Fair Values of Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2017

Quantitative Inputs and Assumptions Used in Level 3 Fair Value Measurements

In accordance with ASU 2011-4, the following table provides information related to quantitative inputs and assumptions used in Level 3 fair value measurements.



	Fair Value (dollars in thousands)			Valuation Technique	Unobservable Inputs	Range / (weighted average)

Pooled Trust Preferred Securities	$	23,646		Discounted Cash Flow	Probability of default	0.00% - 100% (8.98%)
					Prepayment rates	0.00% - 72.02% (4.46%)
					Discount rates	5.00% - 11.50% (a)
Equities	1,670			Par Value	N/A	N/A
Impaired Loans	1,336		(b)	Gas Reserve study	Discount rate	10.00%
					Gas per MMBTU	$2.87 - $3.61 (c)
					Oil per BBL/d	$56.05 - $57.65 (c)
	6,820		(b)	Discounted Cash Flow	Discount Rate	1.90% - 4.68%
Limited Partnership Investments	2,143			Par Value	N/A	N/A


(a)	incorporates spread over the risk free rate related primarily to credit quality and illiquidity of securities.


(b)	the remainder of impaired loans valued using Level 3 inputs are not included in this disclosure as the values of those loans are based on bankruptcy agreement documentation.


(c)	unobservable inputs are defined as follows: MMBTU—one million British thermal units; BBL/d—barrels per day

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

The tables below present the balances of assets and liabilities measured at fair value on a recurring basis at December 31:



	2017
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities—Residential	$	—	$	11,338	$	—	$	11,338
Mortgage-Backed Securities—Commercial	—		24,149		—		24,149
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities—Residential	—		625,555		—		625,555
Mortgage-Backed Securities—Commercial	—		—		—		—
Other Government-Sponsored Enterprises	—		1,097		—		1,097
Obligations of States and Political Subdivisions	—		27,410		—		27,410
Corporate Securities	—		16,493		—		16,493
Pooled Trust Preferred Collateralized Debt Obligations	—		—		23,646		23,646
Total Debt Securities	—		706,042		23,646		729,688
Equities	—		—		1,670		1,670
Total Securities Available for Sale	—		706,042		25,316		731,358
Other Investments	—		29,837		—		29,837
Loans Held for Sale	—		14,850		—		14,850
Other Assets (a)	—		1,778		2,143		3,921
Total Assets	$	—	$	752,507	$	27,459	$	779,966
Other Liabilities (a)	$	—	$	3,079	$	—	$	3,079
Total Liabilities	$	—	$	3,079	$	—	$	3,079


(a)	Hedging and non-hedging interest rate derivatives and limited partnership investments



	2016
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities—Residential	$	—	$	16,617	$	—	$	16,617
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities—Residential	—		676,853		—		676,853
Mortgage-Backed Securities—Commercial	—		1		—		1
Other Government-Sponsored Enterprises	—		16,631		—		16,631
Obligations of States and Political Subdivisions	—		27,229		—		27,229
Corporate Securities	—		6,319		—		6,319
Pooled Trust Preferred Collateralized Debt Obligations	—		—		33,292		33,292
Total Debt Securities	—		743,650		33,292		776,942
Equities	—		—		1,670		1,670
Total Securities Available for Sale	—		743,650		34,962		778,612
Other Investments	—		36,498		—		36,498
Loans Held for Sale	—		7,052		—		7,052
Other Assets (a)	—		6,089		930		7,019
Total Assets	$	—	$	793,289	$	35,892	$	829,181
Other Liabilities (a)	$	—	$	5,972	$	—	$	5,972
Total Liabilities	$	—	$	5,972	$	—	$	5,972


(a)

Schedule of Changes in Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows for the year ended December 31, 2017:



	Pooled Trust Preferred Collateralized Debt Obligations			Equities		Other Assets		Total
	(dollars in thousands)
Balance, beginning of year	$	33,292		$	1,670	$	930	$	35,892
Total gains or losses
Included in earnings	4,329			—		—		4,329
Included in other comprehensive income	3,725			—		—		3,725
Purchases, issuances, sales, and settlements
Purchases	—			—		1,213		1,213
Issuances	—			—		—		—
Sales	—			—		—		—
Settlements	(17,700		)	—		—		(17,700		)
Transfers from Level 3	—			—		—		—
Transfers into Level 3	—			—		—		—
Balance, end of year	$	23,646		$	1,670	$	2,143	$	27,459

There are no gains or losses included in earnings for the period that are attributable to the change in realized gains (losses) relating to assets held at December 31, 2017.

