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Impairment of Investment Securities
 12 Months Ended
Dec. 31, 2019
Impairment of Investment Securities Disclosure [Abstract]  
Impairment of Investment Securities Impairment of Investment Securities
Securities Available for Sale and Held to Maturity
As required by FASB ASC Topic 320, “Investments—Debt and Equity Securities,” credit related other-than-temporary impairment on debt securities is recognized in earnings while non-credit related other-than-temporary impairment on debt securities not expected to be sold is recognized in other comprehensive income (“OCI”). During the years ended December 31, 2019, 2018 and 2017, no other-than-temporary impairment charges were recognized.
First Commonwealth utilizes the specific identification method to determine the net gain or loss on debt securities and the average cost method to determine the net gain or loss on equity securities.
We review our investment portfolio on a quarterly basis for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and whether we are more likely than not to sell the security. We evaluate whether we are more likely than not to sell debt securities based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy, tax position and interest rate risk position. In addition, the risk of future other-than-temporary impairment may be influenced by weakness in the U.S. economy or changes in real estate values.
The following table presents the gross unrealized losses and estimated fair values at December 31, 2019 for both available for sale and held to maturity securities by investment category and time frame for which the securities have been in a continuous unrealized loss position:
 
Less Than 12 Months
 
12 Months or More
 
Total
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
(dollars in thousands)
Obligations of U.S. Government Agencies:
 
 
 
 
 
 
 
 
 
 
 
Mortgage-Backed Securities – Commercial
$
54,501

 
$
(201
)
 
$
16,365

 
$
(149
)
 
$
70,866

 
$
(350
)
Obligations of U.S. Government-Sponsored Enterprises:
 
 
 
 
 
 
 
 
 
 
 
Mortgage-Backed Securities – Residential
111,969

 
(436
)
 
219,015

 
(2,801
)
 
330,984

 
(3,237
)
Total Securities
$
166,470

 
$
(637
)
 
$
235,380

 
$
(2,950
)
 
$
401,850

 
$
(3,587
)
 
At December 31, 2019, fixed income securities issued by U.S. Government-sponsored enterprises comprised 90% of total unrealized losses and Government agencies account for 10% of total unrealized losses. All unrealized losses are a result of changes in market interest rates. At December 31, 2019, there were 36 debt securities in an unrealized loss position, 25 of which related to residential mortgage-backed securities with an unrealized loss of 12 months or more. There were no equity securities in an unrealized loss position at December 31, 2019.

The following table presents the gross unrealized losses and estimated fair value at December 31, 2018 for both available for sale and held to maturity securities by investment category and time frame for which the securities had been in a continuous unrealized loss position: 
 
Less Than 12 Months
 
12 Months or More
 
Total
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
(dollars in thousands)
Obligations of U.S. Government Agencies:
 
 
 
 
 
 
 
 
 
 
 
Mortgage-Backed Securities – Residential
$
2,289

 
$
(41
)
 
$
5,028

 
$
(140
)

$
7,317

 
$
(181
)
Mortgage-Backed Securities – Commercial
95,826

 
(925
)
 
75,959

 
(3,505
)
 
171,785

 
(4,430
)
Obligations of U.S. Government-Sponsored Enterprises:
 
 
 
 
 
 
 
 
 
 
 
Mortgage-Backed Securities – Residential
156,732

 
(1,856
)
 
626,003

 
(20,789
)

782,735

 
(22,645
)
Mortgage-Backed Securities – Commercial
—

 
—

 
12,901

 
(258
)
  
12,901

 
(258
)
Obligations of States and Political Subdivisions
8,591

 
(85
)
 
9,338

 
(234
)
 
17,929

 
(319
)
Corporate Securities
14,769

 
(214
)
 
3,993

 
(7
)
  
18,762

 
(221
)
Total Securities
$
278,207

 
$
(3,121
)
 
$
733,222

 
$
(24,933
)
 
$
1,011,429

 
$
(28,054
)

As of December 31, 2019, our corporate securities had an amortized cost and estimated fair value of $22.9 million and $24.0 million, respectively, and were comprised of debt for large regional banks. At December 31, 2018, these securities had an amortized cost of $20.9 million and estimated fair value of $21.0 million. There were four corporate securities in an unrealized loss position as of December 31, 2019 and one corporate security in a loss position as of December 31, 2018. When unrealized losses exist, management reviews each of the issuer’s asset quality, earnings trend and capital position, to determine whether issues in an unrealized loss position were other-than-temporarily impaired. All interest payments on the corporate securities are being made as contractually required.

During 2018, all of our pooled trust preferred collateralized debt obligations were liquidated either through a successful auction call or sale. Other-than-temporary impairment charges were recognized on the pooled trust preferred securities in 2008, 2009 and 2010. The following table provides a cumulative roll forward of credit losses recognized in earnings for the trust preferred securities for the years ended December 31:
 
2019
 
2018
 
2017
 
(dollars in thousands)
Balance, beginning (a)
$
—

 
$
12,208

 
$
17,056

Credit losses on debt securities for which other-than-temporary impairment was not previously recognized
—

 
—

 
—

Additional credit losses on debt securities for which other-than-temporary impairment was previously recognized
—

 
—

 
—

Increases in cash flows expected to be collected, recognized over the remaining life of the securities (b)
—

 
(223
)
 
(890
)
Reduction for debt securities sold during the period
—

 
(9,164
)
 
—

Reduction for debt securities called during the period
—

 
(2,821
)
 
(3,958
)
Balance, ending
$
—

 
$
—

 
$
12,208

(a)
The beginning balance represents credit related losses included in other-than-temporary impairment charges recognized on debt securities in prior periods.
(b)
Represents the increase in cash flows recognized either as principal payments or interest income during the period.
For the year ended December 31, 2017, no other-than-temporary impairment charges were recorded on equity securities. There were no equity securities in an unrealized loss position as of December 31, 2019 and 2018.
 
Other Investments
As a member of the Federal Home Loan Bank ("FHLB"), First Commonwealth is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements. The level of stock required to be held is dependent on the amount of First Commonwealth's mortgage related assets and outstanding borrowings with the FHLB. This stock is restricted in that it can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, FHLB stock is unlike other investment securities insofar as there is no trading market for FHLB stock and the transfer price is determined by FHLB membership rules and not by market participants. As of December 31, 2019 and 2018, our FHLB stock totaled $15.1 million and $30.5 million, respectively and is included in “Other investments” on the Consolidated Statements of Financial Condition.
FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. First Commonwealth evaluates impairment quarterly and has concluded that the par value of its investment in FHLB stock will be recovered. Accordingly, no impairment charge was recorded on these securities for the year ended December 31, 2019.
At both December 31, 2019 and 2018, Other Investments also includes $1.7 million in equity securities. These securities do not have a readily determinable fair value and are carried at cost. For the years ended December 31, 2019 and 2018, there were no gains or losses recognized through earnings on equity securities. On a quarterly basis, management evaluates equity securities by reviewing the severity and duration of decline in estimated fair value, research reports, analysts’ recommendations, credit rating changes, news stories, annual reports, regulatory filings, impact of interest rate changes and other relevant information.