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, 2016
Obligations of:
U.S. government sponsored agencies	$	1,944	$	60	$	—		$	2,004
States and political subdivisions	110,139		4,192		(3		)	114,328
Residential mortgage-backed securities	642,835		10,293		(2,454		)	650,674
Commercial mortgage-backed securities	23,668		590		—			24,258
Bank-issued trust preferred securities	5,152		—		(822		)	4,330
Equity securities	1,806		4,866		(72		)	6,600
Total available-for-sale securities	$	785,544	$	20,001	$	(3,351	)	$	802,194
December 31, 2015
Obligations of:
U.S. government sponsored agencies	$	2,908	$	58	$	—		$	2,966
States and political subdivisions	111,283		3,487		(44		)	114,726
Residential mortgage-backed securities	635,504		4,905		(8,116		)	632,293
Commercial mortgage-backed securities	23,770		119		(44		)	23,845
Bank-issued trust preferred securities	5,146		—		(511		)	4,635
Equity securities	1,693		4,627		(84		)	6,236
Total available-for-sale securities	$	780,304	$	13,196	$	(8,799	)	$	784,701

Peoples’ investment in equity securities was comprised largely of common stocks issued by various unrelated bank holding companies at both March 31, 2016 and December 31, 2015. At March 31, 2016, there were no securities of a single issuer 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 March 31 were as follows:



	Three Months Ended
	March 31,
(Dollars in thousands)	2016		2015
Gross gains realized	$	96	$	600
Gross losses realized	—		—
Net gain realized	$	96	$	600

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, 2016
Obligations of:
States and political subdivisions	$	—	$	—	—	$	215	$	3	1	$	215	$	3
Residential mortgage-backed securities	69,140		415		17	116,130		2,039		36	185,270		2,454
Bank-issued trust preferred securities	1,991		163		1	2,339		659		3	4,330		822
Equity securities	20		2		1	106		70		1	126		72
Total	$	71,151	$	580	19	$	118,790	$	2,771	41	$	189,941	$	3,351
December 31, 2015
Obligations of:
States and political subdivisions	$	7,662	$	38	8	$	213	$	6	1	$	7,875	$	44
Residential mortgage-backed securities	303,549		3,902		76	102,090		4,214		33	405,639		8,116
Commercial mortgage-backed securities	6,682		44		3	—		—		—	6,682		44
Bank-issued trust preferred securities	2,129		19		1	2,506		492		3	4,635		511
Equity securities	438		15		2	106		69		1	544		84
Total	$	320,460	$	4,018	90	$	104,915	$	4,781	38	$	425,375	$	8,799

Management systematically evaluates available-for-sale investment securities for other-than-temporary declines in fair value on a quarterly basis. At March 31, 2016, 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, 2016 and December 31, 2015, were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At March 31, 2016, approximately 97% 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 3%, 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 100% of their book value, with an aggregate book and fair value of $0.7 million and $0.5 million, respectively. Management 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 March 31, 2016 were primarily attributable to the floating-rate 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 March 31, 2016. 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. government sponsored agencies	$	993		$	—		$	—		$	951		$	1,944
States and political subdivisions	239			12,322			30,930			66,648			110,139
Residential mortgage-backed securities	1			13,866			51,865			577,103			642,835
Commercial mortgage-backed securities	—			3,278			16,656			3,734			23,668
Bank-issued trust preferred securities	—			—			—			5,152			5,152
Equity securities													1,806
Total available-for-sale securities	$	1,233		$	29,466		$	99,451		$	653,588		$	785,544
Fair value
Obligations of:
U.S. government sponsored agencies	$	1,000		$	—		$	—		$	1,004		$	2,004
States and political subdivisions	245			12,728			31,981			69,374			114,328
Residential mortgage-backed securities	1			13,837			52,809			584,027			650,674
Commercial mortgage-backed securities	—			3,400			17,075			3,783			24,258
Bank-issued trust preferred securities	—			—			—			4,330			4,330
Equity securities													6,600
Total available-for-sale securities	$	1,246		$	29,965		$	101,865		$	662,518		$	802,194
Total weighted-average yield	1.96		%	3.12		%	3.34		%	2.74		%	2.83		%

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, 2016
Obligations of:
States and political subdivisions	$	3,828	$	422	$	—		$	4,250
Residential mortgage-backed securities	35,005		990		(74		)	35,921
Commercial mortgage-backed securities	6,033		1		(3		)	6,031
Total held-to-maturity securities	$	44,866	$	1,413	$	(77	)	$	46,202
December 31, 2015
Obligations of:
States and political subdivisions	$	3,831	$	394	$	(4	)	$	4,221
Residential mortgage-backed securities	35,367		363		(534		)	35,196
Commercial mortgage-backed securities	6,530		—		(94		)	6,436
Total held-to-maturity securities	$	45,728	$	757	$	(632	)	$	45,853

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, 2016 and 2015.

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, 2016
Residential mortgage-backed securities	$	—	$	—	—	$	10,313	$	74	2	$	10,313	$	74
Commercial mortgage-backed securities	127		3		1	—		—		—	127		3
Total	$	127	$	3	1	$	10,313	$	74	2	$	10,440	$	77
December 31, 2015
Obligations of:
States and political subdivisions	$	—	$	—	—	$	319	$	4	1	$	319	$	4
Residential mortgage-backed securities	3,706		89		2	10,040		445		2	13,746		534
Commercial mortgage-backed securities	540		4		1	5,895		90		1	6,435		94
Total	$	4,246	$	93	3	$	16,254	$	539	4	$	20,500	$	632

The table below presents the amortized cost, fair value and total weighted-average yield of held-to-maturity securities by contractual maturity at March 31, 2016. 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	$	—		$	323		$	976		$	2,529		$	3,828
Residential mortgage-backed securities	—			—			482			34,523			35,005
Commercial mortgage-backed securities	—			—			—			6,033			6,033
Total held-to-maturity securities	$	—		$	323		$	1,458		$	43,085		$	44,866
Fair value
Obligations of:
States and political subdivisions	$	—		$	332		$	1,116		$	2,802		$	4,250
Residential mortgage-backed securities	—			—			492			35,429			35,921
Commercial mortgage-backed securities	—			—			—			6,031			6,031
Total held-to-maturity securities	$	—		$	332		$	1,608		$	44,262		$	46,202
Total weighted-average yield	—		%	3.03		%	2.85		%	3.32		%	3.30		%

Other Securities

Peoples' other investment securities on the Unaudited 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 $561.7 million and $495.5 million at March 31, 2016 and December 31, 2015, respectively, and held-to-maturity investment securities with carrying values of $20.8 million and $21.4 million at March 31, 2016 and December 31, 2015, 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 $10.8 million and $11.1 million at March 31, 2016 and December 31, 2015, respectively, and held-to-maturity securities with carrying values of $23.1 million and $23.3 million at March 31, 2016 and December 31, 2015, respectively, to secure additional borrowing capacity at the FHLB and the FRB.