Investment Securities

Securities Available for Sale

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



	2018									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	$	9,011	$	479	$	(84	)	$	9,406	$	10,556	$	789	$	(7	)	$	11,338
Mortgage-Backed Securities – Commercial	169,633		214		(2,103		)	167,744		24,611		—		(462		)	24,149
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	686,906		1,846		(15,391		)	673,361		632,422		2,622		(9,489		)	625,555
Other Government-Sponsored Enterprises	10,000		12		—			10,012		1,098		—		(1		)	1,097
Obligations of States and Political Subdivisions	27,592		126		(6		)	27,712		27,083		327		—			27,410
Corporate Securities	20,912		321		(221		)	21,012		15,907		590		(4		)	16,493
Pooled Trust Preferred Collateralized Debt Obligations	—		—		—			—		27,499		526		(4,379		)	23,646
Total Debt Securities	924,054		2,998		(17,805		)	909,247		739,176		4,854		(14,342		)	729,688
Equities	—		—		—			—		1,670		—		—			1,670
Total Securities Available for Sale	$	924,054	$	2,998	$	(17,805	)	$	909,247	$	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 December 31, 2018, by contractual maturity, are shown below:



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	4,000	$	3,993
Due after 1 but within 5 years	17,256		17,045
Due after 5 but within 10 years	35,319		35,448
Due after 10 years	1,929		2,250
	58,504		58,736
Mortgage-Backed Securities (a)	865,550		850,511
Total Debt Securities	$	924,054	$	909,247


(a)	Mortgage Backed Securities include an amortized cost of $178.6 million and a fair value of $177.2 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $686.9 million and a fair value of $673.4 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 years ended December 31:



	2018		2017			2016
	(dollars in thousands)
Proceeds from sales	$	15,939	$	143,660		$	55,744
Gross (losses) gains realized:
Sales Transactions:
Gross gains	$	4,719	$	359		$	305
Gross losses	—		(316		)	(277		)
	4,719		43			28
Maturities and impairment
Gross gains	3,383		5,057			589
Gross losses	—		(60		)	—
Other-than-temporary impairment	—		—			—
	3,383		4,997			589
Net gains and impairment	$	8,102	$	5,040		$	617

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.

During 2017, proceeds from sales of investments include the liquidation of the DCB investment portfolio as well as the sale of small positions in CMO and MBS investments. Gross gains from maturities and impairments resulted from the early redemption of two pooled trust preferred securities. The successful auction call of PreSTL XIII provided a gain of $4.3 million and the liquidation of PreSTL VII by senior note holders resulted in a gain of $0.7 million.

Proceeds from the sales of investments in 2016 were related to sales of small positions in CMO's and MBS's. During 2016, a gain of $0.6 million was recognized as a result of the early redemption of a pooled trust preferred security. This security was redeemed due to an election by the senior note holders to liquidate the trust.

Securities available for sale with an approximate fair value of $636.3 million and $569.0 million were pledged as of December 31, 2018 and 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 December 31:.



	2018									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	$	3,635	$	—	$	(97	)	$	3,538	$	3,925	$	—	$	(14	)	$	3,911
Mortgage-Backed Securities – Commercial	55,221		—		(2,327		)	52,894		58,249		—		(1,394		)	56,855
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	279,109		212		(7,254		)	272,067		305,126		10		(2,552		)	302,584
Mortgage-Backed Securities – Commercial	13,159		—		(258		)	12,901		14,056		—		(71		)	13,985
Obligations of States and Political Subdivisions	42,331		175		(313		)	42,193		40,540		335		(161		)	40,714
Debt Securities Issued by Foreign Governments	400		—		—			400		200		—		—			200
Total Securities Held to Maturity	$	393,855	$	387	$	(10,249	)	$	383,993	$	422,096	$	345	$	(4,192	)	$	418,249

The amortized cost and estimated fair value of debt securities held to maturity at December 31, 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	$	520	$	519
Due after 1 but within 5 years	7,218		7,210
Due after 5 but within 10 years	34,993		34,864
Due after 10 years	—		—
	42,731		42,593
Mortgage-Backed Securities (a)	351,124		341,400
Total Debt Securities	$	393,855	$	383,993


(a)	Mortgage Backed Securities include an amortized cost of $58.9 million and a fair value of $56.4 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $292.3 million and a fair value of $285.0 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 $250.3 million and $338.3 million were pledged as of December 31, 2018 and 2017, respectively, to secure public deposits for other purposes required or permitted by law.