1045-00007 · Client 1045 · Wells Process

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EXHIBIT E

Declarations of Patricia Navarrete, Chief Financial Officer, and Raymond Hu, Chief Accounting Officer, Belmont Ridge Bank National Association

Filed in Connection with the Wells Submission of Belmont Ridge Bank National Association

SEC Division of Enforcement File No. HO-14287

Date of Filing: April 5, 2024

Submitted by:

Calderwood & Harkness LLP 425 Lexington Avenue, 30th Floor New York, NY 10017

On Behalf of:

Belmont Ridge Bank National Association 200 Park Avenue South, 38th Floor New York, NY 10003

DECLARATION OF PATRICIA NAVARRETE

In the Matter of: BELMONT RIDGE BANK NATIONAL ASSOCIATION

SEC File No. HO-14287 SEC Formal Order No. EN-2023-0947

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 ordinary course of business, and my participation in the events described below. If called as a witness, I could and would testify competently to the matters stated herein.

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 2011, when I transitioned from a public-accounting and advisory career to full-time corporate officer roles.

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 LLP in the firm's Financial Services audit practice, where I served as a Senior Manager focused on bank regulatory reporting and SEC compliance for large commercial and retail banking institutions.

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 continuously in that capacity since that date.

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 financial-planning processes. I work closely with BRB's Chief Risk Officer, Annette Kowalski, on matters involving credit risk, market risk, and operational risk that have financial-reporting implications.

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 ("ACL") discussed in detail below.

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 frequently when circumstances warrant.

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' equity of approximately $4.03 billion, pre-tax income of approximately $612 million, and net income of approximately $471.2 million for fiscal year 2022. BRB adopted the current expected credit losses standard, Accounting Standards Codification Topic 326 — Financial Instruments — Credit Losses ("ASC 326" or "CECL"), effective January 1, 2020, in accordance with the guidance issued by the Financial Accounting Standards Board ("FASB") and the transitional provisions available to banking organizations.

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 approximately eighteen months of development and pilot testing that began in early 2019.

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 artificial-intelligence-driven credit-scoring and underwriting model that evaluates a wide array of traditional and alternative data inputs, including FICO scores, debt-to-income ratios, employment verification data, bank transaction history, and other behavioral indicators.

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 portfolio exhibited a net charge-off rate of 2.14% and a 90-plus-day delinquency rate of 1.72%. These metrics were disclosed in the credit-quality tables included in Note 5 (Loans and Allowance for Credit Losses) to BRB's consolidated financial statements and were discussed in the Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") section of the Form 10-K.

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 supportable forecasts of future economic conditions. This methodology is consistent with the measurement objectives set forth in ASC 326-20-30 and with the implementation guidance provided by the FASB's Transition Resource Group for Credit Losses.

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 score, delinquency status, geographic concentration, and borrower payment behavior. Reasonable and supportable forecasts are informed by macroeconomic scenario analysis, including unemployment rate projections, GDP growth estimates, and consumer credit indices sourced from Moody's Analytics and the Federal Reserve's economic projections.

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 detailed quarterly estimation process described in Mr. Hu's declaration. I reviewed the underlying data, the key assumptions, the qualitative overlay adjustments, and the sensitivity analyses before providing my approval.

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 representatives from credit risk analytics, finance and accounting, and the BridgeFin business unit.

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 with the standards of professional care expected of financial officers of a publicly traded national banking institution.

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 preliminary view. As discussed in detail below and in BRB's Wells Submission, the difference between BRB's reported ACL and the Staff's preliminary estimate is attributable to a methodological disagreement regarding the treatment of re-aged and modified loans within the BridgeFin portfolio, not to any error, misstatement, or concealment. BRB's reported ACL was within the range of reasonable estimates permissible under ASC 326, and the methodological choices underlying BRB's estimate were well-supported and consistent with applicable accounting standards, regulatory guidance, and industry practice.

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 qualifying modification, the delinquency clock for each such loan was reset to zero, and the loan was reclassified from its prior delinquency bucket (e.g., 30–59 days past due, 60–89 days past due, or 90+ days past due) to "current" status within BRB's CECL model.

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 and performance characteristics of the BridgeFin portfolio. The Modification Policy was reviewed and approved by the Chief Risk Officer, the Chief Accounting Officer, and me, and was presented to the Board Audit Committee for informational purposes.

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 debt restructurings and workout arrangements, as well as the practical application guidance for ASC 326 published by the American Institute of Certified Public Accountants ("AICPA") and the Center for Audit Quality.

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 interest rate, an extension of loan term, or a temporary forbearance of principal, rather than a capitalization of past-due interest or fees that merely masked continued non-performance; and (c) the borrower's updated credit profile, as assessed by BridgeFin's underwriting model or manual review, demonstrated a reasonable likelihood of continued payment performance. Loans that did not meet all three criteria were not re-aged and remained in their pre-modification delinquency buckets within the CECL model.

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 appropriate — and indeed more accurate as a matter of credit-risk measurement — to recognize that improvement in the CECL model by resetting the delinquency clock. To do otherwise would be to treat a performing, modified loan as equivalent to a non-performing, delinquent loan, which would overstate expected losses and misrepresent the economic reality of the portfolio's credit quality.

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 auditor Whitfield Keane LLP, and by outside counsel at Calderwood & Harkness LLP.

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 statements and other financial information included in the reports fairly present, in all material respects, the financial condition and results of operations of BRB.

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. Model validation includes back-testing of model predictions against actual realized losses, assessment of model assumptions and inputs, review of model documentation, and evaluation of model limitations and compensating controls. The Model Risk Management group reports its validation findings directly to the CRO and to the Board Audit Committee, ensuring independent oversight of the model.

(b) Quarterly ACL Estimation Process. The ACL estimation process is conducted each quarter and involves a structured, multi-step workflow. The credit risk analytics team runs the quantitative CECL model and generates preliminary ACL estimates by portfolio segment. These preliminary estimates are then reviewed by a cross-functional ACL Committee, which considers qualitative overlay adjustments to account for factors not fully captured by the quantitative model. The combined quantitative and qualitative ACL estimate is then reviewed and approved by the Chief Accounting Officer (Mr. Hu) and by me, as CFO.

(c) Documentation of Qualitative Overlay Adjustments. Each quarter, the qualitative overlay adjustments proposed by the ACL Committee are documented in a written memorandum that identifies the specific factor being addressed (e.g., emerging credit trends, changes in underwriting standards, concentration risk, or macroeconomic developments), the directional impact of the adjustment (upward or downward), the dollar amount of the adjustment, and the supporting rationale. These memoranda are maintained in BRB's records and are available for review by the independent auditor and bank examiners.

(d) Presentation to Board Audit Committee. The ACL estimation results, including the quantitative model output, qualitative overlay adjustments, and key assumptions, are presented to the Board Audit Committee each quarter. Gwendolyn Prescott, the Audit Committee Chair, and the other independent members of the Committee have the opportunity to question management regarding the ACL methodology, the reasonableness of the estimates, and any significant changes from the prior quarter. The minutes of these Audit Committee meetings document the presentations and discussions.

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 unqualified audit opinion on both.

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 involved — a designation that is common across the banking industry for ACL estimates under CECL.

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 cycles and included in-person meetings at BRB's offices, telephone calls, video conferences, and extensive written correspondence.

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, Whitfield Keane did not require any adjustment to BRB's reported ACL for fiscal year 2022. The independent auditor concluded that BRB's ACL estimate was within the range of reasonable estimates under ASC 326.

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 with the Commission on November 9, 2023.

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 impact on reported delinquency metrics; and (c) additional quantitative disclosure regarding the composition of the BridgeFin ACL by product type and vintage.

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, down from 1.72% as of December 31, 2022. This improvement in credit-quality metrics demonstrates the effectiveness of BRB's credit management practices and underwriting model refinements, and it is inconsistent with the suggestion that BRB's reported ACL for fiscal year 2022 was materially understated.

IX. Absence of Scienter

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 were presented to, and discussed with, the Board Audit Committee.

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 publicly traded banking institution, and I am confident that BRB's reported ACL was a good-faith, reasonable estimate under ASC 326.

