Contract analysis

I. PURPOSE AND SCOPE OF MEMORANDUM This memorandum outlines the comprehensive preparation strategy for the investigative testimony of Patricia "Trish" Navarrete, Chief Financial Officer of Belmont Ridge Bank National Association ("BRB" or the "Bank"), which is currently scheduled to take place on January 18, 2024, before Staff of the Division of Enforcement of the United States Securities and Exchange Commission ("SE

II. WITNESS BACKGROUND A. Professional Profile Patricia "Trish" Navarrete is the Chief Financial Officer of Belmont Ridge Bank National Association, a nationally chartered commercial bank whose common stock is listed on the Nasdaq Global Select Market under the ticker symbol "BRDG." BRB's principal offices are located at 200 Park Avenue South, 38th Floor, New York, NY 10003. As of the most recently filed proxy statem

III. THE SEC'S INVESTIGATION — CONTEXT FOR TESTIMONY A. Overview of the Investigation The SEC's investigation into BRB originated with a voluntary request letter dated September 18, 2023, directed to BRB's General Counsel, Derek Sung. The voluntary request letter sought the production of documents and information relating to BRB's BridgeFin digital-lending platform, with particular focus on the allowance for credit l

Section 13(a) of the Securities Exchange Act of 1934 and Rule 13a-1 thereunder. Section 13(a) requires issuers of securities registered under Section 12 of the Exchange Act to file periodic reports — including annual reports on Form 10-K and quarterly reports on Form 10-Q — in conformity with the Commission's rules and regulations. Rule 13a-1 implements this requirement with respect to annual reports. The Staff's the

Section 13(b)(2)(A) of the Exchange Act. This provision requires every issuer to "make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer." The Staff's theory would be that BRB's books and records inaccurately reflected the credit quality and delinquency status of the BridgeFin loan portfolio by treating re-ag

IV. ANTICIPATED AREAS OF SEC STAFF INQUIRY Based on our analysis of the investigation to date, the documents produced, the Staff's prior communications, and the typical structure of SEC investigative testimony in financial reporting matters, we anticipate that the examination will focus on the following eight principal topic areas. For each topic, we identify the likely thrust of the Staff's questions and the key fac

V. ANTICIPATED EXHIBITS THE SEC STAFF MAY USE The SEC Staff will almost certainly use exhibits during the examination to anchor Ms. Navarrete's testimony to specific documents. Based on our experience with SEC investigative testimony and our knowledge of the documents in the production, we anticipate the following categories of exhibits: A. SEC Filings The Staff will likely introduce and question Ms. Navarrete about

VI. KEY PREPARATION POINTS AND STRATEGY A. General Testimony Principles At the outset of each preparation session, the following fundamental principles for investigative testimony should be reviewed with Ms. Navarrete. These principles are standard guidance for witnesses in SEC proceedings, but they warrant emphasis given the complexity of the subject matter and the high stakes involved: Answer only the question aske

1. CECL Methodology / ACL Ms. Navarrete should emphasize throughout her testimony on this topic that the ACL estimation process under ASC 326 inherently involves significant management judgment and estimation uncertainty. CECL requires the estimation of lifetime expected credit losses over the remaining contractual life of loans, adjusted for expected prepayments, and incorporating reasonable and supportable forecast

2. Re-Aging / Modification Treatment This is the most sensitive area of the testimony and the topic that requires the most careful preparation. The re-aging issue is the factual foundation of the Staff's case, and the Staff's questions will be designed to establish either that Ms. Navarrete knew the re-aging practice was distorting credit metrics (supporting a scienter theory) or that she was negligent in failing to

3. CFO Certifications Ms. Navarrete should describe her certification process as thorough, deliberate, and supported by multiple layers of internal review and representation. She should explain that before signing the SOX 302 and 906 certifications for each filing, she followed a structured process that included: (a) receiving and reviewing sub-certifications from the heads of each major business unit, including the

4. Communications with Whitfield Keane Ms. Navarrete may describe the general nature and topics of her discussions with the Whitfield Keane engagement team, but she should be cautious about the level of detail she provides. Communications between management and the external auditor in the course of the audit are generally not privileged, but there are privilege considerations if counsel was present during any of thos

5. Privilege Concerns During Testimony Ms. Navarrete must be carefully instructed on the boundaries of privilege during testimony. She should not disclose the substance of any communications with Calderwood & Harkness LLP in connection with the investigation, any communications with BRB's prior outside securities counsel, Caldwell Pratt & Stein LLP (lead partner Martin Caldwell), that are protected by the attorney-cl