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
December 31, 2011
Obligations of:
U.S. Treasury and government agencies	$	32	$	—	$	—		$	32
U.S. government sponsored agencies	12,291		746		—			13,037
States and political subdivisions	32,763		2,982		—			35,745
Residential mortgage-backed securities	521,231		15,607		(9,835		)	527,003
Commercial mortgage-backed securities	35,712		1,577		—			37,289
Bank-issued trust preferred securities	13,886		12		(1,687		)	12,211
Equity securities	1,213		2,134		(93		)	3,254
Total available-for-sale securities	$	617,128	$	23,058	$	(11,615	)	$	628,571
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	512,399		14,154		(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	$	617,122	$	17,970	$	(21,106	)	$	613,986

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

At December 31, 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 $362.1 million and $394.7 million at December 31, 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 $65.2 million and $28.1 million at December 31, 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 year ended December 31 were as follows:



(Dollars in thousands)	2011		2010		2009
Gross gains realized	$	1,110	$	8,306	$	1,460
Gross losses realized	637		1,454		14
Net gain realized	$	473	$	6,852	$	1,446

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
December 31, 2011
Obligations of:
U.S. Treasury and government agencies	$	—	$	—	—	$	3	$	—	1	$	3	$	—
U.S. government sponsored agencies	—		—		—	—		—		—	—		—
States and political subdivisions	—		—		—	—		—		—	—		—
Residential mortgage-backed securities	60,148		756		13	91,400		9,079		15	151,548		9,835
Commercial mortgage-backed securities	—		—		—	—		—		—	—		—
Bank-issued trust preferred securities	6,872		625		4	4,329		1,062		5	11,201		1,687
Equity securities	—		—		—	83		93		1	83		93
Total	$	67,020	$	1,381	17	$	95,815	$	10,234	22	$	162,835	$	11,615
December 31, 2010
Obligations of:
U.S. Treasury and government agencies	$	—	$	—	—	$	—	$	—	—	$	—	$	—
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 December 31, 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 December 31, 2011 and December 31, 2010, were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At December 31, 2011, all of the mortgage-baked securities that have been at an unrealized loss position for twelve months or more have experienced improvement during the last twelve months. Further, the majority of these securities were issued by U.S government sponsored agencies, with 95% of the securities within 90% of their book value. Three of the four bank-issued trust preferred securities at an unrealized loss position for twelve months or more are floating rate securities with the unrealized losses mostly attributable to the current interest rate environment and spreads within that sector. 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 the low number of loans remaining in these securities.

The table below presents the amortized cost, fair value and weighted-average yield of securities by contractual maturity at December 31, 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	$	—		$	11		$	21		$	—		$	32
U.S. government sponsored agencies	—			719			11,572			—			12,291
States and political subdivisions	1,973			4,263			9,577			16,950			32,763
Residential mortgage-backed securities	207			5,405			56,439			459,180			521,231
Commercial mortgage-backed securities	—			—			34,514			1,198			35,712
Bank-issued trust preferred securities	—			—			—			13,886			13,886
Equity securities	—			—			—			1,213			1,213
Total available-for-sale securities	$	2,180		$	10,398		$	112,123		$	492,427		$	617,128
Fair value
Obligations of:
U.S. Treasury and government agencies	$	—		$	11		$	21		$	—		$	32
U.S. government sponsored agencies	—			775			12,262			—			13,037
States and political subdivisions	1,990			4,422			10,731			18,602			35,745
Residential mortgage-backed securities	211			6,005			58,631			462,156			527,003
Commercial mortgage-backed securities	—			—			36,002			1,287			37,289
Bank-issued trust preferred securities	—			—			—			12,211			12,211
Equity securities	—			—			—			3,254			3,254
Total available-for-sale securities	$	2,201		$	11,213		$	117,647		$	497,510		$	628,571
Total average yield	5.71		%	5.61		%	4.09		%	3.75		%	3.85		%

Held-to-Maturity

The following table summarizes Peoples’ held-to-maturity investment securities:



(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2011
Obligations of:
States and political subdivisions	$	3,525	$	262	$	—		$	3,787
Residential mortgage-backed securities	12,776		230		(88		)	12,918
Total held-to-maturity securities	$	16,301	$	492	$	(88	)	$	16,705



(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2010
Obligations of:
States and political subdivisions	$	2,965	$	—	$	(11	)	$	2,954
Residential mortgage-backed securities	—		—		—			—
Total held-to-maturity securities	$	2,965	$	—	$	(11	)	$	—

There were no gross gains and gross losses realized by Peoples from sales of held-to-maturity securities for the year ended December 31, 2011.

The following table presents a summary of held-to-maturity 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
December 31, 2011
Obligations of:
States and political subdivisions	$	—	$	—	—	$	—	$	—	—	$	—	$	—
Residential mortgage-backed securities	6,416		88		1	—		—		—	6,416		88
Total	$	6,416	$	88	1	$	—	$	—	—	$	6,416	$	88
December 31, 2010
Obligations of:
States and political subdivisions	$	2,954	$	11	2	$	—	$	—	—	$	2,954	$	11
Residential mortgage-backed securities	—		—		—	—		—		—	—		—
Total	$	2,954	$	11	2	$	—	$	—	—	$	2,954	$	11



(Dollars in thousands)	Within 1 Year			1 to 5 Years			5 to 10 Years			Over 10 Years			Total
Amortized cost
Obligations of:
States and political subdivisions	—			—			—			3,525			3,525
Residential mortgage-backed securities	—			—			—			12,776			12,776
Total held-to-maturity securities	$	—		$	—		$	—		$	16,301		$	16,301
Fair value
Obligations of:
States and political subdivisions	—			—			—			3,787			3,787
Residential mortgage-backed securities	—			—			—			12,918			12,918
Total held-to-maturity securities	$	—		$	—		$	—		$	16,705		$	16,705
Total average yield	—		%	—		%	—		%	3.04		%	3.04		%

Other Securities

Peoples’ other investment securities on the Consolidated Balance Sheets consisted 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 entities.