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:



	2015									2014
	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	$	20,034	$	2,071	$	(13	)	$	22,092	$	23,344	$	2,595	$	(3	)	$	25,936
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	778,476		7,983		(8,882		)	777,577		947,635		13,076		(9,830		)	950,881
Mortgage-Backed Securities – Commercial	28		—		—			28		72		2		—			74
Other Government-Sponsored Enterprises	19,201		2		(85		)	19,118		269,181		4		(1,308		)	267,877
Obligations of States and Political Subdivisions	27,066		532		—			27,598		27,058		362		(43		)	27,377
Corporate Securities	1,897		422		—			2,319		6,682		573		—			7,255
Pooled Trust Preferred Collateralized Debt Obligations	42,239		916		(7,497		)	35,658		41,926		309		(13,236		)	28,999
Total Debt Securities	888,941		11,926		(16,477		)	884,390		1,315,898		16,921		(24,420		)	1,308,399
Equities	2,170		—		—			2,170		1,420		—		—			1,420
Total Securities Available for Sale	$	891,111	$	11,926	$	(16,477	)	$	886,560	$	1,317,318	$	16,921	$	(24,420	)	$	1,309,819

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.

In 2015, a $0.3 million loss was recognized on the sale of approximately $75.0 million of low-yielding U.S. government agency securities. Proceeds from the sale of these securities were reinvested into higher yielding mortgage-backed securities.

During 2014, a gain of $0.5 million was recognized as the result of a recovery on a trust preferred security for which a $1.3 million loss was recognized in 2013 due to the early redemption of a pooled trust preferred security with a book value of $6.6 million. Senior note holders elected to liquidate all assets of the trust, resulting in losses for the mezzanine notes owned by First Commonwealth. The gain recognized in 2014 was a result of additional proceeds distributed as part of the final liquidation of the trust.

The amortized cost and estimated fair value of debt securities available for sale at December 31, 2015, by contractual maturity, are shown below:



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	2,601	$	2,595
Due after 1 but within 5 years	16,600		16,523
Due after 5 but within 10 years	27,066		27,598
Due after 10 years	44,136		37,977
	90,403		84,693
Mortgage-Backed Securities (a)	798,538		799,697
Total Debt Securities	$	888,941	$	884,390


(a)	Mortgage Backed Securities include an amortized cost of $20.0 million and a fair value of $22.1 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $778.5 million and a fair value of $777.6 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 years ended December 31:



	2015			2014			2013
	(dollars in thousands)
Proceeds from sales	$	88,054		$	132,868		$	671
Gross (losses) gains realized:
Sales Transactions:
Gross gains	$	—		$	291		$	233
Gross losses	(284		)	(243		)	—
	(284		)	48			233
Maturities and impairment
Gross gains	131			502			4
Gross losses	—			—			(1,395		)
Other-than-temporary impairment	—			—			—
	131			502			(1,391		)
Net gains and impairment	$	(153	)	$	550		$	(1,158	)

Securities available for sale with an approximate fair value of $416.1 million and $563.2 million were pledged as of December 31, 2015 and 2014, 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, 2015. There were no held to maturity securities at December 31, 2014.



	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities – Residential	$	4,775	$	—	$	(7	)	$	4,768
Mortgage-Backed Securities – Commercial	16,843		—		(247		)	16,596
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	315,609		30		(1,824		)	313,815
Mortgage-Backed Securities – Commercial	15,187		—		(178		)	15,009
Obligations of States and Political Subdivisions	31,910		301		(58		)	32,153
Total Securities Held to Maturity	$	384,324	$	331	$	(2,314	)	$	382,341

The amortized cost and estimated fair value of debt securities held to maturity at December 31, 2015, 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	$	—	$	—
Due after 1 but within 5 years	108		108
Due after 5 but within 10 years	27,224		27,487
Due after 10 years	4,578		4,558
	31,910		32,153
Mortgage-Backed Securities (a)	352,414		350,188
Total Debt Securities	$	384,324	$	382,341


(a)	Mortgage Backed Securities include an amortized cost of $21.6 million and a fair value of $21.4 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $330.8 million and a fair value of $328.8 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 $45.7 million were pledged as of December 31, 2015 to secure public deposits for other purposes required or permitted by law.