X. Conclusion.

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 consistent with OCC guidance, was reviewed by the independent auditor, and reflected the economic substance of the modifications.

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.

Executed on April 1, 2024 New York, New York

________________________________________

Patricia Navarrete Chief Financial Officer Belmont Ridge Bank National Association

DECLARATION OF RAYMOND HU

In the Matter of: BELMONT RIDGE BANK NATIONAL ASSOCIATION

SEC File No. HO-14287 SEC Formal Order No. EN-2023-0947

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 maintained by BRB in the ordinary course of business, and my direct participation in the events described below. If called as a witness, I could and would testify competently to the matters stated herein.

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 (License No. 094712, active status) and hold the Chartered Global Management Accountant ("CGMA") designation.

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 holding companies. I was involved in the audits of several large national and regional banking organizations, and I developed substantial expertise in the application of accounting standards governing credit losses, including the predecessor incurred-loss model under ASC 450 (formerly SFAS 5 and SFAS 114) and, during my later years at Marlowe Crane CPAs LLP, the transition planning for the CECL standard under ASC 326.

6. I left Marlowe Crane CPAs LLP in 2013 to join BRB as Vice President and Assistant Controller. In that role, I was responsible for the preparation of BRB's SEC filings, coordination with the independent auditor, and the implementation and maintenance of accounting policies. I was promoted to Senior Vice President and Controller in 2016, and I was appointed Chief Accounting Officer in January 2020, coinciding with BRB's adoption of the CECL standard. I have served continuously in the Chief Accounting Officer role since that date.

7. As Chief Accounting Officer, my responsibilities include oversight of BRB's general ledger, preparation and review of all SEC filings (including Forms 10-K, 10-Q, and 8-K), implementation and maintenance of accounting policies (including CECL under ASC 326), management of the quarterly and annual financial close processes, and day-to-day coordination with BRB's independent auditor, Whitfield Keane LLP. I also serve as the principal accounting liaison with the OCC's examination team on matters involving accounting policies and financial reporting.

8. I report directly to Chief Financial Officer Patricia Navarrete. I am a regular participant in the quarterly meetings of BRB's Board of Directors Audit Committee, chaired by Gwendolyn Prescott, at which I present technical accounting matters, provide updates on the ACL estimation process, and respond to questions from the independent directors.

III. CECL Model Development and Implementation

9. BRB adopted CECL (ASC 326) effective January 1, 2020. The adoption of CECL represented a significant change in BRB's approach to credit-loss provisioning, shifting from the prior incurred-loss model — which recognized losses only when they were probable and estimable — to a current expected credit losses model that requires the recognition of lifetime expected losses at the time of loan origination. I played a central role in BRB's CECL implementation project, which began in 2017 and involved extensive cross-functional collaboration among the accounting, credit risk, technology, and business-unit teams.

10. The CECL model for the BridgeFin portfolio was developed by BRB's credit risk analytics team, working in close collaboration with my accounting group and Annette Kowalski's risk management team. Given that BridgeFin was launched in the third quarter of 2020 — after BRB had already adopted CECL — the development of a CECL model specific to the BridgeFin portfolio required particular care. The credit risk analytics team built the model in phases, initially relying on proxy data from comparable consumer and small-business lending portfolios (both internal BRB portfolios and external benchmarking data) and gradually incorporating BridgeFin-specific historical loss data as the portfolio matured and accumulated a sufficient performance history.

11. The CECL model for BridgeFin employs a vintage-cohort methodology. Under this approach, loans are segmented by origination quarter (i.e., all loans originated in a given calendar quarter are grouped together as a "vintage") and further segmented by product type (unsecured personal loans versus small-business microloans). For each vintage-product cohort, the model estimates a lifetime loss curve based on the observed loss experience of prior vintages, adjusted as described below for current conditions and reasonable and supportable forecasts.

12. The key inputs to the CECL model include: (a) historical loss experience, measured as the cumulative net charge-off rates observed across prior BridgeFin vintages and, for earlier vintages with limited BridgeFin-specific data, supplemented by proxy data; (b) current economic conditions, assessed through a range of indicators including the national and state-level unemployment rates, real GDP growth, the Federal Reserve's Senior Loan Officer Opinion Survey on bank lending practices, and consumer credit indices (such as the Federal Reserve Bank of New York's Household Debt and Credit Report and the Consumer Credit Index); and (c) reasonable and supportable forecasts of future economic conditions, derived from macroeconomic scenarios provided by Moody's Analytics and cross-referenced against the Federal Reserve's Summary of Economic Projections and BRB's internal economic research.

13. In addition to the quantitative model output, qualitative overlay adjustments are applied each quarter to account for factors not adequately captured in the quantitative models. These factors may include, but are not limited to, emerging trends in borrower payment behavior, changes in BridgeFin's underwriting standards or credit-score cutoffs, concentration risk (geographic, industry, or borrower segment), model uncertainty or limitations, and regulatory or macroeconomic developments that have not yet been reflected in the historical data or the economic forecast scenarios. The qualitative overlay adjustments are proposed by the cross-functional ACL Committee, debated and refined in committee meetings, and documented in written memoranda with supporting rationale.

IV. Quarterly ACL Estimation Process — Detailed Description

14. The quarterly ACL estimation process for the BridgeFin portfolio follows a structured, multi-step workflow that is designed to ensure rigor, consistency, and appropriate oversight. I describe each step below:

Step 1: Quantitative Model Run. At the beginning of each quarterly estimation cycle, the credit risk analytics team, led by Dr. Sarah Lindholm (Vice President, Credit Risk Analytics), runs the quantitative CECL model using the most recent data as of the quarter-end date. The model generates preliminary ACL estimates by vintage-product segment, together with supporting detail on loss-rate assumptions, roll-rate analyses, and sensitivity outputs. The model run typically occurs within the first five business days following the quarter-end date.

Step 2: Cross-Functional ACL Committee Review. The preliminary model results are presented to the ACL Committee, which meets within the second week following quarter-end. The ACL Committee includes representatives from credit risk analytics (Dr. Lindholm), finance and accounting (myself, together with Elise Tanaka, Vice President and Assistant Controller), the BridgeFin division (a designee of Naveen Chakravarti, typically Michelle Furlong, Director of BridgeFin Credit Operations), and risk management (a designee of Annette Kowalski, typically James Petersen, Senior Vice President and Deputy Chief Risk Officer). The Committee reviews the quantitative model output, discusses portfolio trends, and identifies any factors that may warrant qualitative overlay adjustments.

Step 3: Qualitative Overlay Adjustments. Based on the Committee's discussion, qualitative overlay adjustments are proposed, debated, and refined. Each proposed adjustment is documented in a written memorandum that identifies the specific factor being addressed, the directional impact of the adjustment (upward or downward), the estimated dollar amount, and the supporting rationale. The Committee reaches a consensus on the qualitative overlays to be recommended. During fiscal year 2022, the aggregate qualitative overlay for the BridgeFin portfolio ranged from approximately $8 million to $14 million per quarter, depending on the specific factors assessed.

Step 4: Chief Accounting Officer Review and CFO Approval. I review the combined quantitative and qualitative ACL estimate, including the underlying assumptions, sensitivity analyses, and qualitative overlay documentation. I assess whether the estimate is consistent with ASC 326, whether the qualitative adjustments are adequately supported, and whether the overall ACL level is reasonable in light of the portfolio's credit characteristics and the prevailing economic environment. Following my review, I present the ACL estimate to CFO Patricia Navarrete for her review and approval. Ms. Navarrete and I discuss the estimate, and she provides formal approval before the ACL is finalized for inclusion in BRB's financial statements.

Step 5: Board Audit Committee Presentation. The approved ACL for the BridgeFin portfolio, together with the ACL estimates for BRB's other loan portfolios, is presented to the Board Audit Committee at its quarterly meeting, which typically occurs within three to four weeks after quarter-end. The presentation includes an overview of the quantitative model results, a summary of the qualitative overlay adjustments, a comparison of the current ACL to prior quarters, and a discussion of key risks and uncertainties. Audit Committee Chair Gwendolyn Prescott and the other independent directors have the opportunity to ask questions and request additional information. The Audit Committee's review of the ACL is documented in the minutes of the meeting.

