CALDERWOOD & HARKNESS LLP Attorneys at Law
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Telephone: (212) 554-8000 Facsimile: (212) 554-8001
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT — NOT FOR DISTRIBUTION
MEMORANDUM
TO: Margaret R. Ellsworth, Chair of the Board of Directors, Belmont Ridge Bank NA James W. Prescott, General Counsel & Corporate Secretary, Belmont Ridge Bank NA
FROM: Colette Whitman, Partner, Calderwood & Harkness LLP Natasha Forbes, Associate, Calderwood & Harkness LLP
DATE: July 28, 2025
RE: Shareholder Governance Engagement Strategy — Response to Institutional Shareholder Concerns and Proxy-Season Preparedness
MATTER NO.: 1045-00003
This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It has been prepared at the direction of and for the exclusive use of Belmont Ridge Bank NA and its Board of Directors. This memorandum should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
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I. Executive Summary
The purpose of this memorandum is to advise the Board of Directors of Belmont Ridge Bank NA ("BRB" or the "Bank") on a comprehensive strategy for engaging key institutional shareholders on governance matters, responding to the specific concerns raised by Thornfield Capital Management, LP ("Thornfield") in its letter to the Board dated March 12, 2025, and preparing the Bank for the 2026 proxy season. This memorandum is provided in connection with Calderwood & Harkness's engagement, which commenced on July 1, 2025, to advise BRB on governance-specific remediation elements and related shareholder engagement matters.
The Board operates in a governance environment that has been the subject of heightened scrutiny from both regulatory authorities and institutional shareholders. As discussed in detail below, the Office of the Comptroller of the Currency ("OCC") issued Matter Requiring Attention ("MRA") letter SA-2024-0315, dated November 15, 2024, identifying four discrete governance deficiencies at the Bank. Separately, the Board of Governors of the Federal Reserve System (the "Federal Reserve") issued supervisory letter SR-BHC-2024-1107, dated December 3, 2024, to Belmont Ridge Financial Group, Inc. (the Delaware bank holding company and sole parent of BRB), raising parallel governance concerns at the holding-company level. BRB has undertaken a remediation program, with a deadline of December 31, 2025 established by the OCC for satisfactory resolution of the MRA findings. In parallel, institutional shareholders — most notably Thornfield — and the two leading proxy advisory firms, Gramercy Proxy Services and Northgate Governance Advisors, have flagged governance concerns in connection with recent proxy seasons.
Against this backdrop, we recommend that BRB pursue the following three-pronged strategy:
First, the Bank should conduct a proactive off-season engagement campaign during Q3 and Q4 2025 and Q1 2026, targeting its three largest governance-focused institutional shareholders — Thornfield Capital Management, LP (approximately 7.3% of outstanding common stock), Graycliff Institutional Partners (approximately 5.1%), and Osprey Point Pension Fund (approximately 3.8%) — as well as the proxy advisory firms Gramercy Proxy Services and Northgate Governance Advisors. This engagement should be led by the Board Chair and the Lead Independent Director, with logistical support from the Bank's proxy solicitor, Whitfield Greer & Associates.
Second, the Bank should incorporate enhanced proxy statement disclosures in its 2026 proxy statement, demonstrating the governance improvements adopted during 2025 and directly addressing the concerns raised by institutional shareholders and proxy advisory firms. These disclosures should be coordinated with Meridian Cobalt LLP, the Bank's general corporate counsel, which retains the primary SEC disclosure mandate.
Third, the Bank should ensure close coordination among its advisors — Calderwood & Harkness LLP, Meridian Cobalt LLP, Ashford Pike Advisory LLC (the Bank's regulatory remediation consultant), and Whitfield Greer & Associates — to maintain consistency between the regulatory remediation program and the shareholder engagement narrative, while rigorously safeguarding confidential supervisory information.
As context for this strategy, BRB is a publicly traded national bank, listed on the Nasdaq Stock Market under the ticker symbol BRBK. As of June 30, 2025, the Bank had approximately $38.7 billion in total assets, a market capitalization of approximately $4.2 billion, and approximately 112 million shares of common stock outstanding, trading at approximately $37.50 per share. The Bank is governed by a thirteen-member Board of Directors, of which ten are independent directors and three are non-independent (including the Chief Executive Officer). BRB is headquartered at 600 Lexington Avenue, 34th Floor, New York, New York 10022, and operates 147 branches across eight states.
This memorandum proceeds as follows: Part II provides background on the regulatory governance findings and the current status of the remediation program. Part III analyzes the positions and engagement posture of the Bank's key institutional shareholders. Part IV examines feedback from the proxy advisory firms. Part V sets forth a recommended framework for responding to the Thornfield letter. Part VI outlines a proactive off-season engagement strategy. Part VII recommends disclosure enhancements for the 2026 proxy statement. Part VIII addresses coordination with the Bank's advisors and third parties. Part IX identifies key risk considerations. Part X provides a detailed action-item timeline. Part XI offers concluding observations.
II. Background — Regulatory Governance Findings and Remediation Status
A. OCC and Federal Reserve Supervisory Findings
On November 15, 2024, the OCC issued MRA letter SA-2024-0315 to BRB, setting forth four discrete governance findings arising from the OCC's most recent full-scope examination of the Bank. The MRA letter identified the following areas requiring attention:
Finding 1 — Risk Committee Escalation Protocol. The OCC found that the Risk Committee of the Board of Directors lacks a formalized escalation protocol for enterprise risk matters. Specifically, the OCC determined that the Risk Committee's existing charter and practices did not contain defined triggers, timelines, or procedures for escalating material risk issues from the Risk Committee to the full Board, nor did the charter establish an independent reporting line from the Chief Risk Officer to the Risk Committee separate from management's reporting channel. The absence of such a protocol creates the potential for delays in Board-level awareness of emerging enterprise risk matters and impairs the Board's ability to exercise effective oversight.
