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, 2015
Obligations of:
U.S. Treasury and government agencies	$	—	$	—	$	—		$	—
U.S. government sponsored agencies	3,885		49		—			3,934
States and political subdivisions	112,186		2,430		(403		)	114,213
Residential mortgage-backed securities	580,579		6,655		(7,533		)	579,701
Commercial mortgage-backed securities	27,262		122		(184		)	27,200
Bank-issued trust preferred securities	5,134		—		(466		)	4,668
Equity securities	1,586		4,992		(74		)	6,504
Total available-for-sale securities	$	730,632	$	14,248	$	(8,660	)	$	736,220
December 31, 2014
Obligations of:
U.S. Treasury and government agencies	$	1	$	—	$	—		$	1
U.S. government sponsored agencies	5,836		114		—			5,950
States and political subdivisions	62,292		2,510		(59		)	64,743
Residential mortgage-backed securities	529,245		5,910		(7,864		)	527,291
Commercial mortgage-backed securities	28,021		112		(286		)	27,847
Bank-issued trust preferred securities	6,132		3		(490		)	5,645
Equity securities	1,440		4,044		(81		)	5,403
Total available-for-sale securities	$	632,967	$	12,693	$	(8,780	)	$	636,880

Peoples’ investment in equity securities was comprised largely of common stocks issued by various unrelated bank holding companies at both June 30, 2015 and December 31, 2014. At June 30, 2015, there were no securities of a single issuer, other than U.S. Treasury and government agencies, and U.S. government sponsored agencies/enterprises, that exceeded 10% of stockholders' equity.

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



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2015		2014		2015		2014
Gross gains realized	$	32	$	220	$	632	$	734
Gross losses realized	21		154		21		698
Net gain realized	$	11	$	66	$	611	$	36

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, 2015
Obligations of:
States and political subdivisions	$	34,827	$	392	56	$	210	$	11	1	$	35,037	$	403
Residential mortgage-backed securities	180,761		2,836		48	119,803		4,697		35	300,564		7,533
Commercial mortgage-backed securities	19,422		184		4	—		—		—	19,422		184
Bank-issued trust preferred securities	2,131		5		—	2,537		461		3	4,668		466
Equity securities	41		1		2	102		73		1	143		74
Total	$	237,182	$	3,418	110	$	122,652	$	5,242	40	$	359,834	$	8,660
December 31, 2014
Obligations of:
States and political subdivisions	$	2,602	$	12	4	$	5,788	$	47	8	$	8,390	$	59
Residential mortgage-backed securities	114,018		1,091		21	216,224		6,773		57	330,242		7,864
Commercial mortgage-backed securities	—		—		—	19,404		286		4	19,404		286
Bank-issued trust preferred securities	—		—		—	2,509		490		3	2,509		490
Equity securities	40		2		2	96		79		1	136		81
Total	$	116,660	$	1,105	27	$	244,021	$	7,675	73	$	360,681	$	8,780

Management systematically evaluates available-for-sale investment securities for other-than-temporary declines in fair value on a quarterly basis. At June 30, 2015, 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, 2015 and December 31, 2014, were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At June 30, 2015, approximately 99% of the mortgage-backed securities that had been at an unrealized loss position for twelve months or more were issued by U.S. government sponsored agencies. The remaining 1%, or three positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. Two of the three positions had a fair value less than 90% of their book value, with an aggregate book and fair value of $0.8 million and $0.5 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.

Furthermore, the three bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at June 30, 2015 were primarily attributable to the floating nature of those investments, the current interest rate environment and spreads within that sector.

