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, 2019
Obligations of:
States and political subdivisions	$	83,822	$	1,240	$	(235	)	$	84,827
Residential mortgage-backed securities	711,917		4,034		(8,975		)	706,976
Commercial mortgage-backed securities	6,706		—		(57		)	6,649
Bank-issued trust preferred securities	4,196		116		(194		)	4,118
Total available-for-sale securities	$	806,641	$	5,390	$	(9,461	)	$	802,570
December 31, 2018
Obligations of:
States and political subdivisions	$	88,358	$	787	$	(558	)	$	88,587
Residential mortgage-backed securities	705,289		2,720		(15,401		)	692,608
Commercial mortgage-backed securities	6,812		—		(105		)	6,707
Bank-issued trust preferred securities	4,196		75		(282		)	3,989
Total available-for-sale securities	$	804,655	$	3,582	$	(16,346	)	$	791,891

The unrealized losses related to residential mortgage-backed securities at March 31, 2019 and December 31, 2018, were attributed to changes in market interest rates and spreads since the securities were purchased.

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)	2019		2018
Gross gains realized	$	30	$	2
Gross losses realized	—		1
Net gain realized	$	30	$	1

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, 2019
Obligations of:
States and political subdivisions	$	—	$	—	—	$	11,886	$	235	8	$	11,886	$	235
Residential mortgage-backed securities	14,171		93		28	476,571		8,882		147	490,742		8,975
Commercial mortgage-backed securities	—		—		—	6,653		57		3	6,653		57
Bank-issued trust preferred securities	—		—		—	1,805		194		2	1,805		194
Total	$	14,171	$	93	28	$	496,915	$	9,368	160	$	511,086	$	9,461
December 31, 2018
Obligations of:
States and political subdivisions	$	10,173	$	18	17	$	19,918	$	540	20	$	30,091	$	558
Residential mortgage-backed securities	47,562		226		50	517,335		15,175		170	564,897		15,401
Commercial mortgage-backed securities	—		—		—	6,707		105		3	6,707		105
Bank-issued trust preferred securities	—		—		—	1,718		282		2	1,718		282
Total	$	57,735	$	244	67	$	545,678	$	16,102	195	$	603,413	$	16,346

Management systematically evaluates available-for-sale investment securities for other-than-temporary declines in fair value on a quarterly basis. At March 31, 2019, 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, 2019 and December 31, 2018 were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At March 31, 2019, 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 two positions, consisted of privately issued mortgage-backed securities with all of the underlying mortgages originated prior to 2004. Both of these positions had a fair value of less than 90% of their book value, with an aggregate book and fair value of $214,000 and $146,000, 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.

The unrealized losses with respect to the two bank-issued trust preferred securities that had been in an unrealized loss position for twelve months or more at March 31, 2019 were primarily attributable to the subordinated nature of the debt.

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, 2019. 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	$	889		$	15,450		$	23,997		$	43,486		$	83,822
Residential mortgage-backed securities	2			11,925			62,267			637,723			711,917
Commercial mortgage-backed securities	—			5,625			—			1,081			6,706
Bank-issued trust preferred securities	—			—			4,196			—			4,196
Total available-for-sale securities	$	891		$	33,000		$	90,460		$	682,290		$	806,641
Fair value
Obligations of:
States and political subdivisions	$	887		$	15,504		$	24,388		$	44,048		$	84,827
Residential mortgage-backed securities	2			11,865			61,313			633,796			706,976
Commercial mortgage-backed securities	—			5,588			—			1,061			6,649
Bank-issued trust preferred securities	—			—			4,118			—			4,118
Total available-for-sale securities	$	889		$	32,957		$	89,819		$	678,905		$	802,570
Total weighted-average yield	2.26		%	2.53		%	2.75		%	3.00		%	2.95		%

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, 2019
Obligations of:
States and political subdivisions	$	4,401	$	564	$	—		$	4,965
Residential mortgage-backed securities	28,348		340		(412		)	28,276
Commercial mortgage-backed securities	2,857		—		(32		)	2,825
Total held-to-maturity securities	$	35,606	$	904	$	(444	)	$	36,066
December 31, 2018
Obligations of:
States and political subdivisions	$	4,403	$	493	$	—		$	4,896
Residential mortgage-backed securities	29,044		191		(632		)	28,603
Commercial mortgage-backed securities	3,514		—		(50		)	3,464
Total held-to-maturity securities	$	36,961	$	684	$	(682	)	$	36,963

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, 2019 and 2018.

