Other Investments

As a member of the Federal Home Loan Bank (“FHLB”), First Commonwealth is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements. The level of stock required to be held is dependent on the amount of First Commonwealth's mortgage related assets and outstanding borrowings with the FHLB. This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is unlike other investment securities insofar as there is no trading market for FHLB stock and the transfer price is determined by FHLB membership rules and not by market participants. As of September 30, 2013 and December 31, 2012, our FHLB stock totaled $33.7 million and $28.2 million, respectively and is included in “Other investments” on the Condensed Consolidated Statements of Financial Condition.

During the first six months of 2013 and the entire year of 2012, the FHLB repurchased excess stock from its members by repurchasing the lesser of 5% of the members’ total capital stock outstanding or its total excess capital stock. In July 2013, the FHLB began repurchasing 100% of a members excess stock on a monthly basis. As a result, during the nine-months ended September 30, 2013 and 2012, $9.9 million and $7.3 million, respectively of the stock owned by First Commonwealth was repurchased. The FHLB repurchased stock and paid dividends in 2013 and 2012, however, decisions regarding any future repurchase of excess capital stock and dividend payments will be made by the FHLB on an ongoing basis. Management reviewed the FHLB’s Form 10-Q for the period ended June 30, 2013 filed with the SEC on August 8, 2013.

FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. First Commonwealth evaluates impairment quarterly. The decision of whether impairment exists is a matter of judgment that reflects our view of the FHLB’s long-term performance, which includes factors such as the following:


•	its operating performance;


•	the severity and duration of declines in the fair value of its net assets related to its capital stock amount;


•	its commitment to make payments required by law or regulation and the level of such payments in relation to its operating performance;


•	the impact of legislative and regulatory changes on the FHLB, and accordingly, on the members of FHLB; and


•	its liquidity and funding position.

After evaluating all of these considerations, First Commonwealth concluded that the par value of its investment in FHLB stock will be recovered. Accordingly, no impairment charge was recorded on these securities for the nine-months ended September 30, 2013. Our evaluation of the factors described above in future periods could result in the recognition of impairment charges on FHLB stock.