Finding 2 — Audit Committee Over-Reliance on Management-Prepared Materials. The OCC found that the Audit Committee has historically relied heavily on materials and analyses prepared by management, without adequate independent verification of the information presented. The examination noted that the Audit Committee did not routinely commission independent analyses, seek direct input from the internal audit function outside of management's presence, or engage external subject-matter experts to validate key risk assessments and financial reporting controls. This over-reliance on management-prepared materials undermines the independence and effectiveness of the Audit Committee's oversight function.
Finding 3 — Insufficient Board-Level Information Flow on Compliance and BSA/AML Matters. The OCC identified deficiencies in the flow of compliance and Bank Secrecy Act / Anti-Money Laundering ("BSA/AML") information to the full Board. Specifically, the examination found that BSA/AML reports and compliance updates were provided to the Risk Committee and the Audit Committee but were not consistently escalated to or reviewed by the full Board. The OCC noted that, for a bank of BRB's size and complexity, the full Board should receive regular, comprehensive reports on compliance and BSA/AML matters, including transaction monitoring results, suspicious activity report filing trends, and the status of any compliance deficiencies or corrective actions.
Finding 4 — Governance & Nominating Committee Charter Deficiencies. The OCC found that the charter of the Governance & Nominating Committee does not address director skill-matrix requirements or succession planning for committee chairs. The absence of a formal skills matrix impairs the Committee's ability to assess whether the Board collectively possesses the skills, qualifications, and experience necessary to oversee a complex national bank with $38.7 billion in total assets. Similarly, the absence of a committee-chair succession planning process creates the risk of leadership gaps should current committee chairs depart or rotate off committees.
Separately, on December 3, 2024, the Federal Reserve issued supervisory letter SR-BHC-2024-1107 to Belmont Ridge Financial Group, Inc., the Delaware bank holding company that is the sole parent of BRB. The Federal Reserve's letter raised parallel governance concerns at the holding-company level, reflecting the integrated nature of governance oversight across the bank and holding company structure. The Federal Reserve's supervisory expectations, while directed at the holding company, have direct implications for the governance practices of BRB, as the holding company's Board of Directors overlaps substantially with BRB's Board.
The OCC established a remediation deadline of December 31, 2025 for satisfactory resolution of all four MRA findings. The Federal Reserve's supervisory letter also contemplates remediation on a parallel timeline. It is critical that the Bank's governance remediation program be completed within this timeframe, both to satisfy regulatory expectations and to demonstrate tangible progress to institutional shareholders in advance of the 2026 proxy season.
B. Remediation Progress
BRB has undertaken a multi-track remediation program to address the OCC and Federal Reserve findings. The following summarizes the current status of remediation efforts as of the date of this memorandum:
Initial Remediation Plan. On February 28, 2025, BRB submitted its initial remediation plan to the OCC in response to MRA letter SA-2024-0315. The plan outlined the Bank's proposed approach to addressing each of the four findings, including proposed timeline, responsible parties, and deliverables. The OCC acknowledged receipt of the plan and provided written comments on April 4, 2025, indicating general concurrence with the approach but requesting additional specificity in certain areas, particularly with respect to Finding 1 (Risk Committee escalation protocol) and Finding 3 (BSA/AML information flow).
Engagement of Ashford Pike Advisory LLC. In January 2025, the Bank retained Ashford Pike Advisory LLC, a Washington, D.C.-based regulatory advisory firm, to assist with the operational aspects of the remediation program. Kenneth R. Stoltz, Managing Director at Ashford Pike (located at 1401 K Street NW, Suite 700, Washington, DC 20005), has been leading the day-to-day operational remediation workstreams, including process design, policy drafting, and coordination with the Bank's management team.
Engagement of Calderwood & Harkness LLP. On July 1, 2025, the Bank engaged Calderwood & Harkness LLP to advise on governance-specific remediation elements, including the revision of Board committee charters, the development of a board self-evaluation framework, the preparation of amended Corporate Governance Guidelines, and the design of a director independence assessment methodology. Calderwood & Harkness's engagement is complementary to Ashford Pike's operational remediation work and is focused on the legal and governance dimensions of the remediation program.
Remediation Deliverables in Progress. As of the date of this memorandum, the following governance remediation deliverables are in various stages of preparation and are expected to be completed for Board adoption in Q3 2025:
• Revised Risk Committee Charter. The revised charter will incorporate a formalized escalation protocol with defined triggers, timelines, and an independent reporting line from the Chief Risk Officer directly to the Risk Committee and the full Board. The revised charter will also specify minimum meeting frequency and agenda requirements to ensure comprehensive enterprise risk coverage.
• Revised Audit Committee Charter. The revised charter will establish procedures for independent verification of management-prepared materials, including direct sessions with the internal audit function outside of management's presence and authority for the Audit Committee to engage external subject-matter experts as needed.
• Revised Governance & Nominating Committee Charter. The revised charter will incorporate director skill-matrix requirements, committee-chair succession planning provisions, and enhanced criteria for evaluating director nominees.
• New Board Information Flow Policy. This policy will establish a framework for the regular and systematic flow of compliance, BSA/AML, and enterprise risk information from management to the Risk Committee, the Audit Committee, and the full Board.
• Amended Corporate Governance Guidelines. The amended guidelines will reflect the governance enhancements described above, as well as updated provisions regarding director independence standards, mandatory director education and training, and the Board's annual self-evaluation process.
• Board Self-Evaluation Framework. This framework will establish an annual process for Board and committee self-evaluation, including the engagement of an independent third-party facilitator to conduct the evaluation.
• Director Independence Assessment. A comprehensive independence assessment will be conducted for each director, applying the enhanced independence standards being incorporated into the amended Corporate Governance Guidelines.
