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The firm selected for testing several controls that consisted of reviews of aspects of the issuer's loan portfolio to evaluate the reasonableness of loan grades and the identification of problem loans that management used in its evaluation of the ALL. The firm did not evaluate the specific criteria the control owners used to identify individual loans for follow up and whether loans meeting such criteria were identified for investigation and resolved. (AS 2201.42 and .44)

The issuer reported certain loans for which the borrowers were provided temporary payment relief under the law. The issuer identified that one borrower did not make any subsequent payments on a loan for which it had previously been provided payment relief. As a result the issuer determined that the value of this loan was dependent on the underlying collateral. The issuer estimated the fair value of the loan's collateral and recorded a specific provision within the ALLL. The following deficiencies were identified: - The firm did not identify and test any controls that addressed the valuation of loans for which the borrowers had received temporary payment relief under the law. (AS 2201.39) Unrelated to our review the issuer received additional information concerning the value of the collateral for the above loan and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. The issuer also reevaluated its controls over the valuation of similar loans and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report to include this material weakness.

The issuer reported certain loans for which the borrowers were provided temporary payment relief under the law. The issuer identified that one borrower did not make any subsequent payments on a loan for which it had previously been provided payment relief. As a result the issuer determined that the value of this loan was dependent on the underlying collateral. The issuer estimated the fair value of the loan's collateral and recorded a specific provision within the ALLL. The following deficiencies were identified: - The firm did not perform procedures beyond obtaining the issuer's analysis to test the reasonableness of this specific provision. (AS 2501.07) Unrelated to our review the issuer received additional information concerning the value of the collateral for the above loan and concluded that a material misstatement existed that had not been previously identified. The issuer subsequently corrected this misstatement in a restatement of its financial statements and the firm revised and reissued its report on the financial statements. The issuer also reevaluated its controls over the valuation of similar loans and concluded that a material weakness existed that had not been previously identified. The issuer subsequently reflected this material weakness in a revision to its report on ICFR and the firm revised its opinion on the effectiveness of the issuer's ICFR to express an adverse opinion and reissued its report to include this material weakness. [This citation refers to AS 2501 Auditing Accounting Estimates which was in effect for this audit. This standard was replaced by AS 2501 Auditing Accounting Estimates Including Fair Value Measurements which became effective for audits of financial statements ending on or after December 15 2020.]

The firm's approach for substantively testing the valuation of acquired loans as of the acquisition date and at year end was to test the issuer's process. The firm did not evaluate whether the methods the issuer used to value these loans were in conformity with GAAP including the requirements of FASB ASC Topic 310 Receivables related to (1) whether the acquired assets included loans with deterioration in credit quality since origination and (2) the measurement of purchased impaired loans. (AS 2501.10)

The issuer also reported a component of the ALL related to loans individually evaluated for impairment of which certain loans were considered collateral dependent and the impairment was determined based on the fair value of the collateral less estimated costs to sell. The issuer engaged a specialist to determine the fair value of certain collateral and for the remaining collateral the issuer used an automated valuation model to determine the fair value. The following deficiencies were identified: · The firm did not perform sufficient procedures to test the fair value of collateral based on the company's specialists' valuation reports that it selected for testing because it did not perform further procedures to use the work of the company's specialist as audit evidence. (AS 1105.A1 - .A10; AS 2501.07)

The issuer also reported a component of the ALL related to loans individually evaluated for impairment of which certain loans were considered collateral dependent and the impairment was determined based on the fair value of the collateral less estimated costs to sell. The issuer engaged a specialist to determine the fair value of certain collateral and for the remaining collateral the issuer used an automated valuation model to determine the fair value. The following deficiencies were identified: · The firm's approach to test the fair value of the collateral based on the issuer's internal model it selected for testing was to develop an independent expectation. The firm did not perform any procedures to demonstrate it had a reasonable basis for the assumptions used (AS 2501.22)

The issuer also reported a component of the ALL related to loans individually evaluated for impairment of which certain loans were considered collateral dependent and the impairment was determined based on the fair value of the collateral less estimated costs to sell. The issuer engaged a specialist to determine the fair value of certain collateral and for the remaining collateral the issuer used an automated valuation model to determine the fair value. The following deficiencies were identified: · The firm's approach to test the fair value of the collateral based on the issuer's internal model it selected for testing was to develop an independent expectation. The firm did not perform any procedures to evaluate the relevance and reliability of certain information it obtained from an external source that it used to develop its independent expectation. (AS 1105.04 and .06)

The issuer also reported a component of the ALL related to loans individually evaluated for impairment of which certain loans were considered collateral dependent and the impairment was determined based on the fair value of the collateral less estimated costs to sell. The issuer engaged a specialist to determine the fair value of certain collateral and for the remaining collateral the issuer used an automated valuation model to determine the fair value. The following deficiencies were identified: · The firm did not perform sufficient procedures to test the fair value of collateral based on the company's specialists' valuation reports that it selected for testing because although it determined it needed additional evidence for valuation reports that were significantly aged it limited its procedures to inquiry and obtaining information from external sources without evaluating the relevance and reliability of that information. (AS 1105.04 .06 and .A10; AS 2501.07)

The issuer used a model in the valuation of the ALL that used various data including historical loan-loss data derived from the issuer's data warehouse systems. The firm did not identify and test any controls over the accuracy of the transfer of these data from the issuer's source systems to the data warehouse systems or test other controls that would have provided evidence over the accuracy of these data. (AS 2201.39)

As part of the issuer's overall credit risk assessment for corporate loans collectively evaluated for impairment the issuer determined a loan risk rating for each loan based on loan information for each borrower including a borrower risk rating. The following deficiencies were identified: · The issuer used various models to determine the borrower risk ratings for certain corporate loans. The firm did not identify and test any controls over the issuer's evaluation of the appropriateness of these models. (AS 2201.39)

A portion of the issuer's loans had payment terms that allowed borrowers to make interest-only payments for a fixed period with the repayment of the outstanding principal balance due at a later date. The following deficiencies were identified: · The firm did not identify and test any controls that addressed the timely identification and evaluation of any indicators of deterioration in a borrower's ability to repay the principal associated with these loans. (AS 2201.39)

The issuer's ACL was comprised of various components including quantitative and complementary reserve components and the issuer used various models and assumptions to determine the individual components of the ACL. The firm's approach for substantively testing the ACL was to test the issuer's process. The following deficiency was identified: · The firm did not identify and test any controls over the valuation of assets collateralizing certain loans. (AS 2201.39)