Investment Securities

Available-for-sale

The following table summarizes Peoples’ available-for-sale investment securities:



(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2011
Obligations of:
U.S. Treasury and government agencies	$	35	$	1	$	—		$	36
U.S. government sponsored agencies	12,503		55		(237		)	12,321
States and political subdivisions	36,399		1,699		(7		)	38,091
Residential mortgage-backed securities	538,507		15,339		(12,915		)	540,931
Commercial mortgage-backed securities	36,128		268		(1,108		)	35,288
Bank-issued trust preferred securities	13,882		84		(581		)	13,385
Equity securities	1,213		2,429		(96		)	3,546
Total available-for-sale securities	$	638,667	$	19,875	$	(14,944	)	$	643,598
December 31, 2010
Obligations of:
U.S. Treasury and government agencies	$	38	$	1	$	—		$	39
U.S. government sponsored agencies	12,753		55		(546		)	12,262
States and political subdivisions	46,717		1,063		(401		)	47,379
Residential mortgage-backed securities	512,398		14,155		(19,019		)	507,534
Commercial mortgage-backed securities	30,124		648		(72		)	30,700
Bank-issued trust preferred securities	13,877		79		(972		)	12,984
Equity securities	1,214		1,970		(96		)	3,088
Total available-for-sale securities	$	617,121	$	17,971	$	(21,106	)	$	613,986

Peoples’ investment in equity securities was comprised entirely of common stocks issued by various unrelated bank holding companies at both June 30, 2011 and December 31, 2010.

At June 30, 2011, there were no securities of a single issuer, other than U.S. Treasury and government agencies and U.S. government sponsored agencies that exceeded 10% of stockholders' equity. Peoples had pledged investment securities with a carrying value of $370.7 million and $394.7 million at June 30, 2011 and December 31, 2010, respectively, to secure public and trust department deposits and repurchase agreements in accordance with federal and state requirements. Peoples also pledged investment securities with carrying values of $48.1 million and $28.1 million at June 30, 2011 and December 31, 2010, respectively, to secure additional borrowing capacity at the Federal Home Loan Bank of Cincinnati (“FHLB”) and the Federal Reserve Bank of Cleveland (“FRB”).

The gross gains and gross losses realized by Peoples from sales of available-for-sale securities for the three and six months ended June 30 were as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2011		2010		2011		2010
Gross gains realized	$	56	$	3,018	$	498	$	3,034
Gross losses realized	—		—		82		—
Net gain realized	$	56	$	3,018	$	416	$	3,034

The cost of investment securities sold, and any resulting gain or loss, was based on the specific identification method and recognized as of the trade date.

The following table presents a summary of available-for-sale investment securities that had an unrealized loss:



	Less than 12 Months					12 Months or More					Total
(Dollars in thousands)	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss		No. of Securities	Fair Value		Unrealized Loss
June 30, 2011
Obligations of:
U.S. government sponsored agencies	$	11,423	$	237	1	$	4	$	—	1	$	11,427	$	237
States and political subdivisions	221		7		1	—		—		—	221		7
Residential mortgage-backed securities	81,877		4,763		13	51,049		8,152		14	132,926		12,915
Commercial mortgage-backed securities	29,980		1,108		3	—		—		—	29,980		1,108
Bank-issued trust preferred securities	6,356		34		4	3,473		547		4	9,829		581
Equity securities	—		—		—	80		96		1	80		96
Total	$	129,857	$	6,149	22	$	54,606	$	8,795	20	$	184,463	$	14,944
December 31, 2010
Obligations of:
U.S. government sponsored agencies	$	11,202	$	546	1	$	—	$	—	—	$	11,202	$	546
States and political subdivisions	13,055		401		19	—		—		—	13,055		401
Residential mortgage-backed securities	152,075		13,080		23	39,540		5,939		9	191,615		19,019
Commercial mortgage-backed securities	21,388		72		4	—		—		—	21,388		72
Bank-issued trust preferred securities	4,290		47		3	5,144		925		5	9,434		972
Equity securities	—		—		—	80		96		1	80		96
Total	$	202,010	$	14,146	50	$	44,764	$	6,960	15	$	246,774	$	21,106

Management systematically evaluates investment securities for other-than-temporary declines in fair value on a quarterly basis. At June 30, 2011, management concluded no individual securities were other-than-temporarily impaired since Peoples did not have the intent to sell nor was it more likely than not that Peoples would be required to sell any of the securities with an unrealized loss prior to recovery. Further, the unrealized losses at both June 30, 2011 and December 31, 2010, were attributable to changes in market interest rates and spreads since the securities were purchased.

