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
September 30, 2016
Obligations of:
U.S. government sponsored agencies	$	998	$	3	$	—		$	1,001
States and political subdivisions	113,530		4,309		—			117,839
Residential mortgage-backed securities	599,589		10,037		(2,174		)	607,452
Commercial mortgage-backed securities	22,658		625		—			23,283
Bank-issued trust preferred securities	5,163		47		(427		)	4,783
Equity securities	1,940		5,914		(69		)	7,785
Total available-for-sale securities	$	743,878	$	20,935	$	(2,670	)	$	762,143
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 September 30, 2016 and December 31, 2015. At September 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 September 30 were as follows:



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(Dollars in thousands)	2016			2015		2016		2015
Gross gains realized	$	—		$	94	$	863	$	726
Gross losses realized	1			32		1		53
Net (loss)/gain realized	$	(1	)	$	62	$	862	$	673

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
September 30, 2016
Obligations of:
Residential mortgage-backed securities	$	119,144	$	693	29	$	47,071	$	1,481	21	$	166,215	$	2,174
Bank-issued trust preferred securities	—		—		—	2,571		427		3	2,571		427
Equity securities	—		—		—	107		69		1	107		69
Total	$	119,144	$	693	29	$	49,749	$	1,977	25	$	168,893	$	2,670
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 September 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 September 30, 2016 and December 31, 2015 were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At September 30, 2016, approximately 99% of the mortgage-backed securities market value 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 two positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. Both of these two 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 September 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 September 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	$	998		$	—		$	—		$	—		$	998
States and political subdivisions	675			14,577			29,022			69,256			113,530
Residential mortgage-backed securities	3			14,449			35,568			549,569			599,589
Commercial mortgage-backed securities	—			3,257			16,035			3,366			22,658
Bank-issued trust preferred securities	—			—			—			5,163			5,163
Equity securities													1,940
Total available-for-sale securities	$	1,676		$	32,283		$	80,625		$	627,354		$	743,878
Fair value
Obligations of:
U.S. government sponsored agencies	$	1,001		$	—		$	—		$	—		$	1,001
States and political subdivisions	679			14,923			29,954			72,283			117,839
Residential mortgage-backed securities	4			14,449			36,254			556,745			607,452
Commercial mortgage-backed securities	—			3,372			16,524			3,387			23,283
Bank-issued trust preferred securities	—			—			—			4,783			4,783
Equity securities													7,785
Total available-for-sale securities	$	1,684		$	32,744		$	82,732		$	637,198		$	762,143
Total weighted-average yield	2.98		%	3.17		%	2.95		%	2.65		%	2.72		%

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
September 30, 2016
Obligations of:
States and political subdivisions	$	3,823	$	462	$	—		$	4,285
Residential mortgage-backed securities	34,203		1,030		(28		)	35,205
Commercial mortgage-backed securities	5,636		19		—			5,655
Total held-to-maturity securities	$	43,662	$	1,511	$	(28	)	$	45,145
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 nine months ended September 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
September 30, 2016
Obligations of:
Residential mortgage-backed securities	$	9,053	$	7	1	$	1,001	$	21	1	$	10,054	$	28
Total	$	9,053	$	7	1	$	1,001	$	21	1	$	10,054	$	28
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 September 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	$	—		$	320		$	977		$	2,526		$	3,823
Residential mortgage-backed securities	—			—			4,638			29,565			34,203
Commercial mortgage-backed securities	—			—			—			5,636			5,636
Total held-to-maturity securities	$	—		$	320		$	5,615		$	37,727		$	43,662
Fair value
Obligations of:
States and political subdivisions	$	—		$	328		$	1,123		$	2,834		$	4,285
Residential mortgage-backed securities	—			—			4,824			30,381			35,205
Commercial mortgage-backed securities	—			—			—			5,655			5,655
Total held-to-maturity securities	$	—		$	328		$	5,947		$	38,870		$	45,145
Total weighted-average yield	—		%	3.14		%	2.24		%	2.86		%	2.78		%

Other Securities

Peoples' other investment securities on the Unaudited Consolidated Balance Sheet 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 $529.0 million and $495.5 million at September 30, 2016 and December 31, 2015, respectively, and held-to-maturity investment securities with carrying values of $20.2 million and $21.4 million at September 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 $9.8 million and $11.1 million at September 30, 2016 and December 31, 2015, respectively, and held-to-maturity securities with carrying values of $22.5 million and $23.3 million at September 30, 2016 and December 31, 2015, respectively, to secure additional borrowing capacity at the FHLB and the FRB.