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The issuer determined the qualitative component of the ALL by applying basis points to each qualitative factor. The firm's approach for substantively testing the qualitative component was to test the issuer's process and develop an independent expectation. The following deficiencies were identified: · The firm did not evaluate the relevance of external information it used to develop its independent expectation. (AS 1105.04 and .06)

The issuer's ACL included reserves for loans collectively evaluated for impairment and for loans individually evaluated for impairment. For loans that were collectively evaluated for impairment the issuer estimated quantitative qualitative and economic reserve components. The following deficiencies were identified: · The firm did not evaluate the relevance of certain external data the issuer used in developing the economic reserve and the qualitative reserve. (AS 1105.04 and .06)

The firm's approach for substantively testing the ALL was to test the issuer's process. The following deficiencies were identified: · The firm did not perform any procedures to test or in the alternative sufficiently test controls over the accuracy of certain data produced by the service organization and used by the issuer in estimating the ALL. (AS 2301.08 and .11)

The firm's approach for substantively testing the ALL was to test the issuer's process. The issuer used certain data produced by its service organization to develop the ALL. The firm did not perform procedures to test the accuracy of this data. (AS 2301.08 and .11)

The issuer assigned each loan a loan risk rating which was an important input in estimating the quantitative component of the ACL. The following deficiencies were identified: · The firm's substantive procedures to test the reasonableness of the assigned loan risk ratings for certain loans included making a selection of loans for testing. The firm identified differences in the assigned loan risk ratings but did not evaluate the effect of these differences on whether it had obtained sufficient appropriate audit evidence. Further the firm did not perform any substantive procedures to test the loan risk ratings for the loans that were excluded from the firm's control testing procedures discussed above. (AS 2301.08)

With respect to the allowance for loan losses (ALL) at one of the issuer's subsidiaries: The firm used this spreadsheet in its substantive testing of the ALL but did not perform any procedures to test or test any controls over the completeness of this spreadsheet. (AS 1105.10)

The firm's approach for substantively testing the ALL was to review and test management's process. The firm did not perform sufficient procedures to evaluate the reasonableness of the ALL because the firm did not perform procedures to test certain factors and assumptions used by the issuer to determine the qualitative component of the ALL. (AS 2501.09 .10 and .11)

The issuer's general reserve component of the ALL included a qualitative reserve that included two components based on qualitative adjustments. The firm's approach for substantively testing the ALL was to test the issuer's process. The firm did not perform sufficient procedures to evaluate the reasonableness of the basis points applied to qualitative factors used by the issuer to determine one of the qualitative adjustments because the firm did not evaluate whether the issuer had a reasonable basis for the basis points used. (AS 2501.16)

The issuer's general reserve component of the ALL included a qualitative reserve that included two components based on qualitative adjustments. The firm's approach for substantively testing the ALL was to test the issuer's process. The firm did not evaluate the relevance of certain external data the issuer used to determine the adjustment. (AS 1105.04 and .06)

The issuer determined the qualitative component of the ALL by applying basis points for qualitative factors to each loan type. The firm's approach for substantively testing the qualitative component was to test the issuer's process. The following deficiency was identified: · The firm did not perform any procedures to test the accuracy and/or completeness of reports from the issuer's systems that the firm used in its substantive procedures. (AS 1105.10)

The firm's approach for testing the ALL was to review and test management's process. The firm did not perform any substantive procedures to test or in the alternative identify and test any controls over the accuracy of the historical loan-loss data as discussed above. (AS 2501.11)

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 perform procedures to evaluate whether any impairment indicators existed for these loans beyond testing the collateral valuation for one loan. (AS 2301.08)

The issuer used various qualitative factors to determine the qualitative component of the ALL. The firm's approach for testing the qualitative reserve was to test the issuer's process. The following deficiencies were identified: · The firm did not perform procedures to evaluate the relevance and reliability of external information that the issuer used to develop the significant assumptions related to qualitative factors. (AS 1105.04 and .06)

The firm's internal inspection program inspected this audit and reviewed this area but did not identify the deficiencies below. The issuer calculated the qualitative component of the allowance for loan losses (ALL) by applying basis points to each qualitative factor. The firm did not perform sufficient procedures to test the qualitative component of the ALL because the firm did not evaluate whether the issuer had a reasonable basis for the significant assumptions related to the basis points used. (AS 2501.16)