Step 6: Incorporation into SEC Filings. Following Audit Committee review, the ACL figures are incorporated into BRB's SEC filings (10-K or 10-Q, as applicable), which are prepared under my supervision. I review the credit-quality disclosures, the ACL roll-forward tables, and the MD&A discussion for accuracy and completeness before the filings are submitted to Ms. Navarrete and CEO Marcus Ellingham for their SOX 302 and 906 certifications.

15. This process was followed consistently each quarter during fiscal year 2022 and the first two quarters of fiscal year 2023, the periods most directly relevant to the Staff's investigation. I maintained detailed work papers and documentation of each quarterly ACL estimation cycle, and these records have been made available to the Staff in the course of its investigation.

V. Treatment of Re-Aged / Modified Loans

16. As discussed in Ms. Navarrete's declaration, a central issue in the Staff's investigation involves BRB's treatment of 12,847 re-aged or modified BridgeFin loans with an aggregate outstanding principal balance of approximately $236.4 million. I supervised the accounting treatment of these modifications and can provide additional detail regarding the rationale and methodology.

17. Under BRB's CECL model, these 12,847 loans were treated as "current" after modification, and their delinquency clocks were reset to zero. This means that, for purposes of the vintage-cohort loss-rate estimation, the re-aged loans were removed from their prior delinquency buckets (e.g., 30–59 days past due, 60–89 days past due, or 90+ days past due) and reclassified as current. This treatment affected the composition of the delinquency-status stratification used in the CECL model and, consequently, the estimated loss rates and the resulting ACL.

18. This re-aging treatment followed BRB's written Loan Modification and Re-Aging Policy, which was developed by the BridgeFin credit operations team in consultation with BRB's risk management function and was reviewed and approved by the Model Risk Management group under Chief Risk Officer Annette Kowalski. The Model Risk Management group evaluated the re-aging treatment as part of its quarterly model validation process and concluded that the treatment was appropriate, subject to the specific eligibility criteria set forth in the Policy.

19. The re-aging treatment was consistent with guidance in the OCC's Comptroller's Handbook regarding loan modifications and workout arrangements. The OCC Handbook recognizes that a loan modification, when accompanied by sustained borrower performance, may appropriately result in the re-aging of the loan's delinquency status. The treatment was also consistent with industry practice among other financial institutions, including other digital-first lending platforms, that offer loan modification programs for consumer and small-business borrowers. I consulted with colleagues at several peer institutions (through industry working groups and accounting forums) and confirmed that re-aging upon successful post-modification performance was a widely used approach.

20. I supervised the accounting treatment of the re-aged loans and confirmed that the re-aging approach was appropriate under ASC 326. Specifically, I considered the following factors: (a) the eligibility criteria under BRB's Modification Policy were designed to ensure that re-aging occurred only for borrowers who had demonstrated genuine improvement in their ability to repay, as evidenced by at least three consecutive on-time payments post-modification; (b) the re-aging treatment was applied consistently across all eligible modifications, without selective or opportunistic application; and (c) the qualitative overlay process provided an additional mechanism to account for any residual risk that the quantitative model might not capture with respect to modified loans.

21. I am aware that the SEC Staff has taken the preliminary position that these 12,847 loans should have remained in their original vintage delinquency buckets for loss-rate estimation purposes, without resetting the delinquency clock upon modification. The Staff contends that retaining these loans in their original delinquency buckets would have increased the reported 90-plus-day delinquency rate from 1.72% (as reported by BRB) to approximately 2.38%, and would have increased the reported net charge-off rate from 2.14% to approximately 3.05%. Under the Staff's methodology, the ACL would have been approximately $180.8 million (4.41% of outstanding loans) rather than the $143.5 million (3.50%) reported by BRB.

22. I respectfully disagree with the Staff's position. The Staff's approach effectively disregards the economic reality that a borrower who has received a modification, complied with the modified terms, and made three or more consecutive on-time payments has a fundamentally different credit risk profile than a borrower who remains delinquent. To treat the two categories of borrowers identically in the CECL model would overstate expected losses for the modified-and-performing subpopulation and would produce an ACL that does not faithfully represent the expected lifetime credit losses on the portfolio. The re-aging treatment that BRB applied was designed to capture this economic distinction, and I believe it resulted in a more accurate and more informative estimate of expected credit losses.

VI. Good-Faith Basis for Reported ACL

23. BRB's reported ACL of $143.5 million (3.50% of $4.1 billion in outstanding BridgeFin loans) as of December 31, 2022, was the product of the disciplined quarterly estimation process described above. It reflected the combined output of the quantitative CECL model and the qualitative overlay adjustments, both of which were developed and applied in accordance with ASC 326 and BRB's documented policies and procedures. The estimate was reviewed by me, approved by CFO Patricia Navarrete, presented to the Board Audit Committee, and reviewed by the independent auditor.

24. The SEC Staff's preliminary view that the ACL should have been $180.8 million (4.41%) reflects a different methodological choice regarding the treatment of re-aged loans. While I acknowledge that the Staff's alternative methodology produces a higher ACL estimate, I respectfully submit that both BRB's methodology and the Staff's methodology fall within the range of reasonable approaches under ASC 326. ASC 326 does not prescribe a single "correct" methodology for estimating expected credit losses; rather, it establishes a measurement objective and permits entities to use range methods to achieve that objective, provided the method selected is applied consistently and produces a reasonable estimate. BRB's vintage-cohort methodology with re-aging treatment satisfied these requirements.

25. The difference between BRB's reported ACL ($143.5 million) and the Staff's preliminary estimate ($180.8 million) is approximately $37.3 million. I acknowledge that this difference exceeds BRB's internal materiality threshold for financial reporting purposes, which is approximately $30.6 million, calculated as 5% of BRB's fiscal year 2022 pre-tax income of $612 million. The difference of $37.3 million exceeds this threshold by approximately $6.7 million. However, I respectfully submit that the exceedance of a quantitative materiality threshold by a relatively modest margin does not, by itself, establish that BRB's reported figure was incorrect or misleading. Materiality is a matter of both quantitative and qualitative assessment, and the close proximity of BRB's ACL to the Staff's alternative estimate — within approximately 26% of the difference between the two figures — reflects a close-call judgment rather than an error, misstatement, or intentional understatement.

26. In support of the reasonableness of BRB's reported ACL, I note that BRB engaged Brindoval Analytic Partners LLC, a nationally recognized financial advisory and analytics firm, to prepare a peer comparison analysis of ACL coverage ratios among similarly situated digital-first lending institutions. The peer comparison, prepared under the direction of Dr. Franklin Osei, CPA, CFF, a senior managing director at Brindoval Analytic Partners, demonstrated that BRB's ACL coverage ratio of 3.50% fell within the interquartile range (i.e., between the 25th and 75th percentiles) of ACL coverage ratios reported by a peer group of ten comparable institutions as of December 31, 2022. This peer comparison is discussed in greater detail in BRB's Wells Submission and is attached thereto as a separate exhibit.

VII. Communications with Whitfield Keane LLP

27. During fiscal year 2022 and the subsequent quarterly review periods, I served as the primary accounting contact for Whitfield Keane LLP (PCAOB Registration No. 2847), BRB's independent registered public accounting firm. Whitfield Keane has served as BRB's independent auditor since fiscal year 2015.

28. The Whitfield Keane engagement partner for the fiscal year 2022 audit and subsequent quarterly reviews was Lorraine Dupont, a partner with more than twenty years of experience in the audit of financial institutions. Ms. Dupont's audit team included specialized professionals with expertise in credit-risk modeling, CECL implementation, and bank regulatory accounting. I communicated regularly and frequently with Ms. Dupont and her team throughout the audit and quarterly review cycles.

29. During the fiscal year 2022 audit, Whitfield Keane's audit team performed extensive procedures with respect to BRB's ACL for the BridgeFin portfolio. These procedures included, among other things: (a) evaluating the design and operating effectiveness of BRB's internal controls over the CECL estimation process, including the controls over the re-aging treatment of modified loans; (b) testing the key assumptions and inputs used in the CECL model, including historical loss rates, macroeconomic forecast scenarios, and vintage-cohort segmentation; (c) evaluating the reasonableness of management's qualitative overlay adjustments; (d) performing independent sensitivity analyses to assess the range of reasonable ACL outcomes; and (e) reviewing BRB's Loan Modification and Re-Aging Policy and its application to the 12,847 modified BridgeFin loans.

