and with other members of the Whitfield Keane audit team, regarding BRB's CECL model, the key assumptions and inputs used in the model, the qualitative overlay adjustments, and the ACL levels for the BridgeFin portfolio. These communications occurred throughout the audit and quarterly review cycle

35. During the fiscal year 2022 audit, Whitfield Keane's audit team tested the CECL model's key assumptions, evaluated the reasonableness of management's qualitative overlay adjustments, and performed independent sensitivity analyses on the ACL estimate. Whitfield Keane was aware of BRB's re-aging treatment for modified BridgeFin loans and reviewed the Modification Policy and its application. Following this review, W

VIII. Voluntary Disclosure Enhancements

36. Following the commencement of the SEC's formal order of investigation in September 2023, and in a spirit of cooperation and transparency, BRB proactively undertook to enhance its disclosures regarding the BridgeFin portfolio's credit quality and ACL methodology. These enhanced disclosures were implemented beginning with BRB's Quarterly Report on Form 10-Q for the period ended September 30, 2023, which was filed w

37. The disclosure enhancements included, among other things: (a) the addition of vintage-level delinquency tables that provided investors and analysts with greater granularity regarding the aging and credit performance of BridgeFin loans by origination cohort; (b) expanded MD&A discussion of credit-quality indicators, including a more detailed explanation of BRB's loan modification and re-aging practices and their i

38. In BRB's fiscal year 2023 Annual Report on Form 10-K, filed with the Commission on February 27, 2024, the ACL for the BridgeFin portfolio was reported at $156.2 million, reflecting enhanced qualitative overlays that were adopted as part of BRB's ongoing commitment to prudent credit-risk management. Notably, the 90-plus-day delinquency rate for the BridgeFin portfolio declined to 1.48% as of December 31, 2023, dow

39. I affirm unequivocally that I at no time intended to mislead investors, analysts, regulators, or the Commission regarding BRB's ACL estimates or credit-quality disclosures for the BridgeFin portfolio. I did not at any time direct, encourage, or authorize any employee of BRB to misstate, conceal, or manipulate financial data or credit-quality metrics, nor was I aware of any effort by any person at BRB to do so.

40. All ACL estimates that I reviewed and approved were prepared through BRB's established governance process, which involved multiple layers of review by qualified professionals in credit risk, accounting, and risk management. The estimates were independently validated by BRB's Model Risk Management group and were reviewed and accepted by Whitfield Keane LLP, a PCAOB-registered independent audit firm. The estimates

41. The differences between BRB's reported ACL and the SEC Staff's preliminary view reflect legitimate methodological judgments about the appropriate treatment of re-aged and modified loans within the CECL model — a matter on which reasonable professionals can and do disagree. These differences do not reflect misstatements, errors, or concealment. I exercised the professional care and judgment expected of a CFO of a

42. I reaffirm that BRB's ACL for the BridgeFin portfolio as of December 31, 2022, was estimated in good faith, was within the range of reasonable estimates under ASC 326, and was supported by a robust system of internal controls, a disciplined quarterly estimation process, and independent audit review by Whitfield Keane LLP. The re-aging treatment of modified BridgeFin loans was based on a documented policy that was

43. I respectfully request that the Staff of the Division of Enforcement take the foregoing facts into careful consideration and decline to recommend an enforcement action against Belmont Ridge Bank National Association or any of its officers in connection with the matters described herein. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Execut

I. Introduction and Identification

1. My name is Raymond Hu. I am the Chief Accounting Officer of Belmont Ridge Bank National Association ("BRB" or the "Bank"). My business address is 200 Park Avenue South, 38th Floor, New York, New York 10003.

2. I make this declaration voluntarily, of my own personal knowledge, in support of BRB's Wells Submission filed with the Staff of the Division of Enforcement (the "Staff") of the United States Securities and Exchange Commission (the "Commission" or "SEC"). Except where otherwise indicated, the statements made herein are based on my personal knowledge, my review of relevant corporate records and work papers maintaine

3. I am over eighteen (18) years of age and am competent to testify to the matters set forth in this declaration. I make this declaration under penalty of perjury under the laws of the United States of America.

II. Professional Background and Role at BRB

4. I have approximately twenty-two years of professional experience in public accounting, bank financial reporting, and corporate accounting. I received a Bachelor of Science degree in Accounting from New York University's Leonard N. Stern School of Business in 2001 and a Master of Science degree in Taxation from the same institution in 2003. I am a Certified Public Accountant licensed in the State of New York (Licen

5. Prior to joining BRB, I spent approximately ten years at Muldoon Thackeray CPAs LLP ("Marlowe Crane CPAs LLP") in the firm's Banking & Capital Markets audit practice, where I rose to the position of Senior Manager. During my tenure at Marlowe Crane CPAs LLP, I specialized in the audit of financial institutions, with particular emphasis on loan loss provisioning, fair value measurements, and SEC reporting for bank