Investment Securities

Securities Available for Sale

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



	September 30, 2018									December 31, 2017
	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	$	9,276	$	484	$	(132	)	$	9,628	$	10,556	$	789	$	(7	)	$	11,338
Mortgage-Backed Securities – Commercial	170,086		—		(2,675		)	167,411		24,611		—		(462		)	24,149
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	685,721		987		(25,079		)	661,629		632,422		2,622		(9,489		)	625,555
Other Government-Sponsored Enterprises	100		—		—			100		1,098		—		(1		)	1,097
Obligations of States and Political Subdivisions	27,590		56		(129		)	27,517		27,083		327		—			27,410
Corporate Securities	20,907		473		(279		)	21,101		15,907		590		(4		)	16,493
Pooled Trust Preferred Collateralized Debt Obligations	—		—		—			—		27,499		526		(4,379		)	23,646
Total Debt Securities	913,680		2,000		(28,294		)	887,386		739,176		4,854		(14,342		)	729,688
Equities	1,670		—		—			1,670		1,670		—		—			1,670
Total Securities Available for Sale	$	915,350	$	2,000	$	(28,294	)	$	889,056	$	740,846	$	4,854	$	(14,342	)	$	731,358

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 impact on earnings and interest rate risk positions.

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 estimated fair value of debt securities available for sale at September 30, 2018, by contractual maturity, are shown below.



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	4,099	$	4,089
Due after 1 but within 5 years	15,730		15,464
Due after 5 but within 10 years	26,342		26,269
Due after 10 years	2,426		2,896
	48,597		48,718
Mortgage-Backed Securities (a)	865,083		838,668
Total Debt Securities	$	913,680	$	887,386


(a)	Mortgage-Backed Securities include an amortized cost of $179.4 million and a fair value of $177.0 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $685.7 million and a fair value of $661.6 million for Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.

Proceeds from sales, gross gains (losses) realized on sales, maturities and other-than-temporary impairment charges related to securities available for sale were as follows for the nine months ended September 30:



	2018		2017
	(dollars in thousands)
Proceeds from sales	$	15,939	$	143,660
Gross gains (losses) realized:
Sales Transactions:
Gross gains	$	4,719	$	359
Gross losses	—		(316		)
	4,719		43
Maturities and impairment
Gross gains	3,383		712
Gross losses	—		(60		)
	3,383		652
Net gains and impairment	$	8,102	$	695

Gross gains from sales transactions of $4.7 million were recognized in 2018 as a result of the sale of the remaining pooled trust preferred security portfolio. Gross gains from maturities and impairment of $3.4 million were recognized in 2018 as a result of successful auction calls on PreSTL XIV and PreSTL IX, two of our pooled trust preferred securities. Gross gains of $0.7 million were recognized in 2017 due to the early redemption of another of our trust preferred securities, PreSTL VII.

Securities available for sale with an estimated fair value of $680.9 million and $569.0 million were pledged as of September 30, 2018 and December 31, 2017, respectively, to secure public deposits and for other purposes required or permitted by law.

Securities Held to Maturity

Below is an analysis of the amortized cost and fair values of debt securities held to maturity at:



	September 30, 2018									December 31, 2017
	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	$	3,663	$	—	$	(156	)	$	3,507	$	3,925	$	—	$	(14	)	$	3,911
Mortgage-Backed Securities- Commercial	55,726		—		(2,742		)	52,984		58,249		—		(1,394		)	56,855
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	273,972		—		(11,468		)	262,504		305,126		10		(2,552		)	302,584
Mortgage-Backed Securities – Commercial	13,413		—		(427		)	12,986		14,056		—		(71		)	13,985
Obligations of States and Political Subdivisions	42,447		5		(895		)	41,557		40,540		335		(161		)	40,714
Debt Securities Issued by Foreign Governments	400		—		(5		)	395		200		—		—			200
Total Securities Held to Maturity	$	389,621	$	5	$	(15,693	)	$	373,933	$	422,096	$	345	$	(4,192	)	$	418,249

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	85	$	85
Due after 1 but within 5 years	3,814		3,778
Due after 5 but within 10 years	37,329		36,491
Due after 10 years	1,619		1,598
	42,847		41,952
Mortgage-Backed Securities (a)	346,774		331,981
Total Debt Securities	$	389,621	$	373,933


(a)	Mortgage-Backed Securities include an amortized cost of $59.4 million and a fair value of $56.5 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $287.4 million and a fair value of $275.5 million for Obligations of U.S. Government-sponsored enterprises issued by Fannie Mae and Freddie Mac.

Securities held to maturity with an amortized cost of $298.9 million and $338.3 million were pledged as of September 30, 2018 and December 31, 2017, respectively, to secure public deposits and for other purposes required or permitted by law.