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, 2019
Residential mortgage-backed securities	$	—	$	—	—	$	11,925	$	412	4	$	11,925	$	412
Commercial mortgage-backed securities	—		—		—	2,825		32		1	2,825		32
Total	$	—	$	—	—	$	14,750	$	444	5	$	14,750	$	444
December 31, 2018
Residential mortgage-backed securities	$	—	$	—	—	$	13,102	$	632	5	$	13,102	$	632
Commercial mortgage-backed securities	—		—		—	3,464		50		1	3,464		50
Total	$	—	$	—	—	$	16,566	$	682	6	$	16,566	$	682

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, 2019. 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	$	—		$	306		$	2,983		$	1,112		$	4,401
Residential mortgage-backed securities	—			416			7,992			19,940			28,348
Commercial mortgage-backed securities	—			—			—			2,857			2,857
Total held-to-maturity securities	$	—		$	722		$	10,975		$	23,909		$	35,606
Fair value
Obligations of:
States and political subdivisions	$	—		$	308		$	3,538		$	1,119		$	4,965
Residential mortgage-backed securities	—			414			8,232			19,630			28,276
Commercial mortgage-backed securities	—			—			—			2,825			2,825
Total held-to-maturity securities	$	—		$	722		$	11,770		$	23,574		$	36,066
Total weighted-average yield	—		%	2.43		%	2.90		%	2.78		%	2.81		%

Other Investment Securities

Peoples' other investment securities on the Consolidated Balance Sheet consist largely of shares of FHLB of Cincinnati and FRB of Cleveland, and equity investment securities.

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



(Dollars in thousands)	March 31, 2019		December 31, 2018
FHLB stock	$	27,586	$	29,367
FRB stock	12,294		12,294
Nonqualified deferred compensation	1,210		987
Equity investment securities	299		277
UBB stock	60		60
Total other investment securities	$	41,449	$	42,985

During the first quarter of 2019, Peoples redeemed $1.8 million of FHLB stock to be in compliance with requirements of the FHLB of Cincinnati.

During the three months ended March 31, 2019, Peoples recorded the change in the fair value of equity investment securities held at March 31, 2019 in other non-interest income, resulting in unrealized gains of $22,000. During the three months ended March 31, 2018, Peoples recorded the change in the fair value of equity investment securities held at March 31, 2018 in other non-interest income, resulting in unrealized losses of $460,000. Net realized gains on sales of equity investment securities, included in other non-interest income during the first three months of 2019, consisted of a realized gain of $787,000 related to the sale of restricted Class B Visa stock, which had been held at a carrying cost and fair value of $0 due to the litigation liability associated with the stock.

At March 31, 2019, Peoples' investment in equity investment securities was comprised largely of common stocks issued by various unrelated bank holding companies. There were no equity investment securities of a single issuer that exceeded 10% of Peoples' stockholders' equity.

Pledged Securities

Peoples had pledged available-for-sale investment securities with carrying values of $500.8 million and $430.0 million at March 31, 2019 and December 31, 2018, respectively, and held-to-maturity investment securities with carrying values of $16.2 million and $16.9 million at March 31, 2019 and December 31, 2018, 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 $58.0 million and $60.1 million at March 31, 2019 and December 31, 2018, respectively, and held-to-maturity securities with carrying values of $16.1 million and $16.7 million at March 31, 2019 and December 31, 2018, respectively, to secure additional borrowing capacity at the FHLB and the FRB.