Investment Securities

Securities Available for Sale

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



	March 31, 2018									December 31, 2017
	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	$	10,100	$	646	$	(81	)	$	10,665	$	10,556	$	789	$	(7	)	$	11,338
Mortgage-Backed Securities – Commercial	73,389		—		(1,252		)	72,137		24,611		—		(462		)	24,149
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	681,343		1,913		(18,468		)	664,788		632,422		2,622		(9,489		)	625,555
Other Government-Sponsored Enterprises	1,100		—		(2		)	1,098		1,098		—		(1		)	1,097
Obligations of States and Political Subdivisions	27,086		121		(46		)	27,161		27,083		327		—			27,410
Corporate Securities	20,898		542		(214		)	21,226		15,907		590		(4		)	16,493
Pooled Trust Preferred Collateralized Debt Obligations	13,602		1,252		(722		)	14,132		27,499		526		(4,379		)	23,646
Total Debt Securities	827,518		4,474		(20,785		)	811,207		739,176		4,854		(14,342		)	729,688
Equities	1,670		—		—			1,670		1,670		—		—			1,670
Total Securities Available for Sale	$	829,188	$	4,474	$	(20,785	)	$	812,877	$	740,846	$	4,854	$	(14,342	)	$	731,358

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 March 31, 2018, by contractual maturity, are shown below.



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	5,099	$	5,073
Due after 1 but within 5 years	15,727		15,541
Due after 5 but within 10 years	26,337		26,409
Due after 10 years	15,523		16,594
	62,686		63,617
Mortgage-Backed Securities (a)	764,832		747,590
Total Debt Securities	$	827,518	$	811,207


(a)	Mortgage-Backed Securities include an amortized cost of $83.5 million and a fair value of $82.8 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $681.3 million and a fair value of $664.8 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 three months ended March 31:



	2018		2017
	(dollars in thousands)
Proceeds from sales	$	—	$	—
Gross gains (losses) realized:
Sales Transactions:
Gross gains	$	—	$	—
Gross losses	—		—
	—		—
Maturities and impairment
Gross gains	2,840		652
Gross losses	—		—
	2,840		652
Net gains and impairment	$	2,840	$	652

Gross gains from maturities and impairment of $2.8 million were recognized in 2018 as a result of the successful auction call on PreSTL XIV, one of our pooled trust preferred securities. Gross gains of $0.7 million were recognized in 2017 due to the early redemption of another of our trust preferred securities, PreSTL VII. Securities available for sale with an estimated fair value of $609.9 million and $569.0 million were pledged as of March 31, 2018 and December 31, 2017, 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:



	March 31, 2018									December 31, 2017
	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	$	3,895	$	—	$	(109	)	$	3,786	$	3,925	$	—	$	(14	)	$	3,911
Mortgage-Backed Securities- Commercial	57,762		—		(2,224		)	55,538		58,249		—		(1,394		)	56,855
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	294,205		—		(7,645		)	286,560		305,126		10		(2,552		)	302,584
Mortgage-Backed Securities – Commercial	13,859		—		(299		)	13,560		14,056		—		(71		)	13,985
Obligations of States and Political Subdivisions	40,509		38		(660		)	39,887		40,540		335		(161		)	40,714
Debt Securities Issued by Foreign Governments	200		—		(3		)	197		200		—		—			200
Total Securities Held to Maturity	$	410,430	$	38	$	(10,940	)	$	399,528	$	422,096	$	345	$	(4,192	)	$	418,249

The amortized cost and estimated fair value of debt securities held to maturity at March 31, 2018, 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	$	87	$	86
Due after 1 but within 5 years	3,646		3,626
Due after 5 but within 10 years	35,350		34,764
Due after 10 years	1,626		1,608
	40,709		40,084
Mortgage-Backed Securities (a)	369,721		359,444
Total Debt Securities	$	410,430	$	399,528


(a)	Mortgage-Backed Securities include an amortized cost of $61.7 million and a fair value of $59.3 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $308.1 million and a fair value of $300.1 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 $369.4 million and $338.3 million were pledged as of March 31, 2018 and December 31, 2017, respectively, to secure public deposits and for other purposes required or permitted by law.