30. Based on these procedures, Whitfield Keane did not propose any audit adjustment to BRB's reported ACL for the BridgeFin portfolio for fiscal year 2022. Whitfield Keane concluded that BRB's ACL estimate was within the range of reasonable estimates under ASC 326 and that the re-aging treatment was an acceptable methodology. The independent auditor issued an unqualified opinion on BRB's consolidated financial statements for fiscal year 2022 and an unqualified opinion on the effectiveness of BRB's internal controls over financial reporting.

VIII. Internal Controls Over Financial Reporting

31. BRB's ICFR framework includes specific controls over the CECL estimation process that are designed to ensure the accuracy, completeness, and reliability of the ACL estimates. The key controls include:

(a) Segregation of Duties. The CECL estimation process involves three organizationally distinct functions: (i) model development and quantitative estimation, performed by the credit risk analytics team (within the BridgeFin division and the enterprise risk analytics group); (ii) model validation and independent review, performed by the Model Risk Management group (within the risk management function under Chief Risk Officer Annette Kowalski); and (iii) accounting application and financial-statement incorporation, performed by my accounting group. This three-way segregation of duties ensures that no single function has unchecked control over the model inputs, the model validation, and the financial-statement output.

(b) Quarterly Model Back-Testing. The Model Risk Management group performs quarterly back-testing of the CECL model by comparing predicted loss rates against actual realized losses for prior vintages. Back-testing results are analyzed for evidence of model bias (systematic over- or under-prediction), and any significant deviations are investigated and, where appropriate, result in model recalibration. During fiscal year 2022, the back-testing results indicated that the CECL model's loss predictions were within acceptable tolerance bands for the BridgeFin portfolio.

(c) Documentation Requirements. All qualitative overlay adjustments are documented in written memoranda with supporting rationale, as described in paragraph 14 above. In addition, the credit risk analytics team maintains detailed model documentation, including model development papers, assumption logs, and data-lineage records. My accounting group maintains work papers documenting the quarterly ACL estimation process, the review and approval chain, and the incorporation of ACL figures into BRB's financial statements.

(d) SOX 302/906 Certification Process with Sub-Certifications. BRB's SOX certification process includes a sub-certification framework under which business-unit heads and key functional leaders provide written sub-certifications to the CFO and CEO attesting to the accuracy and completeness of the financial information provided by their respective units. Naveen Chakravarti, as SVP and Division Head of BridgeFin, provides a quarterly sub-certification covering the BridgeFin portfolio data, credit-quality metrics, and related disclosures. These sub-certifications are maintained in BRB's SOX compliance files.

32. No material weakness or significant deficiency in BRB's ICFR was identified for fiscal year 2022 or for the interim periods of Q1 2023 and Q2 2023 by either BRB's internal audit function or by Whitfield Keane LLP. The ICFR framework described above was operating effectively during the periods relevant to the Staff's investigation.

IX. OCC Supervisory Context

33. BRB holds OCC Charter No. 24891 and is subject to ongoing supervisory examination by the OCC. BRB's OCC-assigned examination team conducts regular on-site and off-site reviews of BRB's operations, financial condition, risk management, and compliance, including the Bank's ACL methodology and credit-risk management practices.

34. BRB's most recent composite CAMELS rating, assigned as of the OCC's supervisory assessment dated September 2023, was a "2" (Satisfactory). A CAMELS composite rating of "2" indicates that the institution is fundamentally sound and exhibits only moderate weaknesses that are within the Board of Directors' and management's capabilities and willingness to correct. BRB has maintained a composite CAMELS rating of "2" or better throughout the periods relevant to the Staff's investigation.

35. The OCC's concurrent supervisory assessment, conducted in connection with its ongoing examination of BRB, included a review of BRB's ACL methodology for the BridgeFin portfolio and the re-aging treatment of modified loans. While the specific findings and conclusions of the OCC examination are subject to the bank-examination privilege and cannot be disclosed in full in this declaration, I am able to state that the OCC's examination did not result in a finding of material deficiency in BRB's ACL methodology. BRB has been responsive to all OCC supervisory guidance and recommendations regarding its credit-risk management and provisioning practices.

36. I participated directly in discussions with the OCC examination team regarding the BridgeFin ACL and the re-aging treatment of modified loans. The OCC examiners reviewed BRB's Modification Policy, the application of the re-aging criteria, and the impact on reported credit-quality metrics. I provided the OCC examination team with detailed data and analysis in response to their inquiries.

X. Subsequent Developments — Improving Credit Metrics

37. Subsequent developments in the BridgeFin portfolio's credit performance further support the reasonableness of BRB's ACL estimates for fiscal year 2022. As of December 31, 2023, the BridgeFin portfolio's 90-plus-day delinquency rate had declined to 1.48%, down from 1.72% as of December 31, 2022. This improvement in delinquency rates was driven by several factors, including refinements to BridgeFin's AI-driven underwriting model (which resulted in tighter credit standards for higher-risk borrower segments), the natural seasoning and runoff of earlier vintages that had higher loss rates, and an overall improvement in consumer credit conditions during the second half of 2023.

38. In BRB's fiscal year 2023 Annual Report on Form 10-K, filed with the Commission on February 27, 2024, BRB reported an updated ACL for the BridgeFin portfolio of $156.2 million. The increase from $143.5 million (fiscal year 2022) to $156.2 million (fiscal year 2023) reflects several factors, including the enhanced qualitative overlays adopted as part of BRB's voluntary disclosure enhancements, growth in the outstanding BridgeFin loan balance, and management's continued refinement of the CECL model's assumptions and inputs. The updated ACL was determined through the same disciplined quarterly estimation process described above and was reviewed and accepted by the independent auditor.

39. These improving credit metrics and the proactive increase in the ACL confirm that BRB's credit management and ACL practices are sound, and they are inconsistent with the hypothesis that BRB's fiscal year 2022 ACL was the product of intentional understatement or reckless disregard for the accuracy of its financial reporting.

XI. Absence of Scienter

40. I affirm unequivocally that I at no time intended to misstate, understate, or conceal information regarding BRB's ACL estimates, credit-quality metrics, or related disclosures for the BridgeFin portfolio. Every action I took in connection with the CECL estimation process, the re-aging treatment, and the preparation of BRB's SEC filings was undertaken in good faith, in accordance with my professional responsibilities as a Certified Public Accountant and as BRB's Chief Accounting Officer, and in compliance with GAAP (ASC 326), BRB's documented policies and procedures, and the applicable rules and regulations of the Commission.

41. All of my work was performed under the oversight of BRB's governance framework, including review by CFO Patricia Navarrete, independent validation by the Model Risk Management group, review by the Board Audit Committee, and examination by the independent auditor (Whitfield Keane LLP) and the primary federal banking regulator (OCC). The reported ACL for the BridgeFin portfolio represented my and the team's best professional judgment at the time, informed by all available data and analysis.

42. To the extent that the SEC Staff disagrees with BRB's methodological approach to the treatment of re-aged loans, that disagreement reflects a difference of professional judgment on a matter where ASC 326 provides latitude for varying methodological approaches. It does not reflect fraud, intentional misstatement, or reckless conduct on my part or on the part of any BRB employee.

XII. Conclusion.

43. I reaffirm that BRB's ACL for the BridgeFin portfolio as of December 31, 2022, was estimated in good faith using a rigorous, well-documented process that was consistent with ASC 326, supported by a comprehensive system of internal controls, reviewed and accepted by BRB's independent auditor Whitfield Keane LLP, and validated by the OCC's supervisory examination process. The re-aging treatment of modified BridgeFin loans was based on a written policy that was consistent with OCC guidance and industry practice, was applied consistently and with appropriate eligibility criteria, and reflected the economic substance of the borrowers' improved creditworthiness following modification.

44. 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 in this investigation.

I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.