C. Relevance to Shareholder Engagement
The governance remediation program described above is directly relevant to, and indeed provides the substantive foundation for, the shareholder engagement strategy recommended in this memorandum. The concerns raised by Thornfield, Graycliff, and Osprey Point — and the issues flagged by Gramercy Proxy Services and Northgate Governance Advisors — are substantially aligned with the OCC's MRA findings. In particular, Thornfield's request for enhanced risk-committee reporting mirrors the OCC's Finding 1, and Thornfield's request for an independent board evaluation process is consistent with the governance best practices that the remediation program is designed to implement.
This convergence between regulatory expectations and shareholder concerns creates a powerful opportunity for BRB: by proactively communicating the governance enhancements being adopted in connection with the remediation program, the Board can demonstrate responsiveness to shareholder concerns while simultaneously fulfilling its regulatory obligations. The governance improvements are genuine, substantive, and comprehensive — they are not merely reactive or cosmetic measures — and they should be communicated as such.
However, this opportunity must be pursued with careful attention to the legal constraints on disclosure of confidential supervisory information. Section 1818(u) of Title 12 of the United States Code and the OCC's implementing regulations restrict the disclosure of MRA letters, examination reports, and other confidential supervisory information. The Federal Reserve maintains parallel confidentiality requirements under its supervisory framework. Accordingly, in all shareholder engagement and proxy disclosures, the governance improvements must be framed as the Board's own initiative to strengthen governance practices in light of evolving regulatory expectations and industry best practices — not as responses to specific regulatory findings. The specific existence, content, and terms of the OCC MRA letter and the Federal Reserve supervisory letter must not be disclosed.
Calderwood & Harkness will work closely with the Board Chair, the General Counsel, and Meridian Cobalt LLP to develop messaging that conveys the substance of the governance improvements without crossing any confidentiality boundaries.
III. Analysis of Key Institutional Shareholder Positions
This Part provides a detailed analysis of the three institutional shareholders that are most significant to BRB's governance engagement strategy, as well as a discussion of the aggregate shareholder concentration and its implications.
A. Thornfield Capital Management, LP
Ownership and Filing Status. Thornfield Capital Management, LP holds approximately 7.3% of BRB's outstanding common stock, making it the Bank's largest institutional shareholder. Thornfield's beneficial ownership is reported on Schedule 13G filed with the Securities and Exchange Commission, indicating passive investment intent rather than activist intent. Thornfield is located at 200 Greenwich Street, 40th Floor, New York, New York 10007.
The March 12, 2025 Letter. On March 12, 2025, Thornfield sent a letter to the Board of Directors of BRB setting forth specific governance concerns and requests. The Thornfield letter, which was addressed to the Board collectively and received by the Corporate Secretary's office, contained two primary requests:
1. Enhanced Risk-Committee Reporting. Thornfield requested that the Board adopt more frequent and more detailed reporting from the Risk Committee to the full Board on enterprise risk matters and risk-appetite metrics. Thornfield expressed concern that the current level of Risk Committee reporting may not provide the full Board with sufficient visibility into the Bank's enterprise risk profile, particularly given BRB's size, complexity, and geographic footprint.
2. Adoption of an Independent Board Evaluation Process. Thornfield requested that the Board engage an independent third-party facilitator to conduct the annual board evaluation process, rather than relying solely on internal self-assessment. Thornfield cited governance best practices among peer institutions in the banking sector and noted that independent evaluation processes are increasingly expected by institutional investors and proxy advisory firms.
Tone and Posture. The tone of the Thornfield letter is best characterized as constructive but firm. Thornfield expressed respect for the Board's stewardship of the Bank and acknowledged BRB's financial performance, but made clear that it considers governance enhancement to be a priority. Notably, the letter signaled Thornfield's willingness to escalate its concerns publicly — including through proxy-season actions — if the Board does not demonstrate meaningful responsiveness. While the letter stopped short of threatening a proxy contest or public campaign, the implication of potential escalation was unmistakable.
Assessment. Thornfield is BRB's most significant institutional shareholder from a governance engagement perspective. Its 7.3% ownership stake gives it substantial influence, and its governance concerns are well-informed and substantively aligned with the OCC's MRA findings — particularly Finding 1, which identified the lack of a formalized Risk Committee escalation protocol. The fact that Thornfield's concerns overlap so closely with the regulatory findings creates both an opportunity and a risk: the opportunity lies in the fact that BRB's remediation program is already addressing Thornfield's concerns substantively; the risk lies in the need to communicate the substance of the improvements without disclosing confidential supervisory information.
Thornfield's governance team is sophisticated and well-resourced; they will expect a detailed, substantive response and will evaluate BRB's actions — not merely its words. A generic or vague response will not satisfy Thornfield and could accelerate escalation.
Recommended Response Approach. We recommend direct, proactive engagement with Thornfield's governance team. As discussed in detail in Part V below, the Board Chair should send a formal written response to the Thornfield letter, followed by a governance-focused call or in-person meeting at which the Board Chair and/or Lead Independent Director can share, in general terms, the concrete steps the Board has taken and is taking to enhance risk-committee reporting and the board evaluation process. The engagement should demonstrate genuine responsiveness and provide enough substantive detail to satisfy Thornfield that the Board is addressing its concerns — without disclosing confidential supervisory information.
B. Graycliff Institutional Partners
Ownership and Filing Status. Graycliff Institutional Partners holds approximately 5.1% of BRB's outstanding common stock, as reported on Schedule 13G. Graycliff is the Bank's second-largest institutional shareholder with a governance-engagement focus. Graycliff is located at One Post Office Square, Suite 2600, Boston, Massachusetts 02109.
Proxy Voting History. Graycliff has demonstrated a willingness to use the proxy ballot as a tool for expressing dissatisfaction with governance practices. At the 2024 Annual Meeting of Shareholders, Graycliff withheld its votes from two of the four director nominees standing for election, citing governance deficiencies. This withhold action was a significant signal of Graycliff's governance concerns, as institutional investors of Graycliff's stature and sophistication do not withhold votes lightly. Withholding votes from director nominees is widely understood in the governance community as a meaningful expression of dissatisfaction — a step beyond private engagement but short of a public campaign or proxy contest.