The table below presents the amortized cost, fair value and total weighted-average yield of available-for-sale securities by contractual maturity at June 30, 2015. The weighted-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	$	—		$	—		$	—		$	—		$	—
U.S. government sponsored agencies	—			987			—			2,898			3,885
States and political subdivisions	248			6,367			30,911			74,660			112,186
Residential mortgage-backed securities	—			10,643			34,309			535,627			580,579
Commercial mortgage-backed securities	—			—			22,916			4,346			27,262
Bank-issued trust preferred securities	—			—			—			5,134			5,134
Equity securities													1,586
Total available-for-sale securities	$	248		$	17,997		$	88,136		$	622,665		$	730,632
Fair value
Obligations of:
U.S. Treasury and government agencies	$	—		$	—		$	—		$	—		$	—
U.S. government sponsored agencies	—			999			—			2,935			3,934
States and political subdivisions	251			6,632			31,596			75,734			114,213
Residential mortgage-backed securities	—			10,679			34,542			534,480			579,701
Commercial mortgage-backed securities	—			—			22,771			4,429			27,200
Bank-issued trust preferred securities	—			—			—			4,668			4,668
Equity securities													6,504
Total available-for-sale securities	$	251		$	18,310		$	88,909		$	622,246		$	736,220
Total weighted-average yield	4.79		%	2.69		%	2.83		%	2.67		%	2.70		%

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
June 30, 2015
Obligations of:
States and political subdivisions	$	3,836	$	398	$	(6	)	$	4,228
Residential mortgage-backed securities	36,084		301		(492		)	35,893
Commercial mortgage-backed securities	7,563		—		(58		)	7,505
Total held-to-maturity securities	$	47,483	$	699	$	(556	)	$	47,626
December 31, 2014
Obligations of:
States and political subdivisions	$	3,841	$	448	$	(7	)	$	4,282
Residential mortgage-backed securities	36,945		189		(394		)	36,740
Commercial mortgage-backed securities	7,682		9		(271		)	7,420
Total held-to-maturity securities	$	48,468	$	646	$	(672	)	$	48,442

There were no gross gains or gross losses realized by Peoples from sales of held-to-maturity securities for the three or the six months ended June 30, 2015 and 2014.

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
June 30, 2015
Obligations of:
States and political subdivisions	$	—	$	—	—	$	320	$	6	1	$	320	$	6
Residential mortgage-backed securities	3,787		81		2	10,269		411		2	14,056		492
Commercial mortgage-backed securities	993		8		—	6,512		50		1	7,505		58
Total	$	4,780	$	89	2	$	17,101	$	467	4	$	21,881	$	556
December 31, 2014
Obligations of:
States and political subdivisions	$	—	$	—	—	$	323	$	7	1	$	323	$	7
Residential mortgage-backed securities	$	—	$	—	—	$	18,242	$	394	5	$	18,242	$	394
Commercial mortgage-backed securities	—		—		—	6,356		271		1	6,356		271
Total	$	—	$	—	—	$	24,921	$	672	7	$	24,921	$	672

The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity securities by contractual maturity at June 30, 2015. The weighted-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	$	—		$	327		$	—		$	3,509		$	3,836
Residential mortgage-backed securities	—			—			497			35,587			36,084
Commercial mortgage-backed securities	—			—			—			7,563			7,563
Total held-to-maturity securities	$	—		$	327		$	497		$	46,659		$	47,483
Fair value
Obligations of:
States and political subdivisions	$	—		$	320		$	—		$	3,908		$	4,228
Residential mortgage-backed securities	—			—			495			35,398			35,893
Commercial mortgage-backed securities	—			—			—			7,505			7,505
Total held-to-maturity securities	$	—		$	320		$	495		$	46,811		$	47,626
Total weighted-average yield	—		%	3.14		%	2.28		%	2.75		%	2.75		%

Other Securities

Peoples' other investment securities on the Consolidated Balance Sheets consist largely of shares of the Federal Home Loan Bank of Cincinnati (the “FHLB”) and the Federal Reserve Bank of Cleveland (the "FRB").

Pledged Securities

Peoples had pledged available-for-sale investment securities with carrying values of $471.9 million and $352.8 million at June 30, 2015 and December 31, 2014, respectively, and held-to-maturity investment securities with carrying values of $23.9 million and $22.9 million at June 30, 2015 and December 31, 2014, 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 $12.4 million and $13.5 million at June 30, 2015 and December 31, 2014, respectively, and held-to-maturity securities with carrying values of $23.9 million and $24.5 million at June 30, 2015 and December 31, 2014, respectively, to secure additional borrowing capacity at the FHLB and the FRB.