Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2017

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	$	34,629		Discounted Cash Flow	Probability of default	0% - 100% (9.71%)
					Prepayment rates	0% - 72.15% (3.41%)
					Discount rates	5.00% - 11.50% (a)
Equities	1,670			Par Value	N/A	N/A
Impaired Loans	2,146		(b)	Reserve study	Discount rate	10.00%
					Gas per MMBTU	$2.87 - $3.61 (c)
					Oil per BBL/d	$56.05 - $57.65 (c)
	7,122		(b)	Discounted Cash Flow	Discount Rate	1.90% - 4.68%
Limited Partnership Investments	1,562			Par Value	N/A	N/A


(a)	Incorporates spread over risk free rate related primarily to credit quality and illiquidity of securities.


(b)	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.


(c)	Unobservable inputs are defined as follows: MMBTU - million British thermal units; BBL/d - barrels per day.

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, 2017
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	$	—	$	11,918	$	—	$	11,918
Mortgage-Backed Securities - Commercial	—		24,467		—		24,467
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	—		660,771		—		660,771
Mortgage-Backed Securities - Commercial	—		—		—		—
Other Government-Sponsored Enterprises	—		1,097		—		1,097
Obligations of States and Political Subdivisions	—		27,514		—		27,514
Corporate Securities	—		16,578		—		16,578
Pooled Trust Preferred Collateralized Debt Obligations	—		—		34,629		34,629
Total Debt Securities	—		742,345		34,629		776,974
Equities	—		—		1,670		1,670
Total Securities Available for Sale	—		742,345		36,299		778,644
Other Investments	—		32,302		—		32,302
Loans Held for Sale	—		17,100		—		17,100
Other Assets(a)	—		3,909		1,562		5,471
Total Assets	$	—	$	795,656	$	37,861	$	833,517
Other Liabilities(a)	$	—	$	4,882	$	—	$	4,882
Total Liabilities	$	—	$	4,882	$	—	$	4,882


(a)	Hedging and non-hedging interest rate derivatives and limited partnership investments



	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Obligations of U.S. Government Agencies:
Mortgage-Backed Securities - Residential	$	—	$	16,617	$	—	$	16,617
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities - Residential	—		676,853		—		676,853
Mortgage-Backed Securities - Commercial	—		1		—		1
Other Government-Sponsored Enterprises	—		16,631		—		16,631
Obligations of States and Political Subdivisions	—		27,229		—		27,229
Corporate Securities	—		6,319		—		6,319
Pooled Trust Preferred Collateralized Debt Obligations	—		—		33,292		33,292
Total Debt Securities	—		743,650		33,292		776,942
Equities	—		—		1,670		1,670
Total Securities Available for Sale	—		743,650		34,962		778,612
Other Investments	—		36,498		—		36,498
Loans Held for Sale	—		7,052		—		7,052
Other Assets(a)	—		6,089		930		7,019
Total Assets	$	—	$	793,289	$	35,892	$	829,181
Other Liabilities(a)	$	—	$	5,972	$	—	$	5,972
Total Liabilities	$	—	$	5,972	$	—	$	5,972


(a)	Hedging and 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:



	2017
	Pooled Trust Preferred Collateralized Debt Obligations			Equities		Other Assets			Total
	(dollars in thousands)
Balance, beginning of period	$	33,292		$	1,670	$	930		$	35,892
Total gains or losses
Included in earnings	—			—		—			—
Included in other comprehensive income	1,391			—		—			1,391
Purchases, issuances, sales and settlements
Purchases	—			—		638			638
Issuances	—			—		—			—
Sales	—			—		—			—
Settlements	(54		)	—		(6		)	(60		)
Transfers from Level 3	—			—		—			—
Transfers into Level 3	—			—		—			—
Balance, end of period	$	34,629		$	1,670	$	1,562		$	37,861



	2016
	Pooled Trust Preferred Collateralized Debt Obligations			Equities			Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	35,658		$	2,170		$	—	$	37,828
Total gains or losses
Included in earnings	—			—			—		—
Included in other comprehensive income	(19		)	—			—		(19		)
Purchases, issuances, sales and settlements
Purchases	—			36			168		204
Issuances	—			—			—		—
Sales	—			—			—		—
Settlements	(30		)	—			—		(30		)
Transfers from Level 3	—			(536		)			(536		)
Transfers into Level 3	—			—			536		536
Balance, end of period	$	35,609		$	1,670		$	704	$	37,983

During the nine months ended September 30, 2017, there were no transfers between fair value Levels 1, 2 or 3. During the nine months ended September 30, 2016, $0.5 million in investments in limited partnerships were moved from other equity securities to other assets constituting the transfers into and out of Level 3. There were no gains or losses included in earnings for the periods presented that are attributable to the change in realized gains (losses) relating to assets held at September 30, 2017 and 2016.