Executed on April 2, 2024 New York, New York

________________________________________

Raymond Hu Chief Accounting Officer Belmont Ridge Bank National Association

EXHIBIT E
Declarations of Patricia Navarrete, Chief Financial Officer, and Raymond Hu, Chief Accounting Officer, Belmont Ridge Bank National Association
Filed in Connection with the Wells Submission of Belmont Ridge Bank National Association
SEC Division of Enforcement File No. HO-14287
Date of Filing: April 5, 2024
Submitted by:
Calderwood & Harkness LLP 425 Lexington Avenue, 30th Floor New York, NY 10017
On Behalf of:
Belmont Ridge Bank National Association 200 Park Avenue South, 38th Floor New York, NY 10003
DECLARATION OF PATRICIA NAVARRETE
In the Matter of: BELMONT RIDGE BANK NATIONAL ASSOCIATION
SEC File No. HO-14287 SEC Formal Order No. EN-2023-0947
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 ordinary course of business, and my participation in the events described below. If called as a witness, I could and would testify competently to the matters stated herein.
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 2011, when I transitioned from a public-accounting and advisory career to full-time corporate officer roles.
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 LLP in the firm's Financial Services audit practice, where I served as a Senior Manager focused on bank regulatory reporting and SEC compliance for large commercial and retail banking institutions.
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 continuously in that capacity since that date.
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 financial-planning processes. I work closely with BRB's Chief Risk Officer, Annette Kowalski, on matters involving credit risk, market risk, and operational risk that have financial-reporting implications.
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 ("ACL") discussed in detail below.
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 frequently when circumstances warrant.
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' equity of approximately $4.03 billion, pre-tax income of approximately $612 million, and net income of approximately $471.2 million for fiscal year 2022. BRB adopted the current expected credit losses standard, Accounting Standards Codification Topic 326 — Financial Instruments — Credit Losses ("ASC 326" or "CECL"), effective January 1, 2020, in accordance with the guidance issued by the Financial Accounting Standards Board ("FASB") and the transitional provisions available to banking organizations.
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 approximately eighteen months of development and pilot testing that began in early 2019.
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 artificial-intelligence-driven credit-scoring and underwriting model that evaluates a wide array of traditional and alternative data inputs, including FICO scores, debt-to-income ratios, employment verification data, bank transaction history, and other behavioral indicators.
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 portfolio exhibited a net charge-off rate of 2.14% and a 90-plus-day delinquency rate of 1.72%. These metrics were disclosed in the credit-quality tables included in Note 5 (Loans and Allowance for Credit Losses) to BRB's consolidated financial statements and were discussed in the Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") section of the Form 10-K.
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 supportable forecasts of future economic conditions. This methodology is consistent with the measurement objectives set forth in ASC 326-20-30 and with the implementation guidance provided by the FASB's Transition Resource Group for Credit Losses.
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 score, delinquency status, geographic concentration, and borrower payment behavior. Reasonable and supportable forecasts are informed by macroeconomic scenario analysis, including unemployment rate projections, GDP growth estimates, and consumer credit indices sourced from Moody's Analytics and the Federal Reserve's economic projections.
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 detailed quarterly estimation process described in Mr. Hu's declaration. I reviewed the underlying data, the key assumptions, the qualitative overlay adjustments, and the sensitivity analyses before providing my approval.
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 representatives from credit risk analytics, finance and accounting, and the BridgeFin business unit.
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 with the standards of professional care expected of financial officers of a publicly traded national banking institution.
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 preliminary view. As discussed in detail below and in BRB's Wells Submission, the difference between BRB's reported ACL and the Staff's preliminary estimate is attributable to a methodological disagreement regarding the treatment of re-aged and modified loans within the BridgeFin portfolio, not to any error, misstatement, or concealment. BRB's reported ACL was within the range of reasonable estimates permissible under ASC 326, and the methodological choices underlying BRB's estimate were well-supported and consistent with applicable accounting standards, regulatory guidance, and industry practice.
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 qualifying modification, the delinquency clock for each such loan was reset to zero, and the loan was reclassified from its prior delinquency bucket (e.g., 30–59 days past due, 60–89 days past due, or 90+ days past due) to "current" status within BRB's CECL model.
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 and performance characteristics of the BridgeFin portfolio. The Modification Policy was reviewed and approved by the Chief Risk Officer, the Chief Accounting Officer, and me, and was presented to the Board Audit Committee for informational purposes.
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 debt restructurings and workout arrangements, as well as the practical application guidance for ASC 326 published by the American Institute of Certified Public Accountants ("AICPA") and the Center for Audit Quality.
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 interest rate, an extension of loan term, or a temporary forbearance of principal, rather than a capitalization of past-due interest or fees that merely masked continued non-performance; and (c) the borrower's updated credit profile, as assessed by BridgeFin's underwriting model or manual review, demonstrated a reasonable likelihood of continued payment performance. Loans that did not meet all three criteria were not re-aged and remained in their pre-modification delinquency buckets within the CECL model.
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 appropriate — and indeed more accurate as a matter of credit-risk measurement — to recognize that improvement in the CECL model by resetting the delinquency clock. To do otherwise would be to treat a performing, modified loan as equivalent to a non-performing, delinquent loan, which would overstate expected losses and misrepresent the economic reality of the portfolio's credit quality.
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 auditor Whitfield Keane LLP, and by outside counsel at Calderwood & Harkness LLP.
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 statements and other financial information included in the reports fairly present, in all material respects, the financial condition and results of operations of BRB.
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. Model validation includes back-testing of model predictions against actual realized losses, assessment of model assumptions and inputs, review of model documentation, and evaluation of model limitations and compensating controls. The Model Risk Management group reports its validation findings directly to the CRO and to the Board Audit Committee, ensuring independent oversight of the model.
(b) Quarterly ACL Estimation Process. The ACL estimation process is conducted each quarter and involves a structured, multi-step workflow. The credit risk analytics team runs the quantitative CECL model and generates preliminary ACL estimates by portfolio segment. These preliminary estimates are then reviewed by a cross-functional ACL Committee, which considers qualitative overlay adjustments to account for factors not fully captured by the quantitative model. The combined quantitative and qualitative ACL estimate is then reviewed and approved by the Chief Accounting Officer (Mr. Hu) and by me, as CFO.
(c) Documentation of Qualitative Overlay Adjustments. Each quarter, the qualitative overlay adjustments proposed by the ACL Committee are documented in a written memorandum that identifies the specific factor being addressed (e.g., emerging credit trends, changes in underwriting standards, concentration risk, or macroeconomic developments), the directional impact of the adjustment (upward or downward), the dollar amount of the adjustment, and the supporting rationale. These memoranda are maintained in BRB's records and are available for review by the independent auditor and bank examiners.
(d) Presentation to Board Audit Committee. The ACL estimation results, including the quantitative model output, qualitative overlay adjustments, and key assumptions, are presented to the Board Audit Committee each quarter. Gwendolyn Prescott, the Audit Committee Chair, and the other independent members of the Committee have the opportunity to question management regarding the ACL methodology, the reasonableness of the estimates, and any significant changes from the prior quarter. The minutes of these Audit Committee meetings document the presentations and discussions.
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 unqualified audit opinion on both.
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 involved — a designation that is common across the banking industry for ACL estimates under CECL.
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 cycles and included in-person meetings at BRB's offices, telephone calls, video conferences, and extensive written correspondence.
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, Whitfield Keane did not require any adjustment to BRB's reported ACL for fiscal year 2022. The independent auditor concluded that BRB's ACL estimate was within the range of reasonable estimates under ASC 326.
