Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Inputs, Assets, Quantitative Information

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	$29,456	Discounted Cash Flow	Probability of default	0% - 100% (18.02%)
			Prepayment rates	0% - 100% (6.61%)
			Discount rates	5.25% - 14.00% (a)
Equities	1,420	Par Value	N/A	N/A
Interest Rate Swap	—	Option model	Counterparty credit risk	3.69% - 6.82% (b)
Impaired Loans	5,934 (c)	Reserve study	Discount rate	10.00%
			Gas per MCF	$3.84 - $6.45 (d)
			Oil per BBL/d	$83.64 - $107.00 (d)
			NGL per gallon	$0.83 (d)
	113 (c)	Discounted Cash Flow	Discount Rate	9.00%
Other Real Estate Owned	190	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:



	September 30, 2014
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	$	—	$	24,387	$	—	$	24,387
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	—		982,758		—		982,758
Mortgage-Backed Securities - Commercial	—		81		—		81
Other Government-Sponsored Enterprises	—		267,717		—		267,717
Obligations of States and Political Subdivisions	—		19,669		—		19,669
Corporate Securities	—		7,286		—		7,286
Pooled Trust Preferred Collateralized Debt Obligations	—		—		29,456		29,456
Total Debt Securities	—		1,301,898		29,456		1,331,354
Equities	—		—		1,420		1,420
Total Securities Available for Sale	—		1,301,898		30,876		1,332,774
Other Investments	—		50,994		—		50,994
Loans held for sale	—		1,305		—		1,305
Other Assets(a)	—		9,468		—		9,468
Total Assets	$	—	$	1,363,665	$	30,876	$	1,394,541
Other Liabilities(a)	$	—	$	9,047	$	—	$	9,047
Total Liabilities	$	—	$	9,047	$	—	$	9,047


(a)	Hedging and non-hedging interest rate derivatives



	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

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

For the nine months ended September 30, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:



	2014
	Pooled Trust Preferred Collateralized Debt Obligations			Equities		Loans Held for Sale			Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	23,523		$	1,420	$	—		$	—	$	24,943
Total gains or losses
Included in earnings	—			—		77			—		77
Included in other comprehensive income	7,266			—		—			—		7,266
Purchases, issuances, sales, and settlements
Purchases	—			—		—			—		—
Issuances	—			—		—			—		—
Sales	—			—		(3,112		)	—		(3,112		)
Settlements	(1,333		)	—		—			—		(1,333		)
Transfers into Level 3	—			—		3,035			—		3,035
Balance, end of period	$	29,456		$	1,420	$	—		$	—	$	30,876



	2013
	Pooled Trust Preferred Collateralized Debt Obligations			Equities		Loans Held for Sale			Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	23,373		$	1,420	$	—		$	—	$	24,793
Total gains or losses
Included in earnings	—			—		625			—		625
Included in other comprehensive income	7,399			—		—			—		7,399
Purchases, issuances, sales, and settlements
Purchases	—			—		—			—		—
Issuances	—			—		—			—		—
Sales	—			—		(20,760		)	—		(20,760		)
Settlements	(5,315		)	—		—			—		(5,315		)
Transfers into Level 3	—			—		20,135			—		20,135
Balance, end of period	$	25,457		$	1,420	$	—		$	—	$	26,877

For the three months ended September 30, changes in Level 3 assets and liabilities measured at fair value on a recurring basis are summarized as follows:



	2014
	Pooled Trust Preferred Collateralized Debt Obligations			Equities		Loans Held for Sale		Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	28,154		$	1,420	$	—	$	—	$	29,574
Total gains or losses
Included in earnings	—			—		—		—		—
Included in other comprehensive income	1,470			—		—		—		1,470
Purchases, issuances, sales, and settlements
Purchases	—			—		—		—		—
Issuances	—			—		—		—		—
Sales	—			—		—		—		—
Settlements	(168		)	—		—		—		(168		)
Balance, end of period	$	29,456		$	1,420	$	—	$	—	$	30,876



	2013
	Pooled Trust Preferred Collateralized Debt Obligations			Equities		Loans Held for Sale			Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	25,869		$	1,420	$	—		$	—	27,289
Total gains or losses
Included in earnings	—			—		242			—		242
Included in other comprehensive income	1,716			—		—			—		1,716
Purchases, issuances, sales, and settlements
Purchases	—			—		—			—		—
Issuances	—			—		—			—		—
Sales	—			—		(242		)	—		(242		)
Settlements	(2,128		)	—		—			—		(2,128		)
Balance, end of period	$	25,457		$	1,420	$	—		$	—	$	26,877

Schedule of Assets Measured on Non-Recurring Basis

The tables below present the balances of assets measured at fair value on a non-recurring basis at:



	September 30, 2014
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Impaired loans	$	—	$	27,037	$	13,589	$	40,626
Other real estate owned	—		8,119		190		8,309
Total Assets	$	—	$	35,156	$	13,779	$	48,935



	December 31, 2013
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Impaired loans	$	—	$	36,903	$	13,656	$	50,559
Other real estate owned	—		12,752		172		12,924
Total Assets	$	—	$	49,655	$	13,828	$	63,483

Losses Realized on Assets Measured on Non-Recurring Basis

The following gains(losses) were realized on the assets measured on a nonrecurring basis:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2014			2013			2014			2013
	(dollars in thousands)
Impaired loans	$	456		$	(1,468	)	$	(1,291	)	$	(13,063	)
Other real estate owned	(51		)	(90		)	(1,109		)	(188		)
Total losses	$	405		$	(1,558	)	$	(2,400	)	$	(13,251	)

Carrying Amounts and Fair Values of Financial Instruments

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



	September 30, 2014
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	78,696	$	78,696	$	78,696	$	—	$	—
Interest-bearing deposits	5,374		5,374		5,374		—		—
Securities available for sale	1,332,774		1,332,774		—		1,301,898		30,876
Other investments	50,994		50,994		—		50,994		—
Loans held for sale	1,305		1,305		—		1,305		—
Loans	4,411,481		4,391,765		—		27,037		4,364,728
Financial liabilities
Deposits	4,372,388		4,376,654		—		4,376,654		—
Short-term borrowings	1,034,967		1,034,917		—		1,034,917		—
Long-term debt	116,539		117,655		—		117,655		—
Subordinated debt	72,167		62,714		—		—		62,714



	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

- 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, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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