At June 30, 2011, the residential and commercial mortgage-backed securities that have been at an unrealized loss position for less than twelve months consisted almost entirely of securities issued by U.S government sponsored agencies. Additionally, approximately 93% of the mortgage-backed securities that have been at an unrealized loss position for twelve months or more were issued by U.S government sponsored agencies. Of the remaining mortgage-backed securities, all of the underlying mortgages were originated prior to 2004. Furthermore, five of the eight bank-issued trust preferred securities were within 98% of book value, while the unrealized losses for the remaining three were primarily attributable to the floating nature of these investments and the current interest rate environment.

Of the positions with a fair value less than 90% of their book value, five of the ten securities were mortgage-backed securities issued by U.S government sponsored agencies. The remaining securities were limited to three variable rate bank-issued trust preferred securities, which had an aggregate book value of $3.0 million and fair value of $2.5 million at June 30, 2011, and two variable rate residential mortgage-backed securities with book and market values of $2.0 million and $1.7 million, respectively. Management has analyzed the underlying credit quality of these securities and concluded the unrealized losses were primarily attributable to the floating rate nature of these investments and current market interest rates.

The table below presents the amortized cost, fair value and weighted-average yield of securities by contractual maturity at June 30, 2011. The average yields are based on the amortized cost. In some cases, the issuers may have the right to call or prepay obligations without call or prepayment penalties prior to the contractual maturity date. Rates are calculated on a fully tax-equivalent basis using a 35% federal income tax rate.



(Dollars in thousands)	Within 1 Year			1 to 5 Years			5 to 10 Years			Over 10 Years			Total
Amortized cost
Obligations of:
U.S. Treasury and government agencies	$	—		$	12		$	23		$	—		$	35
U.S. government sponsored agencies	—			843			11,660			—			12,503
States and political subdivisions	2,601			6,574			9,618			17,606			36,399
Residential mortgage-backed securities	—			6,210			56,040			476,257			538,507
Commercial mortgage-backed securities	—			—			34,635			1,493			36,128
Bank-issued trust preferred securities	—			—			—			13,882			13,882
Equity securities	—			—			—			1,213			1,213
Total available-for-sale securities	$	2,601		$	13,639		$	111,976		$	510,451		$	638,667
Fair value
Obligations of:
U.S. Treasury and government agencies	$	—		$	13		$	23		$	—		$	36
U.S. government sponsored agencies	—			898			11,423			—			12,321
States and political subdivisions	2,638			6,821			10,321			18,311			38,091
Residential mortgage-backed securities	—			6,775			58,246			475,910			540,931
Commercial mortgage-backed securities	—			—			33,625			1,663			35,288
Bank-issued trust preferred securities	—			—			—			13,385			13,385
Equity securities	—			—			—			3,546			3,546
Total available-for-sale securities	$	2,638		$	14,507		$	113,638		$	512,815		$	643,598
Total average yield	5.63		%	5.69		%	4.35		%	3.76		%	3.91		%

Held-to-Maturity

At June 30, 2011, Peoples’ held-to-maturity investments consisted of two qualified school construction bonds that are classified as held-to-maturity because of Peoples’ intent and ability to hold the securities to maturity given uncertainty regarding ownership rights of associated tax credits. These securities are carried at an aggregate amortized cost of $3.0 million and have gross unrealized losses totaling $10,744; weighted average cash coupon and tax credit rates of 1.83% and 6.09%, respectively, and remaining contractual maturity over 10 years.

Other Securities

Peoples’ other investment securities on the Consolidated Balance Sheets consist solely of restricted equity securities of the FHLB and the FRB. These securities are carried at cost since they do not have readily determinable fair values due to their restricted nature and Peoples does not exercise significant influence over the