Company: FCNCB
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000798941-25-000010
Chunk: 121

Company: FIRST CITIZENS BANCSHARES INC /DE/
Filing Date: 2025-02-21
Form: 10-K
Item: Item 8
Chunk 121
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 upside and downside scenarios. Quantitative ALLL model outputs may be adjusted through a qualitative assessment to reflect trends not captured within the models, which could include economic conditions, credit quality, concentrations, and significant policy and underwriting changes. Unfunded commitments are assessed to determine both the probability of funding as well as the expectation of future losses. The Company estimates the expected funding amounts and applies the quantitative ALLL PD and LGD models to those expected funding amounts to estimate the AULL.

We identified the assessment of the collective ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the collective ACL due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation of the methodology, including the models used to estimate the PD and LGD, the selection of the economic scenarios, and the weighting of each economic scenario. The assessment also included an evaluation of the conceptual soundness and performance of the PD and LGD models. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collective ACL including controls related to the:

•development and approval of the collective ACL methodology

•continued use and appropriateness of changes to the PD and LGD models, including the significant assumptions used in the PD and LGD models

•selection of the economic scenarios and the weighting of each economic scenario

•performance monitoring of the PD and LGD models

•development of the SVB qualitative adjustment, including the significant assumptions used in the measurement of the SVB qualitative adjustment and

•analysis of the collective ACL results, trends, and ratios.

We evaluated the Company’s process to develop the collective ACL by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

•evaluating the collective ACL methodology for compliance with U.S. generally accepted accounting principles

•evaluating judgments made by the Company relative to the assessment and performance testing of the PD and LGD models by comparing them to relevant Company-specific metrics and trends and the applicable industry and regulatory practices

•assessing the conceptual soundness of the PD and LGD models by inspecting the model documentation to determine whether the