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:



	2016									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	$	15,143	$	1,481	$	(7	)	$	16,617	$	20,034	$	2,071	$	(13	)	$	22,092
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	683,601		4,557		(11,305		)	676,853		778,476		7,983		(8,882		)	777,577
Mortgage-Backed Securities – Commercial	1		—		—			1		28		—		—			28
Other Government-Sponsored Enterprises	16,700		—		(69		)	16,631		19,201		2		(85		)	19,118
Obligations of States and Political Subdivisions	27,075		195		(41		)	27,229		27,066		532		—			27,598
Corporate Securities	5,903		416		—			6,319		1,897		422		—			2,319
Pooled Trust Preferred Collateralized Debt Obligations	39,989		427		(7,124		)	33,292		42,239		916		(7,497		)	35,658
Total Debt Securities	788,412		7,076		(18,546		)	776,942		888,941		11,926		(16,477		)	884,390
Equities	1,670		—		—			1,670		2,170		—		—			2,170
Total Securities Available for Sale	$	790,082	$	7,076	$	(18,546	)	$	778,612	$	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.

During 2016, a gain of $0.6 million was recognized due to the early redemption of a pooled trust preferred security with a book value of $3.1 million. This security was redeemed due to an election by the senior note holders to liquidate the trust.

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.

The amortized cost and estimated fair value of debt securities available for sale at December 31, 2016, by contractual maturity, are shown below:



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	3,300	$	3,292
Due after 1 but within 5 years	17,397		17,343
Due after 5 but within 10 years	27,075		27,229
Due after 10 years	41,895		35,607
	89,667		83,471
Mortgage-Backed Securities (a)	698,745		693,471
Total Debt Securities	$	788,412	$	776,942


(a)	Mortgage Backed Securities include an amortized cost of $15.1 million and a fair value of $16.6 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $683.6 million and a fair value of $676.9 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:



	2016			2015			2014
	(dollars in thousands)
Proceeds from sales	$	55,744		$	88,054		$	132,868
Gross (losses) gains realized:
Sales Transactions:
Gross gains	$	305		$	—		$	291
Gross losses	(277		)	(284		)	(243		)
	28			(284		)	48
Maturities and impairment
Gross gains	589			131			502
Gross losses	—			—			—
Other-than-temporary impairment	—			—			—
	589			131			502
Net gains and impairment	$	617		$	(153	)	$	550

Securities available for sale with an approximate fair value of $445.8 million and $416.1 million were pledged as of December 31, 2016 and 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 December 31:.



	2016									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	$	4,297	$	—	$	(4	)	$	4,293	$	4,775	$	—	$	(7	)	$	4,768
Mortgage-Backed Securities – Commercial	34,444		—		(561		)	33,883		16,843		—		(247		)	16,596
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	280,430		5		(2,527		)	277,908		315,609		30		(1,824		)	313,815
Mortgage-Backed Securities – Commercial	14,675		—		(142		)	14,533		15,187		—		(178		)	15,009
Obligations of States and Political Subdivisions	38,667		55		(721		)	38,001		31,910		301		(58		)	32,153
Total Securities Held to Maturity	$	372,513	$	60	$	(3,955	)	$	368,618	$	384,324	$	331	$	(2,314	)	$	382,341

The amortized cost and estimated fair value of debt securities held to maturity at December 31, 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	2,636		2,615
Due after 5 but within 10 years	31,893		31,384
Due after 10 years	4,138		4,002
	38,667		38,001
Mortgage-Backed Securities (a)	333,846		330,617
Total Debt Securities	$	372,513	$	368,618


(a)	Mortgage Backed Securities include an amortized cost of $38.7 million and a fair value of $38.2 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $295.1 million and a fair value of $292.4 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 $119.2 million and $45.7 million were pledged as of December 31, 2016 and 2015, respectively, to secure public deposits for other purposes required or permitted by law.