At the 2025 Annual Meeting of Shareholders, held on May 14, 2025, Graycliff's voting record should be analyzed in detail to determine whether Graycliff continued its withhold posture or returned to voting in favor of all director nominees. Both Gramercy Proxy Services and Northgate Governance Advisors recommended votes in favor of all director nominees for the 2025 Annual Meeting, but each flagged governance concerns in their reports. Graycliff may have followed the advisory firm recommendations for the 2025 cycle while continuing to monitor the Bank's governance trajectory closely. A review of the Form 8-K reporting the voting results for the 2025 Annual Meeting, as well as any N-PX filings by Graycliff, should be conducted to confirm the voting record.
Assessment. Graycliff's willingness to withhold votes from director nominees distinguishes it from shareholders that limit their governance engagement to private dialogue. Graycliff's concerns appear to be focused on board effectiveness, director qualifications and skill-set alignment, and the transparency of the Board's risk oversight function. These concerns are well-aligned with the OCC's Finding 4 (Governance & Nominating Committee charter deficiencies regarding director skill-matrix requirements and committee-chair succession planning) and, more broadly, with the OCC's overall critique of the Board's governance infrastructure.
The risk with Graycliff is clear: if the Bank does not demonstrate meaningful governance progress by the 2026 proxy season, Graycliff could again withhold votes from director nominees — and potentially expand its withhold campaign to a larger number of nominees. A withhold campaign by a 5.1% shareholder, particularly one with Graycliff's reputation and governance credentials, could attract attention from other institutional investors and from the proxy advisory firms, creating a cascading negative effect.
Recommended Response Approach. We recommend proactive outreach to Graycliff's stewardship team during the off-season (Q4 2025). The engagement should provide updates on the governance enhancements being adopted, with particular emphasis on the director skill-matrix requirements and committee-chair succession planning provisions being incorporated into the revised Governance & Nominating Committee Charter (directly responsive to OCC Finding 4). The engagement should also seek to understand the specific concerns that drove Graycliff's 2024 withhold votes, so that the Board can assess whether those concerns are being adequately addressed by the remediation program. A call or meeting with the Board Chair and/or Lead Independent Director would be appropriate.
C. Osprey Point Pension Fund
Ownership and Filing Status. Osprey Point Pension Fund holds approximately 3.8% of BRB's outstanding common stock, as reported on Schedule 13G. Osprey Point is located at 250 Broadway, 15th Floor, New York, New York 10007.
Engagement Posture. Osprey Point is an active participant in proxy-season governance engagement with its portfolio companies. It has a well-established stewardship program and regularly engages with boards of directors on governance topics. Importantly, Osprey Point has not taken any public adversarial positions with respect to BRB, nor has it withheld votes from director nominees or submitted shareholder proposals. However, it monitors governance practices closely and maintains detailed governance scorecards for its portfolio holdings. Osprey Point's engagement posture is collaborative; the fund values direct access to independent directors and appreciates transparent disclosure of board practices and governance improvements.
Assessment. Osprey Point represents a positive engagement opportunity for BRB. Because Osprey Point's posture is collaborative rather than adversarial, engagement with Osprey Point can serve as a demonstration of the Board's commitment to shareholder dialogue and transparency. A positive engagement experience with Osprey Point could also provide a counterweight to any negative narrative that might emerge from Thornfield or Graycliff. Furthermore, Osprey Point's governance team can provide valuable feedback on BRB's governance practices and disclosures, which the Board can incorporate into its ongoing improvement efforts.
Recommended Response Approach. We recommend including Osprey Point in the off-season engagement calendar and offering a call or meeting with the Board Chair (Margaret R. Ellsworth) and/or Lead Independent Director (David K. Sorrento) to discuss the governance improvements being adopted. The engagement should be framed as a proactive governance update, reflecting the Board's commitment to transparency and best practices. Osprey Point's feedback on the Bank's governance disclosures and practices should be solicited and considered.
D. Aggregate Shareholder Concentration
The combined holdings of Thornfield (7.3%), Graycliff (5.1%), and Osprey Point (3.8%) total approximately 16.2% of BRB's outstanding common stock. This represents a significant governance-focused block among the Bank's institutional shareholder base.
These three shareholders, while each pursuing their own engagement strategies and investment mandates, share a common focus on governance quality, board effectiveness, risk oversight transparency, and shareholder responsiveness. If these shareholders were to align on governance concerns — whether through coordinated engagement, parallel withhold campaigns, or concurrent shareholder proposals — the combined weight of their holdings could create substantial pressure on the Board and attract the attention of other institutional investors and index fund managers.
It is important to note that no shareholder has filed a Schedule 13D with the SEC indicating activist intent; all three shareholders report their beneficial ownership on Schedule 13G, which is available only to investors with passive investment intent (i.e., investment purposes only, without the purpose or effect of changing or influencing the control of the issuer). However, governance engagement — including voting against directors, submitting shareholder proposals, and conducting private engagement with the board — does not require a 13D filing and is fully consistent with passive investment status under Schedule 13G. Accordingly, the absence of a 13D filing should not be interpreted as an absence of governance engagement risk.
The aggregate concentration of these three shareholders underscores the importance of proactive engagement. By addressing the concerns of these shareholders through direct dialogue and tangible governance improvements, the Board can prevent the formation of an informal governance coalition that could complicate the 2026 proxy season.
IV. Analysis of Proxy Advisory Firm Feedback
Proxy advisory firms play an increasingly important role in corporate governance, particularly for publicly traded financial institutions. The voting recommendations of firms such as Gramercy Proxy Services and Northgate Governance Advisors significantly influence the voting decisions of institutional investors, including index fund managers and other passive investors that may follow advisory firm recommendations as a matter of policy. This Part analyzes the feedback received from both Gramercy and Northgate in connection with BRB's recent proxy seasons and recommends a strategy for proactive engagement with these firms.
