Investment Securities

Securities Available for Sale

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



	September 30, 2016									December 31, 2015
	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	$	16,059	$	1,917	$	—		$	17,976	$	20,034	$	2,071	$	(13	)	$	22,092
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	692,092		13,090		(556		)	704,626		778,476		7,983		(8,882		)	777,577
Mortgage-Backed Securities – Commercial	1		—		—			1		28		—		—			28
Other Government-Sponsored Enterprises	19,300		7		—			19,307		19,201		2		(85		)	19,118
Obligations of States and Political Subdivisions	27,073		878		—			27,951		27,066		532		—			27,598
Corporate Securities	5,901		618		—			6,519		1,897		422		—			2,319
Pooled Trust Preferred Collateralized Debt Obligations	43,020		677		(8,088		)	35,609		42,239		916		(7,497		)	35,658
Total Debt Securities	803,446		17,187		(8,644		)	811,989		888,941		11,926		(16,477		)	884,390
Equities	1,670		—		—			1,670		2,170		—		—			2,170
Total Securities Available for Sale	$	805,116	$	17,187	$	(8,644	)	$	813,659	$	891,111	$	11,926	$	(16,477	)	$	886,560

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 September 30, 2016, by contractual maturity, are shown below.



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	5,600	$	5,602
Due after 1 but within 5 years	17,697		17,756
Due after 5 but within 10 years	27,073		27,951
Due after 10 years	44,924		38,077
	95,294		89,386
Mortgage-Backed Securities (a)	708,152		722,603
Total Debt Securities	$	803,446	$	811,989


(a)	Mortgage Backed Securities include an amortized cost of $16.1 million and a fair value of $18.0 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $692.1 million and a fair value of $704.6 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 nine months ended September 30:



	2016			2015
	(dollars in thousands)
Proceeds from sales	$	55,744		$	—
Gross gains (losses) realized:
Sales Transactions:
Gross gains	$	304		$	—
Gross losses	(276		)	—
	28			—
Maturities and impairment
Gross gains	—			125
Gross losses	—			—
Other-than-temporary impairment	—			—
	—			125
Net gains and impairment	$	28		$	125

Securities available for sale with an estimated fair value of $498.5 million and $416.1 million were pledged as of September 30, 2016 and December 31, 2015, 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:



	September 30, 2016									December 31, 2015
	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	$	4,615	$	154	$	—		$	4,769	$	4,775	$	—	$	(7	)	$	4,768
Mortgage-Backed Securities- Commercial	35,625		225		—			35,850		16,843		—		(247		)	16,596
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	297,681		5,865		—			303,546		315,609		30		(1,824		)	313,815
Mortgage-Backed Securities – Commercial	14,809		378		—			15,187		15,187		—		(178		)	15,009
Obligations of States and Political Subdivisions	36,783		884		(25		)	37,642		31,910		301		(58		)	32,153
Total Securities Held to Maturity	$	389,513	$	7,506	$	(25	)	$	396,994	$	384,324	$	331	$	(2,314	)	$	382,341

The amortized cost and estimated fair value of debt securities held to maturity at September 30, 2016, 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	1,223		1,249
Due after 5 but within 10 years	29,368		30,125
Due after 10 years	6,192		6,268
	36,783		37,642
Mortgage-Backed Securities (a)	352,730		359,352
Total Debt Securities	$	389,513	$	396,994


(a)	Mortgage Backed Securities include an amortized cost of $40.2 million and a fair value of $40.6 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $312.5 million and a fair value of $318.7 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 $281.9 million and $45.7 million were pledged as of September 30, 2016 and December 31, 2015, respectively, to secure public deposits and for other purposes required or permitted by law.