During the year ended December 31, 2017, there were no transfers between fair value Levels 1, 2 or 3.

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows for the year ended December 31, 2016:



		Pooled Trust Preferred Collateralized Debt Obligations			Equities			Other Assets		Total
	(dollars in thousands)
Balance, beginning of year		$	35,658		$	2,170		$	—	$	37,828
Total gains or losses
Included in earnings		589			—			—		589
Included in other comprehensive income		850			—			—		850
Purchases, issuances, sales, and settlements
Purchases		—			36			394		430
Issuances		—			—			—		—
Sales		—			—			—		—
Settlements		(3,805		)	—			—		(3,805		)
Transfers from Level 3		—			(536		)	—		(536		)
Transfers into Level 3		—			—			536		536
Balance, end of year		$	33,292		$	1,670		$	930	$	35,892

Schedule of Assets Measured on Nonrecurring Basis

The tables below present the balances of assets measured at fair value on a nonrecurring basis at December 31 and total gains and losses realized on these assets during the year ended December 31:



	2017
	Level 1		Level 2		Level 3		Total		Total Gains (Losses)
	(dollars in thousands)
Impaired loans	$	—	$	23,249	$	15,245	$	38,494	$	(1,548	)
Other real estate owned	—		3,264		—		3,264		(1,099		)
Total Assets	$	—	$	26,513	$	15,245	$	41,758	$	(2,647	)



	2016
	Level 1		Level 2		Level 3		Total		Total Gains (Losses)
	(dollars in thousands)
Impaired loans	$	—	$	18,679	$	19,990	$	38,669	$	(9,032	)
Other real estate owned	—		7,566		—		7,566		(703		)
Total Assets	$	—	$	26,245	$	19,990	$	46,235	$	(9,735	)

Carrying Amounts and Fair Values of Financial Instruments

The following table presents carrying amounts and estimated fair values of First Commonwealth’s financial instruments at December 31:



	2017
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	98,624	$	98,624	$	98,624	$	—	$	—
Interest-bearing deposits	8,668		8,668		8,668		—		—
Securities available for sale	731,358		731,358		—		706,042		25,316
Securities held to maturity	422,096		418,249		—		418,249		—
Other investments	29,837		29,837		—		29,837		—
Loans held for sale	14,850		14,850		—		14,850		—
Loans	5,407,376		5,443,434		—		23,249		5,420,185
Financial liabilities
Deposits	5,580,705		5,580,812		—		5,580,812		—
Short-term borrowings	707,466		707,263		—		707,263		—
Long-term debt	8,161		8,548		—		8,548		—
Subordinated debt	72,167		65,785		—		—		65,785
Capital lease obligation	7,590		7,590		—		7,590		—



	2016
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	91,033	$	91,033	$	91,033	$	—	$	—
Interest-bearing deposits	24,644		24,644		24,644		—		—
Securities available for sale	778,612		778,612		—		743,650		34,962
Securities held to maturity	372,513		368,618		—		368,618		—
Other investments	36,498		36,498		—		36,498		—
Loans held for sale	7,052		7,052		—		7,052		—
Loans	4,879,347		4,878,254		—		18,679		4,859,575
Financial liabilities
Deposits	4,947,408		4,949,714		—		4,949,714		—
Short-term borrowings	867,943		867,667		—		867,667		—
Long-term debt	8,749		9,169		—		9,169		—
Subordinated debt	72,167		65,656		—		—		65,656