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, 2016
Obligations of:
U.S. government sponsored agencies	$	995	$	5	$	—		$	1,000
States and political subdivisions	109,767		5,059		—			114,826
Residential mortgage-backed securities	609,507		12,766		(1,454		)	620,819
Commercial mortgage-backed securities	23,005		784		—			23,789
Bank-issued trust preferred securities	5,157		—		(621		)	4,536
Equity securities	1,874		5,845		(71		)	7,648
Total available-for-sale securities	$	750,305	$	24,459	$	(2,146	)	$	772,618
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 June 30, 2016 and December 31, 2015. At June 30, 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 June 30 were as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2016		2015		2016		2015
Gross gains realized	$	767	$	32	$	863	$	632
Gross losses realized	—		21		—		21
Net gain realized	$	767	$	11	$	863	$	611

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, 2016
Obligations of:
Residential mortgage-backed securities	$	13,543	$	204	8	$	57,891	$	1,250	23	$	71,434	$	1,454
Bank-issued trust preferred securities	2,094		66		1	2,443		555		3	4,537		621
Equity securities	21		1		1	106		70		1	127		71
Total	$	15,658	$	271	10	$	60,440	$	1,875	27	$	76,098	$	2,146
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 June 30, 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 June 30, 2016 and December 31, 2015, were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At June 30, 2016, 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 $0.7 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 June 30, 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 June 30, 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	$	995		$	—		$	—		$	—		$	995
States and political subdivisions	675			12,183			31,536			65,373			109,767
Residential mortgage-backed securities	5			14,654			40,393			554,455			609,507
Commercial mortgage-backed securities	—			3,267			16,054			3,684			23,005
Bank-issued trust preferred securities	—			—			—			5,157			5,157
Equity securities													1,874
Total available-for-sale securities	$	1,675		$	30,104		$	87,983		$	628,669		$	750,305
Fair value
Obligations of:
U.S. government sponsored agencies	$	1,000		$	—		$	—		$	—		$	1,000
States and political subdivisions	684			12,581			32,724			68,837			114,826
Residential mortgage-backed securities	5			14,721			41,262			564,831			620,819
Commercial mortgage-backed securities	—			3,383			16,676			3,730			23,789
Bank-issued trust preferred securities	—			—			—			4,536			4,536
Equity securities													7,648
Total available-for-sale securities	$	1,689		$	30,685		$	90,662		$	641,934		$	772,618
Total weighted-average yield	2.96		%	3.02		%	2.94		%	2.68		%	2.74		%

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, 2016
Obligations of:
States and political subdivisions	$	3,826	$	505	$	—		$	4,331
Residential mortgage-backed securities	34,678		1,324		(25		)	35,977
Commercial mortgage-backed securities	5,802		33		—			5,835
Total held-to-maturity securities	$	44,306	$	1,862	$	(25	)	$	46,143
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 or six months ended June 30, 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
June 30, 2016
Obligations of:
States and political subdivisions	$	—	$	—	—	$	—	$	—	—	$	—	$	—
Residential mortgage-backed securities	—		—		—	1,109		25		1	1,109		25
Commercial mortgage-backed securities	—		—		—	88		—		1	88		—
Total	$	—	$	—	—	$	1,197	$	25	2	$	1,197	$	25
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 June 30, 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	$	—		$	321		$	977		$	2,528		$	3,826
Residential mortgage-backed securities	—			—			4,653			30,025			34,678
Commercial mortgage-backed securities	—			—			—			5,802			5,802
Total held-to-maturity securities	$	—		$	321		$	5,630		$	38,355		$	44,306
Fair value
Obligations of:
States and political subdivisions	$	—		$	332		$	1,136		$	2,863		$	4,331
Residential mortgage-backed securities	—			—			4,870			31,107			35,977
Commercial mortgage-backed securities	—			—			—			5,835			5,835
Total held-to-maturity securities	$	—		$	332		$	6,006		$	39,805		$	46,143
Total weighted-average yield	—		%	3.14		%	2.23		%	2.85		%	2.77		%

Other Securities

Peoples' other investment securities on the Unaudited Consolidated Balance Sheet consists 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 $495.3 million and $495.5 million at June 30, 2016 and December 31, 2015, respectively, and held-to-maturity investment securities with carrying values of $20.5 million and $21.4 million at June 30, 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 $10.0 million and $11.1 million at June 30, 2016 and December 31, 2015, respectively, and held-to-maturity securities with carrying values of $22.8 million and $23.3 million at June 30, 2016 and December 31, 2015, respectively, to secure additional borrowing capacity at the FHLB and the FRB.