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, 2019
Obligations of:
U.S. government sponsored agencies	$	11,714	$	431	$	—		$	12,145
States and political subdivisions	112,647		3,029		(63		)	115,613
Residential mortgage-backed securities	826,797		11,230		(2,855		)	835,172
Commercial mortgage-backed securities	20,432		137		(108		)	20,461
Bank-issued trust preferred securities	4,696		122		(174		)	4,644
Total available-for-sale securities	$	976,286	$	14,949	$	(3,200	)	$	988,035
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 September 30, 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 September 30 were as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands)	2019		2018		2019		2018
Gross gains realized	$	97	$	—	$	157	$	5
Gross losses realized	—		—		87		151
Net losses realized	$	97	$	—	$	70	$	(146	)

The cost of investment securities sold, and any resulting gain or loss, were 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, 2019
Obligations of:
States and political subdivisions	$	—	$	—	—	$	2,632	$	63	1	$	2,632	$	63
Residential mortgage-backed securities	176,740		1,267		41	110,378		1,588		42	287,118		2,855
Commercial mortgage-backed securities	—		—		—	2,481		108		3	2,481		108
Bank-issued trust preferred securities	—		—		—	1,826		174		2	1,826		174
Total	$	176,740	$	1,267	41	$	117,317	$	1,933	48	$	294,057	$	3,200
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 September 30, 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 September 30, 2019 and December 31, 2018 were largely attributable to changes in market interest rates and spreads since the securities were purchased.

At September 30, 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 $208,000 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 remaining number of loans underlying 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 September 30, 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 September 30, 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:
U.S. government sponsored agencies	$	—		$	1,992		$	9,722		$	—		$	11,714
States and political subdivisions	3,769			28,595			42,723			37,560			112,647
Residential mortgage-backed securities	1			1,703			66,677			758,416			826,797
Commercial mortgage-backed securities	—			15,858			989			3,585			20,432
Bank-issued trust preferred securities	—			—			4,696			—			4,696
Total available-for-sale securities	$	3,770		$	48,148		$	124,807		$	799,561		$	976,286
Fair value
Obligations of:
U.S. government sponsored agencies	$	—		$	2,053		$	10,092		$	—		$	12,145
States and political subdivisions	3,774			28,917			44,334			38,588			115,613
Residential mortgage-backed securities	1			1,731			66,823			766,617			835,172
Commercial mortgage-backed securities	—			15,952			1,027			3,482			20,461
Bank-issued trust preferred securities	—			—			4,644			—			4,644
Total available-for-sale securities	$	3,775		$	48,653		$	126,920		$	808,687		$	988,035
Total weighted-average yield	2.26		%	2.52		%	2.74		%	2.83		%	2.80		%

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, 2019
Obligations of:
States and political subdivisions	$	4,395	$	502	$	—		$	4,897
Residential mortgage-backed securities	22,412		237		(41		)	22,608
Commercial mortgage-backed securities	7,022		366		—			7,388
Total held-to-maturity securities	$	33,829	$	1,105	$	(41	)	$	34,893
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 any of the three and nine months ended September 30, 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
September 30, 2019
Residential mortgage-backed securities	$	7,885	$	14	1	$	899	$	27	1	$	8,784	$	41
Total	$	7,885	$	14	1	$	899	$	27	1	$	8,784	$	41
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 September 30, 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	$	303		$	—		$	2,985		$	1,107		$	4,395
Residential mortgage-backed securities	—			—			3,842			18,570			22,412
Commercial mortgage-backed securities	—			404			3,868			2,750			7,022
Total held-to-maturity securities	$	303		$	404		$	10,695		$	22,427		$	33,829
Fair value
Obligations of:
States and political subdivisions	$	305		$	—		$	3,481		$	1,111		$	4,897
Residential mortgage-backed securities	—			—			3,916			18,692			22,608
Commercial mortgage-backed securities	—			410			4,208			2,770			7,388
Total held-to-maturity securities	$	305		$	410		$	11,605		$	22,573		$	34,893
Total weighted-average yield	2.61		%	2.29		%	1.49		%	2.82		%	2.39		%

Other Investment Securities

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

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



(Dollars in thousands)	September 30, 2019		December 31, 2018
FHLB stock	$	27,716	$	29,367
FRB stock	13,310		12,294
Nonqualified deferred compensation	1,336		987
Equity investment securities	318		277
Other investment securities	365		60
Total other investment securities	$	43,045	$	42,985

Peoples redeemed FHLB stock in order to be in compliance with the requirements of the FHLB of Cincinnati, which totaled $1.5 million during the third quarter of 2019, $1.1 million during the second quarter of 2019, and $1.8 million during the first quarter of 2019. During the second quarter of 2019, Peoples acquired $2.8 million FHLB stock from the First Prestonsburg acquisition.

During the three and nine months ended September 30, 2019, Peoples recorded the change in the fair value of equity investment securities held at September 30, 2019 in other non-interest income, resulting in unrealized gains of $19,000 and $42,000, respectively. During the three and nine months ended September 30, 2018, Peoples recorded the change in the fair value of equity investment securities held at September 30, 2018 in other non-interest income, resulting in an unrealized loss of $16,000 and an unrealized gain of $621,000, respectively. Net realized gains on sales of equity investment securities, included in other non-interest income during the first nine 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 zero due to the litigation liability associated with the stock.

At September 30, 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 and held-to-maturity investment securities 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 and held-to-maturity securities to secure additional borrowing capacity at the FHLB and the FRB.

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



	Carrying Amount
(Dollars in thousands)	September 30, 2019		December 31, 2018

Securing public and trust department deposits, and repurchase agreements:
Available-for-sale	$	565,093	$	429,987
Held-to-maturity	14,302		16,928

Securing additional borrowing capacity at the FHLB and the FRB:
Available-for-sale	49,911		60,058
Held-to-maturity	14,835		16,731