Note 8—Securities Available for Sale

Below is an analysis of the amortized cost and fair values of securities available for sale at December 31:


	2011									2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities— Residential	$	32,139	$	4,061	$	(6	)	$	36,194	$	36,719	$	3,874	$	0		$	40,593
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities— Residential		771,196		29,835		0			801,031		618,454		26,513		(2,986	)		641,981
Mortgage-Backed Securities- Commercial		193		1		(1	)		193		233		1		(1	)		233
Other Government—Sponsored Enterprises		267,807		973		(132	)		268,648		184,531		225		(869	)		183,887
Obligations of States and Political Subdivisions		444		15		0			459		47,175		644		0			47,819
Corporate Securities		11,811		162		(562	)		11,411		21,226		494		(344	)		21,376
Pooled Trust Preferred Collateralized Debt Obligations		54,762		3		(31,785	)		22,980		58,780		16		(32,444	)		26,352

Total Debt Securities		1,138,352		35,050		(32,486	)		1,140,916		967,118		31,767		(36,644	)		962,241
Equities		1,860		0		0			1,860		5,137		337		0			5,474

Total Securities Available for Sale	$	1,140,212	$	35,050	$	(32,486	)	$	1,142,776	$	972,255	$	32,104	$	(36,644	)	$	967,715

Mortgage backed securities include mortgage backed obligations of U.S. Government agencies and obligations of U.S. Government-sponsored enterprises. These obligations have contractual maturities ranging from less than one year to approximately 30 years and have an anticipated average life to maturity ranging from less than one year to approximately eight years. All mortgage backed securities contain a certain amount of risk related to the uncertainty of prepayments of the underlying mortgages. Interest rate changes have a direct impact upon prepayment speeds, therefore First Commonwealth uses computer simulation models to test the average life and yield volatility of all mortgage backed securities under various interest rate scenarios to monitor the potential effects on earnings and interest rate risk positions.

During 2011, $5.2 million in single issue trust preferred securities and $1.2 million in corporate debentures owned by a non-bank subsidiary of First Commonwealth were sold in order to reinvest the proceeds in more liquid assets for that subsidiary. The amounts sold represent the subsidiaries entire portfolio of these investments and resulted in a net gain of $0.3 million. During the first half of 2011, $3.0 million in single issue trust preferred securities held by another subsidiary were called, resulting in a gain of $0.1 million. Additionally, during 2011 the Company continued its strategy to liquidate its obligations of states and political subdivisions in order to mitigate future credit risk and improve its tax position. Investments in obligations of states and political subdivisions totaled $0.5 million and $47.8 million as of December 31, 2011 and 2010, respectively. This decline is a result of $4.2 million in maturities and $42.5 million in sales which provided $0.3 million in recognized gains. As of December 31, 2011, all of the remaining investments in obligations of states and political subdivisions were classified as available for sale and none were in an unrealized loss position.

Expected maturities will differ from contractual maturities because issuers may have the right to call or repay obligations with or without call or prepayment penalties. Other fixed income securities within the portfolio also contain prepayment risk. The amortized cost and fair value of debt securities at December 31, 2011, by contractual maturity, are shown below:


	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	9,767	$	9,797
Due after 1 but within 5 years		258,483		259,310
Due after 5 but within 10 years		0		0
Due after 10 years		66,574		34,391

		334,824		303,498
Mortgage-Backed Securities (a)		803,528		837,418

Total debt securities	$	1,138,352	$	1,140,916

(a)

Mortgage Backed Securities include an amortized cost of $32 million and a fair value of $36 million for Obligations of U.S. Government agencies issued by Ginnie Mae and Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac which had an amortized cost of $771 million and a fair value of $801 million.

Proceeds from sale, gross gains (losses) realized on sales, maturities and other-than-temporary impairment charges related to securities available for sale were as follows for the years ended December 31:


	2011			2010			2009
	(dollars in thousands)
Proceeds from sale	$	76,914		$	143,503		$	7,589

Gross gains (losses) realized:
Sales Transactions:
Gross gains	$	2,368		$	2,892		$	15
Gross losses		(258	)		(790	)		0

		2,110			2,102			15
Maturities and impairment:
Gross gains		75			270			205
Gross losses		0			0			0
Other-than-temporary impairment		0			(9,193	)		(36,185	)

		75			(8,923	)		(35,980	)

Net gains (losses) and impairment	$	2,185		$	(6,821	)	$	(35,965	)

Securities available for sale with an approximate fair value of $668.8 million and $659.5 million were pledged as of December 31, 2011 and 2010, respectively, to secure public deposits and for other purposes required or permitted by law.