For loans that were collectively evaluated for impairment the issuer estimated the qualitative reserve component of the allowance for loan losses (ALL) using qualitative factors. The firm's approach for substantively testing the ALL was to test the issuer's process. The issuer used information from a service organization to estimate this component of the ALL. The firm did not perform procedures to test the completeness of certain of this information. (AS 2301.08)

The firm did not perform procedures to test certain information presented in the ALL disclosure beyond comparing prior year information to the prior year financial statements and calculating the mathematical accuracy of certain information presented. (AS 2301.08)

The issuer assigned a risk rating to each commercial loan. The loan risk rating was an important input in estimating the ACL for commercial loans collectively assessed for impairment. The following deficiencies were identified: · The firm's sample to test the reasonableness of the risk ratings for certain commercial loans was too small because in determining its sample the firm did not consider certain characteristics of the loan population. (AS 2315.16 .23 and .23A)

The issuer assigned a risk rating to each commercial loan. The loan risk rating was an important input (1) in estimating the ACL for commercial loans collectively assessed for impairment and (2) in determining the fair value of a certain type of commercial loans that the issuer reclassifies to available-for-sale (AFS) securities for financial reporting purposes. The firm's sample to test the reasonableness of the risk ratings for commercial loans including loans reclassified to AFS securities was too small because in determining its sample the firm did not consider certain characteristics of the loan population including whether the population of loans reclassified to AFS securities should have been tested separately. (AS 2315.16 .23 and .23A)

The firm did not perform any substantive procedures to test the ACL for these loans. (AS 2501.07)

To test the reasonableness of assigned loan grades to non-impaired loans which are an input used in estimating the ALL the firm selected loans originated in prior years that exceeded a monetary threshold for testing. The firm did not perform any procedures to test the remaining population of loans originated in prior years. (AS 1105.27; AS 2301.08)

The issuer's ALL consisted of a qualitative component and an unallocated reserve component. The firm's approach for substantively testing the ALL was to both test the issuer's process and develop an independent expectation of the estimate. The following deficiencies were identified: · The firm used the issuer's loan grades in its independent expectation. The firm selected loans that met specific criteria to test the loan's assigned grade. The firm did not perform procedures to test loan grades for the remaining population of loans. (AS 1105.27; AS 2301.08 and .11)

The issuer's ALL consisted of a qualitative component and an unallocated reserve component. The firm's approach for substantively testing the ALL was to both test the issuer's process and develop an independent expectation of the estimate. The following deficiencies were identified: · The firm did not evaluate the relevance of external information it used to develop its independent expectation. (AS 1105.04 and .06)

The firm selected for testing a control that consisted of management's review of assigned loan risk ratings. The firm did not identify that this control only operated over newly originated loans and as designed would not prevent or detect a material misstatement related to the assignment of loan risk ratings to loans in the issuer's existing loan portfolio. (AS 2301.19)

The issuer's ALL included a general reserve and a specific reserve for loans that are individually evaluated for impairment. The issuer assigned risk ratings to certain of its loans. The risk ratings were an important input in determining whether a loan would be individually evaluated for impairment as part of the specific reserve or considered as part of the general reserve. To test loans rated as pass the firm selected certain loans for testing from one loan portfolio. The firm did not perform any substantive procedures to test the risk ratings for the remaining population of pass-rated loans in other portfolios. (AS 1105.27; AS 2301.08)

The issuer's ALL included a general reserve and a specific reserve for loans that are individually evaluated for impairment. The issuer assigned risk ratings to certain of its loans. The risk ratings were an important input in determining whether a loan would be individually evaluated for impairment as part of the specific reserve or considered as part of the general reserve. To test loans not rated as pass the firm performed certain of its procedures as of an interim date. The firm did not perform procedures beyond inquiry to extend its conclusions on the risk ratings of these loans for the period between the interim testing date and year end. (AS 2301.45)

The issuer used certain data to determine the quantitative component of the ACL. In addition the firm used this data to substantively test the ACL. The firm did not perform any procedures to test or (as discussed above) identify and test any controls over the accuracy of this data. (AS 2301.08)