A. Gramercy Proxy Services
For the 2025 Annual Meeting of Shareholders, held on May 14, 2025, Gramercy Proxy Services issued a report recommending votes in favor of all director nominees standing for election. This favorable recommendation was a positive outcome for the Bank, but it was accompanied by governance concerns that should not be overlooked.
Gramercy's report flagged a number of governance issues that, while not sufficient to trigger a negative voting recommendation in 2025, were identified as areas requiring improvement. Based on our review of Gramercy's published methodology and the governance profile of BRB, the flagged concerns likely included the following:
• Staleness of Governance Documents. BRB's Corporate Governance Guidelines were last amended in March 2022, a period of over three years. The Board Code of Conduct was last amended in January 2020, a period of over five years. The Risk Committee Charter was last amended in January 2021, a period of over four years. Gramercy's methodology considers the currency of governance documents as a factor in assessing the Board's commitment to governance best practices, and the age of BRB's governance documents likely contributed to the flagged concerns.
• Lack of a Formalized Board Evaluation Process. Gramercy's methodology evaluates whether the Board has adopted a formal, structured process for annual self-evaluation, including the use of external facilitators. The absence of such a process at BRB was likely noted as a governance deficiency.
• Board Refreshment and Director Skills Alignment. Gramercy evaluates the composition of the Board against the skills and qualifications needed to oversee a complex financial institution. Questions about board refreshment — including the average tenure of directors, the rate of director turnover, and the alignment of director skills with the Bank's strategic and risk profile — were likely raised in Gramercy's report.
Gramercy's methodology encompasses a broad range of governance factors, including board independence, committee composition, governance document currency, executive compensation alignment with shareholder interests, and responsiveness to shareholder concerns. BRB's favorable recommendation in 2025 should be understood as a close call rather than a clean bill of health; the flagged concerns represent areas where Gramercy expects to see progress by the 2026 proxy season.
Key Risk. If BRB does not demonstrate meaningful governance progress by the time Gramercy issues its report for the 2026 Annual Meeting, Gramercy may shift to an "against" or "withhold" recommendation on one or more director nominees. Such a shift would have significant consequences for the Bank's proxy-season outcomes, as many institutional investors rely on Gramercy's recommendations in making their voting decisions. A negative Gramercy recommendation, combined with the governance concerns of Thornfield, Graycliff, and Osprey Point, could result in elevated director vote-against levels and potential embarrassment for the Board.
B. Northgate Governance Advisors
Northgate Governance Advisors similarly issued a favorable recommendation for the 2025 Annual Meeting, recommending votes in favor of all director nominees. Like Gramercy, Northgate's report flagged governance concerns that it identified as areas for improvement.
Northgate's areas of focus likely include the following:
• Risk Oversight Practices. Northgate evaluates the Board's risk oversight framework, including the structure and activities of the Risk Committee, the frequency and quality of risk reporting to the full Board, and the independence and authority of the Chief Risk Officer. Given the OCC's findings regarding the Risk Committee's lack of a formalized escalation protocol and the insufficient Board-level information flow on compliance and BSA/AML matters, BRB's risk oversight practices were likely identified as an area requiring enhancement.
• Audit Committee Independence and Processes. Northgate assesses the independence and effectiveness of the Audit Committee, including the committee's processes for obtaining and verifying information independent of management. The OCC's Finding 2 — identifying the Audit Committee's over-reliance on management-prepared materials — aligns with the types of concerns that Northgate's methodology is designed to identify.
• Board Diversity and Skills. Northgate evaluates the diversity and skills composition of the Board, including gender, racial/ethnic, and experiential diversity, as well as the alignment of director skills with the institution's strategic needs. The absence of a formal director skills matrix at BRB was likely noted.
• Shareholder Responsiveness. Northgate evaluates the Board's responsiveness to shareholder concerns, including whether the Board has a track record of engaging with shareholders on governance topics and incorporating shareholder feedback into its governance practices. The Thornfield letter and Graycliff's 2024 withhold votes are likely to be noted by Northgate as governance engagement events that require a demonstrable Board response.
Key Risk. The risk profile with Northgate is similar to that with Gramercy. The 2025 favorable recommendation should be viewed as conditional on the Bank's ability to demonstrate meaningful governance progress by the 2026 proxy season. A negative Northgate recommendation, particularly if coupled with a negative Gramercy recommendation, would create significant headwinds for director elections at the 2026 Annual Meeting.
C. Engagement with Proxy Advisory Firms
We recommend that BRB conduct proactive engagement with both Gramercy Proxy Services and Northgate Governance Advisors during Q4 2025 or early Q1 2026, well ahead of the 2026 proxy filing season. Both firms maintain processes for pre-proxy-season engagement with issuers, permitting companies to present governance enhancements and provide context for their governance practices prior to the issuance of the firms' voting recommendations.
The engagement with the proxy advisory firms should accomplish the following objectives:
• Present the governance enhancements adopted by the Board during 2025, including the revised committee charters, the Board Information Flow Policy, the amended Corporate Governance Guidelines, the director skills matrix, the committee-chair succession planning process, and the independent board evaluation framework.
• Demonstrate the Board's responsiveness to the concerns flagged in the firms' 2025 reports.
• Provide context for the governance improvements as part of the Board's ongoing commitment to best practices for financial institutions of BRB's size and complexity.
• Answer questions from the firms' analysts and provide any supporting documentation that is publicly available (e.g., revised committee charters and governance guidelines posted to the Bank's investor-relations website).
To facilitate this engagement, updated governance documents should be posted to BRB's investor-relations website promptly upon Board adoption. Proxy advisory firms review publicly available governance materials as part of their research process, and the availability of updated documents will support favorable assessments. The posting of updated governance documents also serves as a public signal of the Board's governance improvements, which may be noted by institutional investors beyond the three key shareholders identified in this memorandum.
