Fair Values of Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2013

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	$	23,523		Discounted Cash Flow	Probability of default	0% - 100% (19.08%)
					Prepayment rates	0% - 74.35% (7.50%)
					Discount rates	5.75% - 15.50% (a)
Equities	1,420			Par Value	N/A	N/A
Interest Rate Swaps	0			Option model	Counterparty credit risk	7.89% - 8.92% (b)
Impaired Loans	6,868		(c)	Gas Reserve study	Discount rate	10.00%
					Gas per MCF	$3.56 - $7.60 (d)
					Oil per BBL/d	$79.27 - $106.00 (d)
					NGL per gallon	$1.54 (d)
Other Real Estate Owned	172			Internal Valuation	N/A	N/A


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


(b)	represents the range of the credit spread curve used in valuation.


(c)	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.


(d)	unobservable inputs are defined as follows: MCF—million cubic feet; BBL/d—barrels per day; NGL—natural gas liquid.

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:



	2013
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities—Residential	$	—	$	25,204	$	—	$	25,204
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities—Residential	—		994,887		—		994,887
Mortgage-Backed Securities—Commercial	—		105		—		105
Other Government-Sponsored Enterprises	—		266,125		—		266,125
Obligations of States and Political Subdivisions	—		80		—		80
Corporate Securities	—		7,021		—		7,021
Pooled Trust Preferred Collateralized Debt Obligations	—		—		23,523		23,523
Total Debt Securities	—		1,293,422		23,523		1,316,945
Equities	—		—		1,420		1,420
Total Securities Available for Sale	—		1,293,422		24,943		1,318,365
Other Investments	—		35,444		—		35,444
Loans Held for Sale	—		—		—		—
Other Assets (a)	—		14,358		—		14,358
Total Assets	$	—	$	1,343,224	$	24,943	$	1,368,167
Other Liabilities (a)	$	—	$	14,318	$	—	$	14,318
Total Liabilities	$	—	$	14,318	$	—	$	14,318


(a)	Non-hedging interest rate derivatives



	2012
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities—Residential	$	—	$	31,664	$	—	$	31,664
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities—Residential	—		864,401		—		864,401
Mortgage-Backed Securities—Commercial	—		149		—		149
Other Government-Sponsored Enterprises	—		242,664		—		242,664
Obligations of States and Political Subdivisions	—		86		—		86
Corporate Securities	—		6,991		—		6,991
Pooled Trust Preferred Collateralized Debt Obligations	—		—		23,373		23,373
Total Debt Securities	—		1,145,955		23,373		1,169,328
Equities	555		—		1,420		1,975
Total Securities Available for Sale	555		1,145,955		24,793		1,171,303
Other Investments	—		28,228		—		28,228
Loans Held for Sale	—		—		—		—
Other Assets (a)	—		16,480		—		16,480
Total Assets	$	555	$	1,190,663	$	24,793	$	1,216,011
Other Liabilities (a)	$	—	$	18,726	$	—	$	18,726
Total Liabilities	$	—	$	18,726	$	—	$	18,726


(a)	Non-hedging interest rate derivatives

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, 2013:



	Pooled Trust Preferred Collateralized Debt Obligations			Equities		Loans Held for Sale			Other Assets		Total
	(dollars in thousands)
Balance, beginning of year	$	23,373		$	1,420	$	—		$	—	$	24,793
Total gains or losses
Included in earnings	(1,395		)	—		625			—		(770		)
Included in other comprehensive income	12,338			—		—			—		12,338
Purchases, issuances, sales, and settlements
Purchases	—			—		—			—		—
Issuances	—			—		—			—		—
Sales	—			—		(20,760		)	—		(20,760		)
Settlements	(10,793		)	—		—			—		(10,793		)
Transfers from Level 3	—			—		—			—		—
Transfers into Level 3	—			—		20,135			—		20,135
Balance, end of year	$	23,523		$	1,420	$	—		$	—	$	24,943

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, 2013.

During the year ended December 31, 2013, there were no transfers between fair value Levels 1 and 2. However, $20.1 million of loans were transferred into Level 3 from Level 2 due to the loans being transferred to a held for sale status. The loans transferred and subsequently sold related to three nonperforming relationships for which this was determined to be an appropriate exit strategy. Completion of the loan sales resulted in a $0.6 million gain for the period.

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, 2012:



		Pooled Trust Preferred Collateralized Debt Obligations			Equities		Loans Held for Sale			Other Assets			Total
	(dollars in thousands)
Balance, beginning of year		$	22,980		$	1,420	$	13,412		$	—		$	37,812
Total gains or losses
Included in earnings		—			—		2,870			(461		)	2,409
Included in other comprehensive income		5,490			—		—			—			5,490
Purchases, issuances, sales, and settlements
Purchases		—			—		—			—			—
Issuances		—			—		—			—			—
Sales		—			—		(15,981		)	—			(15,981		)
Settlements		(5,097		)	—		(301		)	—			(5,398		)
Transfers from Level 3		—			—		—			—			—
Transfers into Level 3		—			—		—			461			461
Balance, end of year		$	23,373		$	1,420	$	—		$	—		$	24,793

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:



	2013
	Level 1		Level 2		Level 3		Total		Total Gains (Losses)
	(dollars in thousands)
Impaired loans	$	—	$	36,903	$	13,656	$	50,559	$	(13,681	)
Other real estate owned	—		12,752		172		12,924		(198		)
Total Assets	$	—	$	49,655	$	13,828	$	63,483	$	(13,879	)



	2012
	Level 1		Level 2		Level 3		Total		Total Gains (Losses)
	(dollars in thousands)
Impaired loans	$	—	$	82,949	$	6,827	$	89,776	$	(13,793	)
Other real estate owned	—		11,981		247		12,228		(3,772		)
Total Assets	$	—	$	94,930	$	7,074	$	102,004	$	(17,565	)

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:



	2013
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	74,427	$	74,427	$	74,427	$	—	$	—
Interest-bearing deposits	3,012		3,012		3,012		—		—
Securities available for sale	1,318,365		1,318,365		—		1,293,422		24,943
Other investments	35,444		35,444		—		35,444		—
Loans	4,283,833		4,321,847		—		36,903		4,284,944
Financial liabilities
Deposits	4,603,863		4,531,685		—		4,531,685		—
Short-term borrowings	626,615		626,603		—		626,603		—
Long-term debt	144,385		145,477		—		145,477		—
Subordinated debt	72,167		51,706		—		—		51,706



	2012
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	98,724	$	98,724	$	98,724	$	—	$	—
Interest-bearing deposits	4,258		4,258		4,258		—		—
Securities available for sale	1,171,303		1,171,303		555		1,145,955		24,793
Other investments	28,228		28,228		—		28,228		—
Loans	4,204,704		4,245,114		—		82,949		4,162,165
Financial liabilities
Deposits	4,557,881		4,493,764		—		4,493,764		—
Short-term borrowings	356,227		356,221		—		356,221		—
Long-term debt	174,471		176,178		—		176,178		—
Subordinated debt	105,750		76,735		—		—		76,735

- Definition

Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

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- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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