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:


	2012									2011
	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	$	27,883	$	3,781	$	0		$	31,664	$	32,139	$	4,061	$	(6	)	$	36,194
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities—Residential		839,102		25,691		(392	)		864,401		771,196		29,835		0			801,031
Mortgage-Backed Securities—Commercial		148		1		0			149		193		1		(1	)		193
Other Government—Sponsored Enterprises		241,970		766		(72	)		242,664		267,807		973		(132	)		268,648
Obligations of States and Political Subdivisions		82		4		0			86		444		15		0			459
Corporate Securities		6,703		288		0			6,991		11,811		162		(562	)		11,411
Pooled Trust Preferred Collateralized Debt Obligations		51,866		3		(28,496	)		23,373		54,762		3		(31,785	)		22,980

Total Debt Securities		1,167,754		30,534		(28,960	)		1,169,328		1,138,352		35,050		(32,486	)		1,140,916
Equities		1,859		116		0			1,975		1,860		0		0			1,860

Total Securities Available for Sale	$	1,169,613	$	30,650	$	(28,960	)	$	1,171,303	$	1,140,212	$	35,050	$	(32,486	)	$	1,142,776

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 with lower anticipated lives to maturity due to prepayments. 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 2012, $5.1 million in single issue trust preferred securities and $0.2 million in pooled trust preferred securities were called by their issuers, providing security gains of $0.2 million.

In 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. Additionally, $3.0 million in single issue trust preferred securities held by another subsidiary were called, resulting in a gain of $0.1 million. Also during 2011, the Company executed 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. At December 31, 2012 and 2011, investments in obligations of states and political subdivisions had an amortized cost of $82 thousand and $0.4 million, respectively, and were classified as available for sale. None of these securities 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, 2012, by contractual maturity, are shown below:


	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	0	$	0
Due after 1 but within 5 years		242,052		242,750
Due after 5 but within 10 years		0		0
Due after 10 years		58,569		30,364

		300,621		273,114
Mortgage-Backed Securities (a)		867,133		896,214

Total debt securities	$	1,167,754	$	1,169,328

(a)

Mortgage Backed Securities include an amortized cost of $28 million and a fair value of $32 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 $839 million and a fair value of $864 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:


	2012		2011			2010
	(dollars in thousands)
Proceeds from sale	$	0	$	76,914		$	143,503

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

		0		2,110			2,102
Maturities, calls and impairment:
Gross gains		192		75			270
Gross losses		0		0			0
Other-than-temporary impairment		0		0			(9,193	)

		192		75			(8,923	)

Net gains (losses) and impairment	$	192	$	2,185		$	(6,821	)

Securities available for sale with an approximate fair value of $631.0 million and $668.8 million were pledged as of December 31, 2012 and 2011, respectively, to secure public deposits and for other purposes required or permitted by law.