V. Response to the Thornfield Capital Management Letter — Recommended Framework
The Thornfield letter of March 12, 2025 requires a prompt, substantive, and carefully crafted response. More than four months have passed since the letter was received, and the absence of a formal Board response to date risks being perceived by Thornfield as unresponsive or dismissive. We recommend that the Board respond promptly and that the response be followed by direct engagement with Thornfield's governance team. This Part sets forth the recommended procedural steps, substantive content, and tone and confidentiality considerations for the response.
A. Procedural Steps
Formal Written Response. Board Chair Margaret R. Ellsworth should send a formal written response to the Thornfield letter. The response should be addressed to the signatory of the Thornfield letter (typically the Managing Partner or Head of ESG/Governance at Thornfield Capital Management, LP) and should acknowledge receipt of the March 12, 2025 letter. The response should summarize the Board's commitment to enhanced governance and signal the Board's interest in direct engagement with Thornfield's governance team to discuss the specific topics raised in the letter.
Timing. The response letter should be sent promptly — ideally within thirty (30) days of the date of this memorandum (i.e., by the end of August 2025). Any further delay in responding could be perceived by Thornfield as a lack of responsiveness, which could accelerate Thornfield's stated willingness to escalate its concerns publicly. A prompt response, even if followed by a more detailed engagement in Q4 2025, demonstrates that the Board has taken Thornfield's concerns seriously and is actively addressing them.
Legal Review. The response letter should be reviewed by both Calderwood & Harkness LLP and Meridian Cobalt LLP (Harold F. Dunleavy, Partner, Corporate Practice Group) prior to issuance. Calderwood & Harkness will review the letter for compliance with confidential supervisory information restrictions and for appropriateness of the governance messaging. Meridian Cobalt will review the letter for consistency with the Bank's SEC filings and for Regulation FD implications. The response letter should not be sent without the approval of both firms.
Follow-Up Meeting. Following the issuance of the written response, the Board Chair (and/or Lead Independent Director David K. Sorrento) should schedule a follow-up call or in-person meeting with Thornfield's governance team. This meeting should take place during Q4 2025 and should be facilitated by Whitfield Greer & Associates (Anne-Marie Delacroix, Senior Vice President), which can assist with scheduling, logistics, and meeting preparation. The meeting will provide an opportunity for the Board to present a more detailed discussion of the governance enhancements being adopted and to address Thornfield's specific questions and concerns.
B. Substantive Points to Address
The response letter and the follow-up meeting should address the following substantive points, which correspond to the specific requests set forth in the Thornfield letter:
1. Enhanced Risk-Committee Reporting. The Board should inform Thornfield that it is in the process of revising the Risk Committee Charter to incorporate a formalized escalation protocol with defined triggers, timelines, and independent reporting lines. Specifically, the revised charter will establish a direct reporting relationship between the Chief Risk Officer and the Risk Committee, ensure that material risk matters are escalated to the full Board on a timely basis pursuant to defined protocols, and enhance the frequency and quality of risk reporting. The Risk Committee is currently chaired by Priya Venkataraman, whose expertise in risk management and financial regulation brings relevant qualifications to the oversight of this enhancement. The Board should convey that the revised charter is being prepared for adoption and is expected to be finalized in the near term.
2. Independent Board Evaluation. The Board should inform Thornfield that it is adopting a comprehensive board and committee self-evaluation framework that includes the engagement of an independent third-party facilitator. This framework is being developed for implementation in the 2025 annual evaluation cycle, which will represent the first year of the enhanced evaluation process. The Governance & Nominating Committee, chaired by Margaret R. Ellsworth, will oversee the process and ensure that the evaluation results are used to inform board composition, committee assignments, and director development. The use of an independent third-party facilitator is directly responsive to Thornfield's request and is consistent with best practices among peer institutions.
3. General Governance Enhancements. The Board should reference, at a high level and without disclosing confidential supervisory information, the comprehensive governance review underway. This reference should encompass the full scope of governance enhancements being adopted, including:
• Updates to multiple Board committee charters (Risk, Audit, and Governance & Nominating)
• Adoption of a new Board Information Flow Policy to ensure regular and comprehensive reporting on compliance, BSA/AML, and enterprise risk matters
• Amendments to the Corporate Governance Guidelines to reflect updated independence standards, director education requirements, and evaluation processes
• Development of a director skill-matrix to ensure that the Board collectively possesses the skills, qualifications, and experience necessary to oversee a national bank with $38.7 billion in total assets and 147 branches across eight states
• Establishment of a formalized process for committee-chair succession planning
• Strengthening of director independence assessment methodologies
The response should convey that these enhancements are comprehensive and reflect the Board's commitment to governance practices consistent with the highest standards applicable to financial institutions of BRB's size and complexity.
C. Tone and Confidentiality Considerations
Tone. The response letter and all subsequent communications with Thornfield should maintain a tone of constructive engagement. The Board should acknowledge Thornfield's role as a significant and valued shareholder, express appreciation for Thornfield's thoughtful governance feedback, and demonstrate a genuine commitment to addressing the concerns raised. The response should avoid any defensiveness, dismissiveness, or minimization of the issues identified. Thornfield's governance team will evaluate the Board's response as a measure of the Board's governance culture; a defensive or evasive response could signal a lack of genuine commitment to improvement.
Confidentiality of Supervisory Information. Under no circumstances should the response letter or any oral communications with Thornfield disclose the existence, content, or terms of OCC MRA letter SA-2024-0315 or Federal Reserve supervisory letter SR-BHC-2024-1107. These documents constitute confidential supervisory information within the meaning of 12 U.S.C. § 1818(u) and the OCC's implementing regulations at 12 C.F.R. Part 4, Subpart C. Unauthorized disclosure of confidential supervisory information can result in regulatory enforcement action against the Bank and individual directors, including civil money penalties. The Federal Reserve maintains parallel confidentiality requirements under its regulations.
