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, 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	$	9,706	$	576	$	(103	)	$	10,179	$	10,556	$	789	$	(7	)	$	11,338
Mortgage-Backed Securities – Commercial	121,996		36		(1,747		)	120,285		24,611		—		(462		)	24,149
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	690,692		1,344		(21,284		)	670,752		632,422		2,622		(9,489		)	625,555
Other Government-Sponsored Enterprises	100		—		—			100		1,098		—		(1		)	1,097
Obligations of States and Political Subdivisions	27,087		120		(39		)	27,168		27,083		327		—			27,410
Corporate Securities	20,902		497		(310		)	21,089		15,907		590		(4		)	16,493
Pooled Trust Preferred Collateralized Debt Obligations	—		—		—			—		27,499		526		(4,379		)	23,646
Total Debt Securities	870,483		2,573		(23,483		)	849,573		739,176		4,854		(14,342		)	729,688
Equities	1,670		—		—			1,670		1,670		—		—			1,670
Total Securities Available for Sale	$	872,153	$	2,573	$	(23,483	)	$	851,243	$	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 June 30, 2018, by contractual maturity, are shown below.



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	4,099	$	4,078
Due after 1 but within 5 years	15,728		15,443
Due after 5 but within 10 years	26,339		26,416
Due after 10 years	1,923		2,420
	48,089		48,357
Mortgage-Backed Securities (a)	822,394		801,216
Total Debt Securities	$	870,483	$	849,573


(a)	Mortgage-Backed Securities include an amortized cost of $131.7 million and a fair value of $130.4 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $690.7 million and a fair value of $670.8 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 six months ended June 30:



	2018		2017
	(dollars in thousands)
Proceeds from sales	$	15,939	$	103,618
Gross gains (losses) realized:
Sales Transactions:
Gross gains	$	4,719	$	—
Gross losses	—		(49		)
	4,719		(49		)
Maturities and impairment
Gross gains	3,383		712
Gross losses	—		(60		)
	3,383		652
Net gains and impairment	$	8,102	$	603

Gross gains from sales transactions of $4.7 million were recognized in 2018 as a result of the sale of the remaining pooled trust preferred security portfolio. Gross gains from maturities and impairment of $3.4 million were recognized in 2018 as a result of successful auction calls on PreSTL XIV and PreSTL IX, two 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 $720.2 million and $569.0 million were pledged as of June 30, 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:



	June 30, 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	$	3,867	$	—	$	(128	)	$	3,739	$	3,925	$	—	$	(14	)	$	3,911
Mortgage-Backed Securities- Commercial	56,991		—		(2,509		)	54,482		58,249		—		(1,394		)	56,855
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	285,624		—		(9,241		)	276,383		305,126		10		(2,552		)	302,584
Mortgage-Backed Securities – Commercial	13,659		—		(369		)	13,290		14,056		—		(71		)	13,985
Obligations of States and Political Subdivisions	42,478		60		(655		)	41,883		40,540		335		(161		)	40,714
Debt Securities Issued by Foreign Governments	400		—		(9		)	391		200		—		—			200
Total Securities Held to Maturity	$	403,019	$	60	$	(12,911	)	$	390,168	$	422,096	$	345	$	(4,192	)	$	418,249

The amortized cost and estimated fair value of debt securities held to maturity at June 30, 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	$	86	$	86
Due after 1 but within 5 years	3,830		3,807
Due after 5 but within 10 years	37,340		36,775
Due after 10 years	1,622		1,606
	42,878		42,274
Mortgage-Backed Securities (a)	360,141		347,894
Total Debt Securities	$	403,019	$	390,168


(a)	Mortgage-Backed Securities include an amortized cost of $60.9 million and a fair value of $58.2 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $299.2 million and a fair value of $289.7 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 $365.3 million and $338.3 million were pledged as of June 30, 2018 and December 31, 2017, respectively, to secure public deposits and for other purposes required or permitted by law.