Investment Securities

Securities Available for Sale

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



	June 30, 2017									December 31, 2016
	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	$	13,839	$	1,352	$	(7	)	$	15,184	$	15,143	$	1,481	$	(7	)	$	16,617
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	694,114		4,638		(8,063		)	690,689		683,601		4,557		(11,305		)	676,853
Mortgage-Backed Securities – Commercial	—		—		—			—		1		—		—			1
Other Government-Sponsored Enterprises	1,096		—		—			1,096		16,700		—		(69		)	16,631
Obligations of States and Political Subdivisions	27,079		476		—			27,555		27,075		195		(41		)	27,229
Corporate Securities	15,899		505		—			16,404		5,903		416		—			6,319
Pooled Trust Preferred Collateralized Debt Obligations	40,378		463		(7,193		)	33,648		39,989		427		(7,124		)	33,292
Total Debt Securities	792,405		7,434		(15,263		)	784,576		788,412		7,076		(18,546		)	776,942
Equities	1,670		—		—			1,670		1,670		—		—			1,670
Total Securities Available for Sale	$	794,075	$	7,434	$	(15,263	)	$	786,246	$	790,082	$	7,076	$	(18,546	)	$	778,612

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 June 30, 2017, by contractual maturity, are shown below.



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	996	$	997
Due after 1 but within 5 years	14,087		14,176
Due after 5 but within 10 years	27,079		27,555
Due after 10 years	42,290		35,975
	84,452		78,703
Mortgage-Backed Securities (a)	707,953		705,873
Total Debt Securities	$	792,405	$	784,576


(a)	Mortgage-Backed Securities include an amortized cost of $13.8 million and a fair value of $15.2 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $694.1 million and a fair value of $690.7 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 six months ended June 30:



	2017			2016
	(dollars in thousands)
Proceeds from sales	$	103,618		$	55,744
Gross gains (losses) realized:
Sales Transactions:
Gross gains	$	—		$	304
Gross losses	(49		)	(276		)
	(49		)	28
Maturities and impairment
Gross gains	712			—
Gross losses	(60		)	—
	652			—
Net gains and impairment	$	603		$	28

Proceeds from sales of investments for the six months ended June 30, 2017 included the liquidation of the DCB investment portfolio in April 2017. These securities were sold because of the small positions held in the portfolio. Gross gains of $0.7 million recognized in 2017 were a result of the early redemption of one of our trust preferred securities. Securities available for sale with an estimated fair value of $517.2 million and $445.8 million were pledged as of June 30, 2017 and December 31, 2016, 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:



	June 30, 2017									December 31, 2016
	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	$	4,142	$	—	$	(13	)	$	4,129	$	4,297	$	—	$	(4	)	$	4,293
Mortgage-Backed Securities- Commercial	58,780		—		(727		)	58,053		34,444		—		(561		)	33,883
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	332,768		193		(1,527		)	331,434		280,430		5		(2,527		)	277,908
Mortgage-Backed Securities – Commercial	14,393		22		—			14,415		14,675		—		(142		)	14,533
Obligations of States and Political Subdivisions	40,603		431		(138		)	40,896		38,667		55		(721		)	38,001
Debt Securities Issued by Foreign Governments	200		—		—			200		—		—		—			—
Total Securities Held to Maturity	$	450,886	$	646	$	(2,405	)	$	449,127	$	372,513	$	60	$	(3,955	)	$	368,618

The amortized cost and estimated fair value of debt securities held to maturity at June 30, 2017, 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	3,118		3,142
Due after 5 but within 10 years	32,061		32,354
Due after 10 years	5,624		5,600
	40,803		41,096
Mortgage-Backed Securities (a)	410,083		408,031
Total Debt Securities	$	450,886	$	449,127


(a)	Mortgage-Backed Securities include an amortized cost of $62.9 million and a fair value of $62.2 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $347.2 million and a fair value of $345.8 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 $296.3 million and $119.2 million were pledged as of June 30, 2017 and December 31, 2016, respectively, to secure public deposits and for other purposes required or permitted by law.