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, 2019									December 31, 2018
	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	$	8,731	$	539	$	(24	)	$	9,246	$	9,011	$	479	$	(84	)	$	9,406
Mortgage-Backed Securities – Commercial	169,153		457		(1,490		)	168,120		169,633		214		(2,103		)	167,744
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	660,080		2,749		(8,863		)	653,966		686,906		1,846		(15,391		)	673,361
Other Government-Sponsored Enterprises	10,000		6		—			10,006		10,000		12		—			10,012
Obligations of States and Political Subdivisions	28,010		204		—			28,214		27,592		126		(6		)	27,712
Corporate Securities	22,903		665		(19		)	23,549		20,912		321		(221		)	21,012
Total Securities Available for Sale	$	898,877	$	4,620	$	(10,396	)	$	893,101	$	924,054	$	2,998	$	(17,805	)	$	909,247

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, 2019, by contractual maturity, are shown below.



	Amortized Cost		Estimated Fair Value
	(dollars in thousands)
Due within 1 year	$	—	$	—
Due after 1 but within 5 years	27,333		27,588
Due after 5 but within 10 years	33,580		34,181
Due after 10 years	—		—
	60,913		61,769
Mortgage-Backed Securities (a)	837,964		831,332
Total Debt Securities	$	898,877	$	893,101


(a)	Mortgage-Backed Securities include an amortized cost of $177.9 million and a fair value of $177.4 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $660.1 million and a fair value of $654.0 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:



	2019		2018
	(dollars in thousands)
Proceeds from sales	$	—	$	—
Gross gains (losses) realized:
Sales Transactions:
Gross gains	$	—	$	—
Gross losses	—		—
	—		—
Maturities and impairment
Gross gains	—		2,840
Gross losses	—		—
	—		2,840
Net gains and impairment	$	—	$	2,840

Gross gains of $2.8 million were recognized in 2018 as a result of a successful auction call on PreSTL XIV, one of our pooled trust preferred securities. There were no gains or losses recognized in 2019.

Securities available for sale with an estimated fair value of $625.2 million and $636.3 million were pledged as of March 31, 2019 and December 31, 2018, 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, 2019									December 31, 2018
	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	$	3,606	$	—	$	(26	)	$	3,580	$	3,635	$	—	$	(97	)	$	3,538
Mortgage-Backed Securities- Commercial	54,898		—		(1,763		)	53,135		55,221		—		(2,327		)	52,894
Obligations of U.S. Government-Sponsored Enterprises:
Mortgage-Backed Securities – Residential	270,807		352		(3,303		)	267,856		279,109		212		(7,254		)	272,067
Mortgage-Backed Securities – Commercial	12,894		—		(95		)	12,799		13,159		—		(258		)	12,901
Obligations of States and Political Subdivisions	42,304		400		(31		)	42,673		42,331		175		(313		)	42,193
Debt Securities Issued by Foreign Governments	400		—		—			400		400		—		—			400
Total Securities Held to Maturity	$	384,909	$	752	$	(5,218	)	$	380,443	$	393,855	$	387	$	(10,249	)	$	383,993

The amortized cost and estimated fair value of debt securities held to maturity at March 31, 2019, 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	$	518	$	518
Due after 1 but within 5 years	7,922		7,965
Due after 5 but within 10 years	34,264		34,590
Due after 10 years	—		—
	42,704		43,073
Mortgage-Backed Securities (a)	342,205		337,370
Total Debt Securities	$	384,909	$	380,443


(a)	Mortgage-Backed Securities include an amortized cost of $58.5 million and a fair value of $56.7 million for Obligations of U.S. Government agencies issued by Ginnie Mae and an amortized cost of $283.7 million and a fair value of $280.7 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 $324.7 million and $250.3 million were pledged as of March 31, 2019 and December 31, 2018, respectively, to secure public deposits and for other purposes required or permitted by law.