CMS Case Study

C loyd Bank and Trust Risk Assessment Summary 2020-2021

Audit Area:

Due From Banks

Definition (score range)

Risk Factor

Score

High (21-30)

Moderate (11-20)

Low (0-10)

Rationale

The Due from Banks function is subject to minimal regulatory requirements (i.e. Regulation F). The Bank has an established Regulation F Policy to ensure compliance with regulatory requirements.

Regulatory requirements are limited to low-profile regulations and law issues that warrant action but have significantly lower levels of risk. Impact on accurate timely financial reporting is minimal. Likelihood of material financial reporting effect is negligible.

Significant regulatory requirements are evident; however, regulatory expectations are clear, seasoned, and considered routine. Violations if any will be technical in nature. Material financial effect is possible; however, activity is routine and noncomplex and errors would be readily evident in normal operations. Seasoned and complex manual or automated systems are important to management decision making or product delivery; however, collaborating or alternative back-up systems exist. There is no basis for control assessment, or they are thought to be weak.

Potential violations of high profile regulations with potential fines, legal liability or costly corrective action are possible. Material financial misstatement is possible due to incorrect handling of infrequent, complex transactions or estimates. Critical management decisions may be based on these financial areas. Complex manual or automated systems are new, critical to management

Compliance

10

Although the processes are automated and routine, transactions passing through the "due from" accounts could have a material effect on the financial statements.

Nature of Transactions

14

Noncomplex systems and operations are seasoned, with well established back up routines.

The Bank holds "due from" accounts with CenterState Bank, FNBB, ServisFirst, Bryant Bank, and FHLB. These accounts are reconciled on a monthly basis and members of management also have the ability to access account transaction histories, copies of statements, etc. at any time through the other banks' online systems.

Nature of Operations

11

decision making, or important to product delivery.

Controls are nonexistent or known to be weak.

Controls are strong or adequate.

Control activities over the Due from Banks function are in place. The Bank has not experienced any control issues with Due from Banks..

Internal Controls

8

Changes to systems, processes, or procedures

Major changes since last audit are anticipated this year or not recently reviewed. Management lacks experience or places low priority on internal controls.

Minor changes since last audit are anticipated this year.

No changes since last audit are planned this year.

No significant changes occurred in the last 12 months and there are no anticipated changes within the next 12 months.

5

Management has average experience.

Management is experienced and has high priority on controls.

Members of management have achieved their positions within the Bank because of their level of knowledge, demonstrated skills, and experience within the banking industry. A strong emphasis is placed on maintaining a sound control environment.

Management

9

57

Risk Score

- 5 -