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
March 31, 2012
Obligations of:
U.S. Treasury and government agencies	$	31	$	—	$	—		$	31
U.S. government sponsored agencies	655		47		—			702
States and political subdivisions	31,164		3,011		—			34,175
Residential mortgage-backed securities	520,613		13,662		(11,616		)	522,659
Commercial mortgage-backed securities	35,253		1,005		(28		)	36,230
Bank-issued trust preferred securities	13,888		54		(1,041		)	12,901
Equity securities	1,213		2,220		(95		)	3,338
Total available-for-sale securities	$	602,817	$	19,999	$	(12,780	)	$	610,036
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

Peoples’ investment in equity securities was comprised entirely of common stocks issued by various unrelated bank holding companies at both March 31, 2012 and December 31, 2011. At March 31, 2012, 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.

The gross gains and gross losses realized by Peoples from sales of available-for-sale securities for the three months ended March 31 were as follows:



	Three Months Ended
	March 31,
(Dollars in thousands)	2012		2011
Gross gains realized	$	3,272	$	442
Gross losses realized	109		82
Net gain realized	$	3,163	$	360

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
March 31, 2012
Obligations of:
U.S. Treasury and government agencies	$	—	$	—	—	$	—	$	—	—	$	—	$	—
U.S. government sponsored agencies	—		—		—	—		—		—	—		—
States and political subdivisions	—		—		—	—		—		—	—		—
Residential mortgage-backed securities	95,533		2,509		16	86,868		9,107		16	182,401		11,616
Commercial mortgage-backed securities	6,138		28		1	—		—		—	6,138		28
Bank-issued trust preferred securities	4,830		194		3	4,545		847		5	9,375		1,041
Equity securities	—		—		—	80		95		1	80		95
Total	$	106,501	$	2,731	20	$	91,493	$	10,049	22	$	197,994	$	12,780
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

Management systematically evaluates available-for-sale investment securities for other-than-temporary declines in fair value on a quarterly basis. At March 31, 2012, 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 March 31, 2012 and December 31, 2011, were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At March 31, 2012, securities that have been at an unrealized loss position for less than twelve months consisted of three bank issued trust preferred securities and seventeen mortgage-backed securities, both private label and those issued by U.S. government sponsored enterprises. Additionally, of the mortgage-backed securities that have been at an unrealized loss position for twelve months or more, 96% were issued by U.S. government sponsored enterprises. Of the remaining 4%, which consisted of private label mortgage-backed securities, all of the underlying mortgages were originated prior to 2004.

Furthermore, five of the eight bank-issued trust preferred securities at an unrealized loss position were within 90% of book value, while the unrealized losses for the remaining three were primarily attributable to the floating nature of these investments, the current interest rate environment and spreads within that sector.

Of the positions with a fair value less than 90% of their book value, three of the nine securities were mortgage-backed securities issued by U.S government sponsored enterprises. The remaining securities were limited to three bank-issued trust preferred securities, which had an aggregate book value of approximately $3.0 million and fair value of $2.2 million at March 31, 2012, and three variable rate residential mortgage-backed securities with book and market values of $2.2 million and $1.6 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 the low number of loans remaining in these securities.

The table below presents the amortized cost, fair value and weighted-average yield of available-for-sale securities by contractual maturity at March 31, 2012. 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		$	20		$	—		$	31
U.S. government sponsored agencies	—			655			—			—			655
States and political subdivisions	1,173			3,464			9,905			16,622			31,164
Residential mortgage-backed securities	125			1,073			50,744			468,671			520,613
Commercial mortgage-backed securities	—			—			18,398			16,855			35,253
Bank-issued trust preferred securities	—			—			—			13,888			13,888
Equity securities	—			—			—			1,213			1,213
Total available-for-sale securities	$	1,298		$	5,203		$	79,067		$	517,249		$	602,817
Fair value
Obligations of:
U.S. Treasury and government agencies	$	—		$	11		$	20		$	—		$	31
U.S. government sponsored agencies	—			702			—			—			702
States and political subdivisions	1,184			3,598			10,991			18,402			34,175
Residential mortgage-backed securities	127			1,148			52,339			469,045			522,659
Commercial mortgage-backed securities	—			—			19,145			17,085			36,230
Bank-issued trust preferred securities	—			—			—			12,901			12,901
Equity securities	—			—			—			3,338			3,338
Total available-for-sale securities	$	1,311		$	5,459		$	82,495		$	520,771		$	610,036
Total average yield	6.23		%	5.67		%	4.31		%	3.6		%	3.71		%

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
March 31, 2012
Obligations of:
States and political subdivisions	$	3,524	$	287	$	—		$	3,811
Residential mortgage-backed securities	23,902		287		(242		)	23,947
Commercial mortgage-backed securities	6,872		4		—			6,876
Total held-to-maturity securities	$	34,298	$	578	$	(242	)	$	34,634
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

There were no gross gains or gross losses realized by Peoples from sales of held-to-maturity securities for the three months ended March 31, 2012.

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
March 31, 2012
Obligations of:
States and political subdivisions	$	—	$	—	—	$	—	$	—	—	$	—	$	—
Residential mortgage-backed securities	5,956		242		1	—		—		—	5,956		242
Total	$	5,956	$	242	1	$	—	$	—	—	$	5,956	$	242
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

The table below presents the amortized cost, fair value and weighted-average yield of held-to-maturity securities by contractual maturity at March 31, 2012. 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:
States and political subdivisions	$	—		$	—		$	—		$	3,524		$	3,524
Residential mortgage-backed securities	—			—			—			23,902			23,902
Commercial mortgage-backed securities	—			—			—			6,872			6,872
Total held-to-maturity securities	$	—		$	—		$	—		$	34,298		$	34,298
Fair value
Obligations of:
States and political subdivisions	$	—		$	—		$	—		$	3,811		$	3,811
Residential mortgage-backed securities	—			—			—			23,947			23,947
Commercial mortgage-backed securities	—			—			—			6,876			6,876
Total held-to-maturity securities	$	—		$	—		$	—		$	34,634		$	34,634
Total average yield	—		%	—		%	—		%	3.04		%	3.04		%

Other Securities

Peoples’ other investment securities on the Consolidated Balance Sheets consisted solely of restricted equity securities issued by the Federal Home Loan Bank of Cincinnati (“FHLB”) and the Federal Reserve Bank of Cleveland(“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.

Pledged Securities

Peoples had pledged available-for-sale investment securities with a carrying value of $360.9 million and $359.1 million at March 31, 2012 and December 31, 2011, respectively, to secure public and trust department deposits and repurchase agreements in accordance with federal and state requirements. Additionally, Peoples had pledged held-to-maturity investment securities with a carrying value of $26.9 million and $3.0 million at March 31, 2012 and December 31, 2011, respectively, to secure public and trust department deposits and repurchase agreements in accordance with federal and state requirements. Peoples also pledged available-for-sale investment securities with carrying values of $61.2 million and $65.2 million at March 31, 2012 and December 31, 2011, respectively, to secure additional borrowing capacity at the FHLB and the FRB .