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, 2018
Obligations of:
States and political subdivisions	$	96,730	$	1,052	$	(577	)	$	97,205
Residential mortgage-backed securities	699,788		2,195		(20,237		)	681,746
Commercial mortgage-backed securities	6,974		—		(110		)	6,864
Bank-issued trust preferred securities	5,197		116		(218		)	5,095
Total available-for-sale securities	$	808,689	$	3,363	$	(21,142	)	$	790,910
December 31, 2017
Obligations of:
States and political subdivisions	100,039		1,786		(256		)	101,569
Residential mortgage-backed securities	684,100		2,582		(13,018		)	673,664
Commercial mortgage-backed securities	7,004		11		(39		)	6,976
Bank-issued trust preferred securities	5,195		141		(207		)	5,129
Equity securities (a)	1,394		6,520		(65		)	7,849
Total available-for-sale securities	$	797,732	$	11,040	$	(13,585	)	$	795,187

(a) As of January 1, 2018, Peoples adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment

securities to other investment securities.

Peoples' investment in equity securities was comprised largely of common stocks issued by various unrelated bank holding companies at both March 31, 2018 and December 31, 2017. At December 31, 2017, there were no equity 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)	2018		2017
Gross gains realized	$	2	$	340
Gross losses realized	1		—
Net gain (loss) realized	$	1	$	340

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, 2018
Obligations of:
States and political subdivisions	$	26,370	$	306	37	$	5,095	$	271	2	$	31,465	$	577
Residential mortgage-backed securities	321,636		7,396		95	279,802		12,841		86	601,438		20,237
Commercial mortgage-backed securities	5,609		93		2	1,256		17		1	6,865		110
Bank-issued trust preferred securities	—		—		—	2,782		218		3	2,782		218
Total	$	353,615	$	7,795	134	$	288,935	$	13,347	92	$	642,550	$	21,142
December 31, 2017
Obligations of:
States and political subdivisions	$	16,985	$	89	18	$	5,308	$	167	1	$	22,293	$	256
Residential mortgage-backed securities	274,998		3,462		77	291,812		9,556		88	566,810		13,018
Commercial mortgage-backed securities	2,487		23		1	1,274		16		1	3,761		39
Bank-issued trust preferred securities	—		—		—	2,792		207		3	2,792		207
Equity securities (a)	276		1		1	112		64		1	388		65
Total	$	294,746	$	3,575	97	$	301,298	$	10,010	94	$	596,044	$	13,585

(a) As of January 1, 2018, Peoples adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

Management systematically evaluates available-for-sale investment securities for other-than-temporary declines in fair value on a quarterly basis. At March 31, 2018, 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, 2018 and December 31, 2017 were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At March 31, 2018, approximately 99% of the mortgage-backed securities with a 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 four positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. Two of the four positions had a fair value of less than 90% of their book value, with an aggregate book and fair value of $0.5 million and $0.3 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 unrealized losses with respect to the three bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at March 31, 2018 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, 2018. 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.



(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	$	1,294		$	10,503		$	30,295		$	54,638		$	96,730
Residential mortgage-backed securities	439			14,398			40,311			644,640			699,788
Commercial mortgage-backed securities	—			5,701			—			1,273			6,974
Bank-issued trust preferred securities	—			—			2,197			3,000			5,197
Total available-for-sale securities	$	1,733		$	30,602		$	72,803		$	703,551		$	808,689
Fair value
Obligations of:
States and political subdivisions	$	1,301		$	10,492		$	30,332		$	55,080		$	97,205
Residential mortgage-backed securities	433			14,140			39,654			627,519			681,746
Commercial mortgage-backed securities	—			5,608			—			1,256			6,864
Bank-issued trust preferred securities	—			—			2,313			2,782			5,095
Total available-for-sale securities	$	1,734		$	30,240		$	72,299		$	686,637		$	790,910
Total weighted-average yield	2.77		%	2.52		%	3.15		%	2.86		%	2.88		%

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, 2018
Obligations of:
States and political subdivisions	$	3,807	$	493	$	—		$	4,300
Residential mortgage-backed securities	31,590		192		(804		)	30,978
Commercial mortgage-backed securities	4,254		—		(92		)	4,162
Total held-to-maturity securities	$	39,651	$	685	$	(896	)	$	39,440
December 31, 2017
Obligations of:
States and political subdivisions	$	3,810	$	607	$	—		$	4,417
Residential mortgage-backed securities	32,487		269		(529		)	32,227
Commercial mortgage-backed securities	4,631		—		(62		)	4,569
Total held-to-maturity securities	$	40,928	$	876	$	(591	)	$	41,213

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, 2018 and 2017.

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, 2018
Residential mortgage-backed securities	$	5,774	$	48	4	$	11,729	$	756	3	$	17,503	$	804
Commercial mortgage-backed securities	—		—		—	4,162		92		1	4,162		92
Total	$	5,774	$	48	4	$	15,891	$	848	4	$	21,665	$	896
December 31, 2017
Residential mortgage-backed securities	$	1,476	$	4	2	$	12,098	$	525	3	$	13,574	$	529
Commercial mortgage-backed securities	—		—		—	4,569		62		1	4,569		62
Total	$	1,476	$	4	2	$	16,667	$	587	4	$	18,143	$	591

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, 2018. 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.



(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	$	—		$	312		$	2,981		$	514		$	3,807
Residential mortgage-backed securities	—			439			6,336			24,815			31,590
Commercial mortgage-backed securities	—			—			—			4,254			4,254
Total held-to-maturity securities	$	—		$	751		$	9,317		$	29,583		$	39,651
Fair value
Obligations of:
States and political subdivisions	$	—		$	312		$	3,459		$	529		$	4,300
Residential mortgage-backed securities	—			430			6,315			24,233			30,978
Commercial mortgage-backed securities	—			—			—			4,162			4,162
Total held-to-maturity securities	$	—		$	742		$	9,774		$	28,924		$	39,440
Total weighted-average yield	—		%	3.16		%	2.79		%	3.53		%	3.35		%

Other Investment 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"), and equity securities. As of January 1, 2018, Peoples adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment securities to other investment securities.

The following table summarizes the carrying value of Peoples' other investment securities:



(Dollars in thousands)	March 31, 2018		December 31, 2017
March 31, 2018
FHLB stock	$	28,132	$	28,132
FRB stock	10,179		10,179
Equity securities (a)	7,471		—
Other	974		60
Total other investment securities	$	46,756	$	38,371

(a) As of January 1, 2018, Peoples adopted ASU 2016-01, resulting in the reclassification of equity securities from available-for-sale investment

securities to other investment securities.

Pledged Securities

Peoples had pledged available-for-sale investment securities with carrying values of $551.1 million and $522.7 million at March 31, 2018 and December 31, 2017, respectively, and held-to-maturity investment securities with carrying values of $17.9 million and $18.3 million at March 31, 2018 and December 31, 2017, 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 $5.0 million and $6.7 million at March 31, 2018 and December 31, 2017, respectively, and held-to-maturity securities with carrying values of $19.0 million and $19.9 million at March 31, 2018 and December 31, 2017, respectively, to secure additional borrowing capacity at the FHLB and the FRB.