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 with the Commission on November 9, 2023.
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 impact on reported delinquency metrics; and (c) additional quantitative disclosure regarding the composition of the BridgeFin ACL by product type and vintage.
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, down from 1.72% as of December 31, 2022. This improvement in credit-quality metrics demonstrates the effectiveness of BRB's credit management practices and underwriting model refinements, and it is inconsistent with the suggestion that BRB's reported ACL for fiscal year 2022 was materially understated.
IX. Absence of Scienter
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 were presented to, and discussed with, the Board Audit Committee.
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 publicly traded banking institution, and I am confident that BRB's reported ACL was a good-faith, reasonable estimate under ASC 326.
X. Conclusion.
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 consistent with OCC guidance, was reviewed by the independent auditor, and reflected the economic substance of the modifications.
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.
Executed on April 1, 2024 New York, New York
________________________________________
Patricia Navarrete Chief Financial Officer Belmont Ridge Bank National Association
DECLARATION OF RAYMOND HU
In the Matter of: BELMONT RIDGE BANK NATIONAL ASSOCIATION
SEC File No. HO-14287 SEC Formal Order No. EN-2023-0947
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 maintained by BRB in the ordinary course of business, and my direct participation in the events described below. If called as a witness, I could and would testify competently to the matters stated herein.
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 (License No. 094712, active status) and hold the Chartered Global Management Accountant ("CGMA") designation.
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 holding companies. I was involved in the audits of several large national and regional banking organizations, and I developed substantial expertise in the application of accounting standards governing credit losses, including the predecessor incurred-loss model under ASC 450 (formerly SFAS 5 and SFAS 114) and, during my later years at Marlowe Crane CPAs LLP, the transition planning for the CECL standard under ASC 326.
6. I left Marlowe Crane CPAs LLP in 2013 to join BRB as Vice President and Assistant Controller. In that role, I was responsible for the preparation of BRB's SEC filings, coordination with the independent auditor, and the implementation and maintenance of accounting policies. I was promoted to Senior Vice President and Controller in 2016, and I was appointed Chief Accounting Officer in January 2020, coinciding with BRB's adoption of the CECL standard. I have served continuously in the Chief Accounting Officer role since that date.
7. As Chief Accounting Officer, my responsibilities include oversight of BRB's general ledger, preparation and review of all SEC filings (including Forms 10-K, 10-Q, and 8-K), implementation and maintenance of accounting policies (including CECL under ASC 326), management of the quarterly and annual financial close processes, and day-to-day coordination with BRB's independent auditor, Whitfield Keane LLP. I also serve as the principal accounting liaison with the OCC's examination team on matters involving accounting policies and financial reporting.
8. I report directly to Chief Financial Officer Patricia Navarrete. I am a regular participant in the quarterly meetings of BRB's Board of Directors Audit Committee, chaired by Gwendolyn Prescott, at which I present technical accounting matters, provide updates on the ACL estimation process, and respond to questions from the independent directors.
III. CECL Model Development and Implementation
9. BRB adopted CECL (ASC 326) effective January 1, 2020. The adoption of CECL represented a significant change in BRB's approach to credit-loss provisioning, shifting from the prior incurred-loss model — which recognized losses only when they were probable and estimable — to a current expected credit losses model that requires the recognition of lifetime expected losses at the time of loan origination. I played a central role in BRB's CECL implementation project, which began in 2017 and involved extensive cross-functional collaboration among the accounting, credit risk, technology, and business-unit teams.
10. The CECL model for the BridgeFin portfolio was developed by BRB's credit risk analytics team, working in close collaboration with my accounting group and Annette Kowalski's risk management team. Given that BridgeFin was launched in the third quarter of 2020 — after BRB had already adopted CECL — the development of a CECL model specific to the BridgeFin portfolio required particular care. The credit risk analytics team built the model in phases, initially relying on proxy data from comparable consumer and small-business lending portfolios (both internal BRB portfolios and external benchmarking data) and gradually incorporating BridgeFin-specific historical loss data as the portfolio matured and accumulated a sufficient performance history.
11. The CECL model for BridgeFin employs a vintage-cohort methodology. Under this approach, loans are segmented by origination quarter (i.e., all loans originated in a given calendar quarter are grouped together as a "vintage") and further segmented by product type (unsecured personal loans versus small-business microloans). For each vintage-product cohort, the model estimates a lifetime loss curve based on the observed loss experience of prior vintages, adjusted as described below for current conditions and reasonable and supportable forecasts.
12. The key inputs to the CECL model include: (a) historical loss experience, measured as the cumulative net charge-off rates observed across prior BridgeFin vintages and, for earlier vintages with limited BridgeFin-specific data, supplemented by proxy data; (b) current economic conditions, assessed through a range of indicators including the national and state-level unemployment rates, real GDP growth, the Federal Reserve's Senior Loan Officer Opinion Survey on bank lending practices, and consumer credit indices (such as the Federal Reserve Bank of New York's Household Debt and Credit Report and the Consumer Credit Index); and (c) reasonable and supportable forecasts of future economic conditions, derived from macroeconomic scenarios provided by Moody's Analytics and cross-referenced against the Federal Reserve's Summary of Economic Projections and BRB's internal economic research.
13. In addition to the quantitative model output, qualitative overlay adjustments are applied each quarter to account for factors not adequately captured in the quantitative models. These factors may include, but are not limited to, emerging trends in borrower payment behavior, changes in BridgeFin's underwriting standards or credit-score cutoffs, concentration risk (geographic, industry, or borrower segment), model uncertainty or limitations, and regulatory or macroeconomic developments that have not yet been reflected in the historical data or the economic forecast scenarios. The qualitative overlay adjustments are proposed by the cross-functional ACL Committee, debated and refined in committee meetings, and documented in written memoranda with supporting rationale.
IV. Quarterly ACL Estimation Process — Detailed Description
14. The quarterly ACL estimation process for the BridgeFin portfolio follows a structured, multi-step workflow that is designed to ensure rigor, consistency, and appropriate oversight. I describe each step below:
Step 1: Quantitative Model Run. At the beginning of each quarterly estimation cycle, the credit risk analytics team, led by Dr. Sarah Lindholm (Vice President, Credit Risk Analytics), runs the quantitative CECL model using the most recent data as of the quarter-end date. The model generates preliminary ACL estimates by vintage-product segment, together with supporting detail on loss-rate assumptions, roll-rate analyses, and sensitivity outputs. The model run typically occurs within the first five business days following the quarter-end date.
Step 2: Cross-Functional ACL Committee Review. The preliminary model results are presented to the ACL Committee, which meets within the second week following quarter-end. The ACL Committee includes representatives from credit risk analytics (Dr. Lindholm), finance and accounting (myself, together with Elise Tanaka, Vice President and Assistant Controller), the BridgeFin division (a designee of Naveen Chakravarti, typically Michelle Furlong, Director of BridgeFin Credit Operations), and risk management (a designee of Annette Kowalski, typically James Petersen, Senior Vice President and Deputy Chief Risk Officer). The Committee reviews the quantitative model output, discusses portfolio trends, and identifies any factors that may warrant qualitative overlay adjustments.
Step 3: Qualitative Overlay Adjustments. Based on the Committee's discussion, qualitative overlay adjustments are proposed, debated, and refined. Each proposed adjustment is documented in a written memorandum that identifies the specific factor being addressed, the directional impact of the adjustment (upward or downward), the estimated dollar amount, and the supporting rationale. The Committee reaches a consensus on the qualitative overlays to be recommended. During fiscal year 2022, the aggregate qualitative overlay for the BridgeFin portfolio ranged from approximately $8 million to $14 million per quarter, depending on the specific factors assessed.
Step 4: Chief Accounting Officer Review and CFO Approval. I review the combined quantitative and qualitative ACL estimate, including the underlying assumptions, sensitivity analyses, and qualitative overlay documentation. I assess whether the estimate is consistent with ASC 326, whether the qualitative adjustments are adequately supported, and whether the overall ACL level is reasonable in light of the portfolio's credit characteristics and the prevailing economic environment. Following my review, I present the ACL estimate to CFO Patricia Navarrete for her review and approval. Ms. Navarrete and I discuss the estimate, and she provides formal approval before the ACL is finalized for inclusion in BRB's financial statements.