All governance enhancements should be framed as the Board's own initiative to strengthen governance practices, consistent with evolving regulatory expectations, industry best practices, and the standards that institutional shareholders and proxy advisory firms expect of financial institutions of BRB's size and complexity. The Board should not reference "regulatory remediation," "MRA," "examination findings," or similar terms that could signal the existence of specific supervisory actions. The messaging should be affirmative ("the Board is enhancing its governance practices") rather than responsive ("the Board is addressing deficiencies identified by regulators").
Legal Review Requirement. All written communications to Thornfield — including the response letter, any written governance summaries, and any presentation materials — must be reviewed by legal counsel prior to issuance. Calderwood & Harkness will review for confidential supervisory information compliance and governance messaging; Meridian Cobalt will review for SEC disclosure and Regulation FD considerations. Oral communications should be guided by talking points prepared and reviewed by legal counsel, and directors and officers participating in meetings with Thornfield should be briefed on the boundaries of permissible disclosure prior to any meeting.
VI. Proactive Off-Season Engagement Strategy
An effective governance engagement strategy is not limited to responding to the Thornfield letter; it must encompass a broader, proactive outreach campaign that positions BRB as a governance leader in the banking sector. This Part sets forth a detailed off-season engagement strategy spanning Q3 2025 through Q1 2026, addressing the engagement calendar, the participants who should lead the engagement, the format and materials for engagement meetings, and the Regulation FD considerations that apply.
A. Engagement Calendar
The engagement strategy should be executed in three phases, aligned with the Bank's governance remediation timeline and the 2026 proxy filing season:
Q3 2025 (August – September). This phase is focused on completing the governance infrastructure that will form the substance of the engagement campaign. During this period, the Board should:
• Finalize and adopt the revised Risk Committee Charter, revised Audit Committee Charter, and revised Governance & Nominating Committee Charter.
• Adopt the new Board Information Flow Policy.
• Adopt the amended Corporate Governance Guidelines.
• Post all updated governance documents to the BRB investor-relations website promptly upon Board adoption.
• Prepare the governance engagement presentation deck and talking points for use in shareholder and proxy advisory firm meetings.
• Conduct the planning call with Whitfield Greer & Associates to align on engagement targets, messaging, and scheduling.
It is essential that the governance documents be in final, adopted form before the Bank initiates substantive engagement with shareholders and proxy advisory firms. Engaging with shareholders about prospective governance improvements — rather than adopted improvements — carries the risk that the improvements may be perceived as aspirational rather than concrete. Adopted documents demonstrate commitment.
Q4 2025 (October – December). This is the primary engagement phase. During this period, the Board should:
• Conduct outreach to Thornfield Capital Management, LP, Graycliff Institutional Partners, and Osprey Point Pension Fund. Each shareholder should be offered a governance-focused call or in-person meeting with the Board Chair (Margaret R. Ellsworth) and/or Lead Independent Director (David K. Sorrento).
• The engagement with Thornfield should serve as the follow-up to the response letter sent in August 2025, providing an opportunity for detailed discussion of the governance enhancements.
• The engagement with Graycliff should seek to understand the specific concerns that drove the 2024 withhold votes and present the governance improvements that address those concerns.
• The engagement with Osprey Point should be framed as a proactive governance update, reflecting the Board's commitment to transparency and dialogue.
• Initiate pre-proxy engagement with Gramercy Proxy Services and Northgate Governance Advisors, presenting the governance enhancements and providing supporting documentation.
• Schedule the coordination meeting with Meridian Cobalt LLP to begin planning the 2026 proxy statement governance disclosures.
Q1 2026 (January – March). This phase is focused on follow-up and proxy preparation. During this period:
• Conduct follow-up engagement with any shareholders or proxy advisory firms that require additional dialogue.
• Begin preparation of the 2026 proxy statement, incorporating the enhanced governance disclosures described in Part VII below.
• Complete pre-proxy engagement with Gramercy and Northgate, ensuring that both firms have access to updated governance materials and are aware of the Board's governance enhancements.
• Monitor the governance landscape for any new developments, including shareholder proposals, proxy advisory firm policy updates, or changes in shareholder ownership positions.
B. Who Should Lead Engagement
Effective shareholder governance engagement requires the participation of independent directors, reflecting the Board's direct involvement in and commitment to governance improvement. The following individuals should serve as the primary participants in the engagement campaign:
Margaret R. Ellsworth, Board Chair. As Chair of the Board of Directors and Chair of the Governance & Nominating Committee, Ms. Ellsworth is the most appropriate director to lead governance engagement with institutional shareholders. Her direct involvement signals the Board's commitment to governance at the highest level and provides shareholders with access to the director most directly responsible for governance oversight. Ms. Ellsworth's participation is particularly important for the Thornfield engagement, given that the Thornfield letter was addressed to the Board of Directors and requires a response from the Board's leadership.
David K. Sorrento, Lead Independent Director. Mr. Sorrento should participate in governance engagement meetings either alongside Ms. Ellsworth or as an alternative representative when scheduling conflicts arise. The participation of the Lead Independent Director is valued by institutional shareholders because it provides assurance that the Board's governance practices are subject to robust independent oversight. Mr. Sorrento's participation may be particularly relevant for the Graycliff engagement, given Graycliff's focus on board independence and effectiveness.
James W. Prescott, General Counsel & Corporate Secretary. Mr. Prescott should coordinate all logistics for the engagement campaign, including scheduling, agenda preparation, and distribution of materials. Mr. Prescott should also ensure that all communications — written and oral — are reviewed by legal counsel for compliance with Regulation FD and confidential supervisory information restrictions. While Mr. Prescott may participate in engagement meetings in a supporting role, the primary dialogue should be led by the independent directors.
Whitfield Greer & Associates. Anne-Marie Delacroix, Senior Vice President at Whitfield Greer & Associates (300 Madison Avenue, Suite 1510, New York, NY 10017), should be engaged to assist with the scheduling, messaging, and logistics of all shareholder outreach. Whitfield Greer has existing relationships with the governance teams at major institutional investors and can facilitate introductions, manage scheduling, and provide intelligence on shareholder voting policies and governance priorities. Ms. Delacroix should participate in the planning process and in engagement meetings as appropriate.