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:



	2017
	Pooled Trust Preferred Collateralized Debt Obligations		Equities		Other Assets			Total
	(dollars in thousands)
Balance, beginning of period	$	33,648	$	1,670	$	1,477		$	36,795
Total gains or losses
Included in earnings	—		—		—			—
Included in other comprehensive income	981		—		—			981
Purchases, issuances, sales and settlements
Purchases	—		—		91			91
Issuances	—		—		—			—
Sales	—		—		—			—
Settlements	—		—		(6		)	(6		)
Transfers from Level 3	—		—		—			—
Transfers into Level 3	—		—		—			—
Balance, end of period	$	34,629	$	1,670	$	1,562		$	37,861



	2016
	Pooled Trust Preferred Collateralized Debt Obligations		Equities		Other Assets		Total
	(dollars in thousands)
Balance, beginning of period	$	33,723	$	1,670	$	704	36,097
Total gains or losses
Included in earnings	—		—		—		—
Included in other comprehensive income	1,886		—		—		1,886
Purchases, issuances, sales and settlements
Purchases	—		—		—		—
Issuances	—		—		—		—
Sales	—		—		—		—
Settlements	—		—		—		—
Transfers from Level 3	—		—		—		—
Transfers into Level 3	—		—		—		—
Balance, end of period	$	35,609	$	1,670	$	704	$	37,983

During the three months ended September 30, 2017 and 2016, there were no transfers between fair value Levels 1, 2 or 3. There were no gains or losses included in earnings for the periods presented that are attributable to the change in realized gains (losses) relating to assets held at September 30, 2017 and 2016.

Schedule of Assets Measured on Non-Recurring Basis

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



	September 30, 2017
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Impaired loans	$	—	$	19,878	$	16,743	$	36,621
Other real estate owned	—		6,083		—		6,083
Total Assets	$	—	$	25,961	$	16,743	$	42,704



	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(dollars in thousands)
Impaired loans	$	—	$	18,679	$	19,990	$	38,669
Other real estate owned	—		7,566		—		7,566
Total Assets	$	—	$	26,245	$	19,990	$	46,235

Losses Realized on Assets Measured on Non-Recurring Basis

The following gain (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,
	2017			2016			2017			2016
	(dollars in thousands)
Impaired loans	$	(156	)	$	386		$	160		$	(13,982	)
Other real estate owned	(116		)	(114		)	(1,196		)	(331		)
Total losses	$	(272	)	$	272		$	(1,036	)	$	(14,313	)

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, 2017
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	98,319	$	98,319	$	98,319	$	—	$	—
Interest-bearing deposits	29,709		29,709		29,709		—		—
Securities available for sale	778,644		778,644		—		742,345		36,299
Securities held to maturity	436,081		434,882		—		434,882		—
Other investments	32,302		32,302		—		32,302		—
Loans held for sale	17,100		17,100		—		17,100		—
Loans	5,375,847		5,403,523		—		19,878		5,383,645
Financial liabilities
Deposits	5,555,057		5,556,870		—		5,556,870		—
Short-term borrowings	805,825		805,721		—		805,721		—
Subordinated debt	72,167		66,779		—		—		66,779
Long-term debt	8,311		8,805		—		8,805		—
Capital lease obligation	7,677		7,677		—		7,677		—



	December 31, 2016
			Fair Value Measurements Using:
	Carrying Amount		Total		Level 1		Level 2		Level 3
	(dollars in thousands)
Financial assets
Cash and due from banks	$	91,033	$	91,033	$	91,033	$	—	$	—
Interest-bearing deposits	24,644		24,644		24,644		—		—
Securities available for sale	778,612		778,612		—		743,650		34,962
Securities held to maturity	372,513		368,618		—		368,618		—
Other investments	36,498		36,498		—		36,498		—
Loans held for sale	7,052		7,052		—		7,052		—
Loans	4,879,347		4,878,254		—		18,679		4,859,575
Financial liabilities
Deposits	4,947,408		4,949,714		—		4,949,714		—
Short-term borrowings	867,943		867,667		—		867,667		—
Subordinated debt	72,167		65,656		—		—		65,656
Long-term debt	8,749		9,169		—		9,169		—