Step 5: Board Audit Committee Presentation. The approved ACL for the BridgeFin portfolio, together with the ACL estimates for BRB's other loan portfolios, is presented to the Board Audit Committee at its quarterly meeting, which typically occurs within three to four weeks after quarter-end. The presentation includes an overview of the quantitative model results, a summary of the qualitative overlay adjustments, a comparison of the current ACL to prior quarters, and a discussion of key risks and uncertainties. Audit Committee Chair Gwendolyn Prescott and the other independent directors have the opportunity to ask questions and request additional information. The Audit Committee's review of the ACL is documented in the minutes of the meeting.
Step 6: Incorporation into SEC Filings. Following Audit Committee review, the ACL figures are incorporated into BRB's SEC filings (10-K or 10-Q, as applicable), which are prepared under my supervision. I review the credit-quality disclosures, the ACL roll-forward tables, and the MD&A discussion for accuracy and completeness before the filings are submitted to Ms. Navarrete and CEO Marcus Ellingham for their SOX 302 and 906 certifications.
15. This process was followed consistently each quarter during fiscal year 2022 and the first two quarters of fiscal year 2023, the periods most directly relevant to the Staff's investigation. I maintained detailed work papers and documentation of each quarterly ACL estimation cycle, and these records have been made available to the Staff in the course of its investigation.
V. Treatment of Re-Aged / Modified Loans
16. As discussed in Ms. Navarrete's declaration, a central issue in the Staff's investigation involves BRB's treatment of 12,847 re-aged or modified BridgeFin loans with an aggregate outstanding principal balance of approximately $236.4 million. I supervised the accounting treatment of these modifications and can provide additional detail regarding the rationale and methodology.
17. Under BRB's CECL model, these 12,847 loans were treated as "current" after modification, and their delinquency clocks were reset to zero. This means that, for purposes of the vintage-cohort loss-rate estimation, the re-aged loans were removed from their prior delinquency buckets (e.g., 30–59 days past due, 60–89 days past due, or 90+ days past due) and reclassified as current. This treatment affected the composition of the delinquency-status stratification used in the CECL model and, consequently, the estimated loss rates and the resulting ACL.
18. This re-aging treatment followed BRB's written Loan Modification and Re-Aging Policy, which was developed by the BridgeFin credit operations team in consultation with BRB's risk management function and was reviewed and approved by the Model Risk Management group under Chief Risk Officer Annette Kowalski. The Model Risk Management group evaluated the re-aging treatment as part of its quarterly model validation process and concluded that the treatment was appropriate, subject to the specific eligibility criteria set forth in the Policy.
19. The re-aging treatment was consistent with guidance in the OCC's Comptroller's Handbook regarding loan modifications and workout arrangements. The OCC Handbook recognizes that a loan modification, when accompanied by sustained borrower performance, may appropriately result in the re-aging of the loan's delinquency status. The treatment was also consistent with industry practice among other financial institutions, including other digital-first lending platforms, that offer loan modification programs for consumer and small-business borrowers. I consulted with colleagues at several peer institutions (through industry working groups and accounting forums) and confirmed that re-aging upon successful post-modification performance was a widely used approach.
20. I supervised the accounting treatment of the re-aged loans and confirmed that the re-aging approach was appropriate under ASC 326. Specifically, I considered the following factors: (a) the eligibility criteria under BRB's Modification Policy were designed to ensure that re-aging occurred only for borrowers who had demonstrated genuine improvement in their ability to repay, as evidenced by at least three consecutive on-time payments post-modification; (b) the re-aging treatment was applied consistently across all eligible modifications, without selective or opportunistic application; and (c) the qualitative overlay process provided an additional mechanism to account for any residual risk that the quantitative model might not capture with respect to modified loans.
21. I am aware that the SEC Staff has taken the preliminary position that these 12,847 loans should have remained in their original vintage delinquency buckets for loss-rate estimation purposes, without resetting the delinquency clock upon modification. The Staff contends that retaining these loans in their original delinquency buckets would have increased the reported 90-plus-day delinquency rate from 1.72% (as reported by BRB) to approximately 2.38%, and would have increased the reported net charge-off rate from 2.14% to approximately 3.05%. Under the Staff's methodology, the ACL would have been approximately $180.8 million (4.41% of outstanding loans) rather than the $143.5 million (3.50%) reported by BRB.
22. I respectfully disagree with the Staff's position. The Staff's approach effectively disregards the economic reality that a borrower who has received a modification, complied with the modified terms, and made three or more consecutive on-time payments has a fundamentally different credit risk profile than a borrower who remains delinquent. To treat the two categories of borrowers identically in the CECL model would overstate expected losses for the modified-and-performing subpopulation and would produce an ACL that does not faithfully represent the expected lifetime credit losses on the portfolio. The re-aging treatment that BRB applied was designed to capture this economic distinction, and I believe it resulted in a more accurate and more informative estimate of expected credit losses.
VI. Good-Faith Basis for Reported ACL
23. BRB's reported ACL of $143.5 million (3.50% of $4.1 billion in outstanding BridgeFin loans) as of December 31, 2022, was the product of the disciplined quarterly estimation process described above. It reflected the combined output of the quantitative CECL model and the qualitative overlay adjustments, both of which were developed and applied in accordance with ASC 326 and BRB's documented policies and procedures. The estimate was reviewed by me, approved by CFO Patricia Navarrete, presented to the Board Audit Committee, and reviewed by the independent auditor.
24. The SEC Staff's preliminary view that the ACL should have been $180.8 million (4.41%) reflects a different methodological choice regarding the treatment of re-aged loans. While I acknowledge that the Staff's alternative methodology produces a higher ACL estimate, I respectfully submit that both BRB's methodology and the Staff's methodology fall within the range of reasonable approaches under ASC 326. ASC 326 does not prescribe a single "correct" methodology for estimating expected credit losses; rather, it establishes a measurement objective and permits entities to use range methods to achieve that objective, provided the method selected is applied consistently and produces a reasonable estimate. BRB's vintage-cohort methodology with re-aging treatment satisfied these requirements.
25. The difference between BRB's reported ACL ($143.5 million) and the Staff's preliminary estimate ($180.8 million) is approximately $37.3 million. I acknowledge that this difference exceeds BRB's internal materiality threshold for financial reporting purposes, which is approximately $30.6 million, calculated as 5% of BRB's fiscal year 2022 pre-tax income of $612 million. The difference of $37.3 million exceeds this threshold by approximately $6.7 million. However, I respectfully submit that the exceedance of a quantitative materiality threshold by a relatively modest margin does not, by itself, establish that BRB's reported figure was incorrect or misleading. Materiality is a matter of both quantitative and qualitative assessment, and the close proximity of BRB's ACL to the Staff's alternative estimate — within approximately 26% of the difference between the two figures — reflects a close-call judgment rather than an error, misstatement, or intentional understatement.
26. In support of the reasonableness of BRB's reported ACL, I note that BRB engaged Brindoval Analytic Partners LLC, a nationally recognized financial advisory and analytics firm, to prepare a peer comparison analysis of ACL coverage ratios among similarly situated digital-first lending institutions. The peer comparison, prepared under the direction of Dr. Franklin Osei, CPA, CFF, a senior managing director at Brindoval Analytic Partners, demonstrated that BRB's ACL coverage ratio of 3.50% fell within the interquartile range (i.e., between the 25th and 75th percentiles) of ACL coverage ratios reported by a peer group of ten comparable institutions as of December 31, 2022. This peer comparison is discussed in greater detail in BRB's Wells Submission and is attached thereto as a separate exhibit.
VII. Communications with Whitfield Keane LLP
27. During fiscal year 2022 and the subsequent quarterly review periods, I served as the primary accounting contact for Whitfield Keane LLP (PCAOB Registration No. 2847), BRB's independent registered public accounting firm. Whitfield Keane has served as BRB's independent auditor since fiscal year 2015.
28. The Whitfield Keane engagement partner for the fiscal year 2022 audit and subsequent quarterly reviews was Lorraine Dupont, a partner with more than twenty years of experience in the audit of financial institutions. Ms. Dupont's audit team included specialized professionals with expertise in credit-risk modeling, CECL implementation, and bank regulatory accounting. I communicated regularly and frequently with Ms. Dupont and her team throughout the audit and quarterly review cycles.