C. Engagement Format
The engagement strategy should employ the following formats:
One-on-One Meetings. Each key shareholder (Thornfield, Graycliff, and Osprey Point) should be offered a dedicated one-on-one meeting, either in person or via videoconference, at the shareholder's preference. One-on-one meetings permit candid and detailed discussion of governance topics and are the format most valued by institutional shareholder governance teams. Meetings should be scheduled for approximately 45 to 60 minutes.
Governance Engagement Presentation Deck. A governance engagement presentation deck should be prepared for use in all shareholder and proxy advisory firm meetings. The deck should cover the following topics:
• Board composition and independence (13 directors, 10 independent, 3 non-independent)
• Committee structure (5 standing committees: Risk, Audit, Governance & Nominating, Compensation, and Technology & Operations) and committee leadership
• Summary of governance document updates, including the revised committee charters, Board Information Flow Policy, and amended Corporate Governance Guidelines
• Risk oversight enhancements, including the Risk Committee's new escalation protocol, enhanced meeting frequency (at least 8 meetings per year), and the direct reporting relationship between the Chief Risk Officer and the Risk Committee
• Board evaluation process, including the engagement of an independent third-party facilitator
• Director skill-matrix and committee-chair succession planning
• Shareholder responsiveness and engagement activities
The presentation deck should be visually clean and professional, consistent with materials used by well-governed financial institutions in their governance engagement programs. The deck should be reviewed by Calderwood & Harkness and Meridian Cobalt prior to use.
Written Governance Update Summary. Consideration should be given to whether a written governance update summary should be prepared and provided to shareholders in connection with the engagement meetings. A written summary can serve as a useful leave-behind document that shareholders can reference in their internal governance evaluations. However, any written document provided to shareholders must be carefully reviewed for Regulation FD and confidential supervisory information considerations. If a written summary is prepared, it should be limited to information that is (or will be, upon posting of updated governance documents) publicly available.
D. Regulation FD Considerations
As a publicly traded company listed on the Nasdaq Stock Market (ticker BRBK), BRB is subject to Regulation FD (17 C.F.R. § 243.100 et seq.), which prohibits the selective disclosure of material nonpublic information to certain persons, including institutional investors, unless such disclosure is made simultaneously to the public (in the case of intentional disclosure) or promptly to the public (in the case of non-intentional disclosure).
Governance discussions generally do not implicate Regulation FD when they are limited to board practices, committee structures, governance policies, and similar governance topics that do not constitute material nonpublic information about the company's financial results, business operations, or prospects. The topics covered in the governance engagement campaign — board composition, committee charters, governance guidelines, risk oversight processes, and board evaluation frameworks — are governance-process topics rather than material business or financial information, and are generally considered to fall outside the scope of Regulation FD.
However, caution is warranted in two areas:
Regulatory Matters. Any reference to the OCC MRA letter, the Federal Reserve supervisory letter, or the remediation program could constitute material nonpublic information if the existence and terms of these regulatory actions have not been publicly disclosed. If the OCC MRA and Federal Reserve supervisory letter have been disclosed in BRB's SEC filings (e.g., in risk factor disclosures or management's discussion and analysis in the Form 10-K or Form 10-Q), the scope of permissible discussion may be broader. If these regulatory actions have not been publicly disclosed, any reference to them — even oblique or indirect — risks a Regulation FD violation. Calderwood & Harkness should coordinate with Meridian Cobalt LLP to determine the current state of public disclosure regarding the regulatory findings before any engagement meetings take place.
Remediation Timelines. If the December 31, 2025 remediation deadline or the progress of the remediation program has not been publicly disclosed, references to specific timelines or remediation milestones could constitute selective disclosure of material nonpublic information. All messaging regarding remediation should be framed in general terms (e.g., "the Board is in the process of adopting enhanced governance practices") rather than specific terms (e.g., "the Board must complete governance remediation by year-end 2025 pursuant to a regulatory requirement").
Calderwood & Harkness will prepare a Regulation FD compliance protocol for the engagement campaign, including talking points that delineate the boundaries of permissible discussion, and will brief all participants on Regulation FD requirements prior to any engagement meeting.
VII. Disclosure Enhancements for the 2026 Proxy Statement
A. Overview. The 2026 proxy statement represents the Bank's most important public governance disclosure and should serve as the definitive statement of the governance improvements adopted during 2025. A well-crafted proxy statement that clearly and comprehensively describes the Board's governance enhancements will satisfy shareholder expectations, support favorable proxy advisory firm recommendations, and demonstrate the Board's commitment to governance best practices.
Preparation of the 2026 proxy statement will be led by Meridian Cobalt LLP (Harold F. Dunleavy, Partner, Corporate Practice Group), which retains the Bank's general corporate and SEC disclosure mandate. Calderwood & Harkness will provide governance-specific input and review, ensuring that the proxy disclosures accurately reflect the governance enhancements adopted and are consistent with the messaging conveyed during the off-season engagement campaign. Coordination between Calderwood & Harkness and Meridian Cobalt is essential to avoid inconsistencies between the proxy disclosures and the engagement messaging.
B. Recommended Enhanced Disclosures
We recommend that the 2026 proxy statement include the following enhanced governance disclosures:
1. Board and Committee Governance Enhancements. The proxy statement should include a dedicated section describing the governance enhancements adopted during 2025, including the adoption of revised committee charters for the Risk Committee, Audit Committee, and Governance & Nominating Committee; the new Board Information Flow Policy; and the amended Corporate Governance Guidelines. The disclosure should summarize the key changes effected by each document in clear, accessible language. Importantly, the disclosure must be framed as the Board's proactive initiative and should not reference confidential supervisory information. The description should emphasize the comprehensiveness of the governance review and the Board's commitment to adopting practices that meet the highest standards applicable to banking institutions of BRB's size and complexity.
2. Director Skill-Matrix. The proxy statement