29. During the fiscal year 2022 audit, Whitfield Keane's audit team performed extensive procedures with respect to BRB's ACL for the BridgeFin portfolio. These procedures included, among other things: (a) evaluating the design and operating effectiveness of BRB's internal controls over the CECL estimation process, including the controls over the re-aging treatment of modified loans; (b) testing the key assumptions and inputs used in the CECL model, including historical loss rates, macroeconomic forecast scenarios, and vintage-cohort segmentation; (c) evaluating the reasonableness of management's qualitative overlay adjustments; (d) performing independent sensitivity analyses to assess the range of reasonable ACL outcomes; and (e) reviewing BRB's Loan Modification and Re-Aging Policy and its application to the 12,847 modified BridgeFin loans.
30. Based on these procedures, Whitfield Keane did not propose any audit adjustment to BRB's reported ACL for the BridgeFin portfolio for fiscal year 2022. Whitfield Keane concluded that BRB's ACL estimate was within the range of reasonable estimates under ASC 326 and that the re-aging treatment was an acceptable methodology. The independent auditor issued an unqualified opinion on BRB's consolidated financial statements for fiscal year 2022 and an unqualified opinion on the effectiveness of BRB's internal controls over financial reporting.
VIII. Internal Controls Over Financial Reporting
31. BRB's ICFR framework includes specific controls over the CECL estimation process that are designed to ensure the accuracy, completeness, and reliability of the ACL estimates. The key controls include:
(a) Segregation of Duties. The CECL estimation process involves three organizationally distinct functions: (i) model development and quantitative estimation, performed by the credit risk analytics team (within the BridgeFin division and the enterprise risk analytics group); (ii) model validation and independent review, performed by the Model Risk Management group (within the risk management function under Chief Risk Officer Annette Kowalski); and (iii) accounting application and financial-statement incorporation, performed by my accounting group. This three-way segregation of duties ensures that no single function has unchecked control over the model inputs, the model validation, and the financial-statement output.
(b) Quarterly Model Back-Testing. The Model Risk Management group performs quarterly back-testing of the CECL model by comparing predicted loss rates against actual realized losses for prior vintages. Back-testing results are analyzed for evidence of model bias (systematic over- or under-prediction), and any significant deviations are investigated and, where appropriate, result in model recalibration. During fiscal year 2022, the back-testing results indicated that the CECL model's loss predictions were within acceptable tolerance bands for the BridgeFin portfolio.
(c) Documentation Requirements. All qualitative overlay adjustments are documented in written memoranda with supporting rationale, as described in paragraph 14 above. In addition, the credit risk analytics team maintains detailed model documentation, including model development papers, assumption logs, and data-lineage records. My accounting group maintains work papers documenting the quarterly ACL estimation process, the review and approval chain, and the incorporation of ACL figures into BRB's financial statements.
(d) SOX 302/906 Certification Process with Sub-Certifications. BRB's SOX certification process includes a sub-certification framework under which business-unit heads and key functional leaders provide written sub-certifications to the CFO and CEO attesting to the accuracy and completeness of the financial information provided by their respective units. Naveen Chakravarti, as SVP and Division Head of BridgeFin, provides a quarterly sub-certification covering the BridgeFin portfolio data, credit-quality metrics, and related disclosures. These sub-certifications are maintained in BRB's SOX compliance files.
32. No material weakness or significant deficiency in BRB's ICFR was identified for fiscal year 2022 or for the interim periods of Q1 2023 and Q2 2023 by either BRB's internal audit function or by Whitfield Keane LLP. The ICFR framework described above was operating effectively during the periods relevant to the Staff's investigation.
IX. OCC Supervisory Context
33. BRB holds OCC Charter No. 24891 and is subject to ongoing supervisory examination by the OCC. BRB's OCC-assigned examination team conducts regular on-site and off-site reviews of BRB's operations, financial condition, risk management, and compliance, including the Bank's ACL methodology and credit-risk management practices.
34. BRB's most recent composite CAMELS rating, assigned as of the OCC's supervisory assessment dated September 2023, was a "2" (Satisfactory). A CAMELS composite rating of "2" indicates that the institution is fundamentally sound and exhibits only moderate weaknesses that are within the Board of Directors' and management's capabilities and willingness to correct. BRB has maintained a composite CAMELS rating of "2" or better throughout the periods relevant to the Staff's investigation.
35. The OCC's concurrent supervisory assessment, conducted in connection with its ongoing examination of BRB, included a review of BRB's ACL methodology for the BridgeFin portfolio and the re-aging treatment of modified loans. While the specific findings and conclusions of the OCC examination are subject to the bank-examination privilege and cannot be disclosed in full in this declaration, I am able to state that the OCC's examination did not result in a finding of material deficiency in BRB's ACL methodology. BRB has been responsive to all OCC supervisory guidance and recommendations regarding its credit-risk management and provisioning practices.
36. I participated directly in discussions with the OCC examination team regarding the BridgeFin ACL and the re-aging treatment of modified loans. The OCC examiners reviewed BRB's Modification Policy, the application of the re-aging criteria, and the impact on reported credit-quality metrics. I provided the OCC examination team with detailed data and analysis in response to their inquiries.
X. Subsequent Developments — Improving Credit Metrics
37. Subsequent developments in the BridgeFin portfolio's credit performance further support the reasonableness of BRB's ACL estimates for fiscal year 2022. As of December 31, 2023, the BridgeFin portfolio's 90-plus-day delinquency rate had declined to 1.48%, down from 1.72% as of December 31, 2022. This improvement in delinquency rates was driven by several factors, including refinements to BridgeFin's AI-driven underwriting model (which resulted in tighter credit standards for higher-risk borrower segments), the natural seasoning and runoff of earlier vintages that had higher loss rates, and an overall improvement in consumer credit conditions during the second half of 2023.
38. In BRB's fiscal year 2023 Annual Report on Form 10-K, filed with the Commission on February 27, 2024, BRB reported an updated ACL for the BridgeFin portfolio of $156.2 million. The increase from $143.5 million (fiscal year 2022) to $156.2 million (fiscal year 2023) reflects several factors, including the enhanced qualitative overlays adopted as part of BRB's voluntary disclosure enhancements, growth in the outstanding BridgeFin loan balance, and management's continued refinement of the CECL model's assumptions and inputs. The updated ACL was determined through the same disciplined quarterly estimation process described above and was reviewed and accepted by the independent auditor.
39. These improving credit metrics and the proactive increase in the ACL confirm that BRB's credit management and ACL practices are sound, and they are inconsistent with the hypothesis that BRB's fiscal year 2022 ACL was the product of intentional understatement or reckless disregard for the accuracy of its financial reporting.
XI. Absence of Scienter
40. I affirm unequivocally that I at no time intended to misstate, understate, or conceal information regarding BRB's ACL estimates, credit-quality metrics, or related disclosures for the BridgeFin portfolio. Every action I took in connection with the CECL estimation process, the re-aging treatment, and the preparation of BRB's SEC filings was undertaken in good faith, in accordance with my professional responsibilities as a Certified Public Accountant and as BRB's Chief Accounting Officer, and in compliance with GAAP (ASC 326), BRB's documented policies and procedures, and the applicable rules and regulations of the Commission.
41. All of my work was performed under the oversight of BRB's governance framework, including review by CFO Patricia Navarrete, independent validation by the Model Risk Management group, review by the Board Audit Committee, and examination by the independent auditor (Whitfield Keane LLP) and the primary federal banking regulator (OCC). The reported ACL for the BridgeFin portfolio represented my and the team's best professional judgment at the time, informed by all available data and analysis.
42. To the extent that the SEC Staff disagrees with BRB's methodological approach to the treatment of re-aged loans, that disagreement reflects a difference of professional judgment on a matter where ASC 326 provides latitude for varying methodological approaches. It does not reflect fraud, intentional misstatement, or reckless conduct on my part or on the part of any BRB employee.
XII. Conclusion.
43. I reaffirm that BRB's ACL for the BridgeFin portfolio as of December 31, 2022, was estimated in good faith using a rigorous, well-documented process that was consistent with ASC 326, supported by a comprehensive system of internal controls, reviewed and accepted by BRB's independent auditor Whitfield Keane LLP, and validated by the OCC's supervisory examination process. The re-aging treatment of modified BridgeFin loans was based on a written policy that was consistent with OCC guidance and industry practice, was applied consistently and with appropriate eligibility criteria, and reflected the economic substance of the borrowers' improved creditworthiness following modification.
44. 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 in this investigation.
I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.
Executed on April 2, 2024 New York, New York
________________________________________
Raymond Hu Chief Accounting Officer Belmont Ridge Bank National Association

EXHIBIT E

DECLARATION OF PATRICIA NAVARRETE

DECLARATION OF RAYMOND HU

Record

Parties

Dates

Amounts