3.	Investment Securities

Investment securities at June 30, 2011 and December 31, 2010 consisted of the following (dollars in thousands):

			Gross		Gross
	Amortized		unrealized		unrealized		Estimated
	cost		gains		losses		fair value
6/30/2011
Available-for-sale
U.S. Agency mortgage-backed securities (MBS) *	$	104,521	$	3,502	$	293	$	107,730
Non-agency MBS		4,387		41		7		4,421
U.S. Agency asset-backed securities		11,099		617		229		11,487
Mutual fund		464		20		-		484
	$	120,471	$	4,180	$	529	$	124,122
Held-to-maturity
Obligations of state and political subdivisions	$	1,335	$	86	$	-	$	1,421

12/31/2010
Available-for-sale
U.S. Agency MBS *	$	95,622	$	2,300	$	621	$	97,301
Non-agency MBS		5,051		15		28		5,038
U.S. Agency asset-backed securities		11,707		643		151		12,199
Mutual fund		456		16		-		472
	$	112,836	$	2,974	$	800	$	115,010
Held-to-maturity
Obligations of state and political subdivisions	$	1,806	$	98	$	-	$	1,904

* U.S. Agency MBS include private label MBS of approximately $14.2 million and $14.9 million at June 30, 2011 and December 31, 2010, respectively, which are supported by FHA/VA collateral.

The following table presents the contractual maturities of investment securities at June 30, 2011 (dollars in thousands):

	Available-for-sale				Held-to-maturity
	Amortized		Estimated		Amortized		Estimated
	cost		fair value		cost		fair value
3 months to one year	$	-	$	-	$	310	$	316
One to three years		388		409		642		689
Three to five years		19		20		383		416
Five to ten years		11,651		11,958		-		-
Over ten years		107,949		111,251		-		-
Other		464		484		-		-
	$	120,471	$	124,122	$	1,335	$	1,421

The following table presents the fair value and gross unrealized losses of the Bank’s investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2011 and December 31, 2010 (dollars in thousands):

	Less than 12 months				12 months or more				Total
	Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses		Estimated fair value		Unrealized losses
6/30/2011
U.S. Agency MBS	$	10,835	$	265	$	5,153	$	28	$	15,988	$	293
Non-agency MBS		716		7		-		-		716		7
U.S. Agency asset-backed securities		-		-		3,351		229		3,351		229
	$	11,551	$	272	$	8,504	$	257	$	20,055	$	529

12/31/2010
U.S. Agency MBS	$	17,639	$	472	$	6,531	$	149	$	24,170	$	621
Non-agency MBS		3,646		27		996		1		4,642		28
U.S. Agency asset-backed securities		-		-		3,788		151		3,788		151
	$	21,285	$	499	$	11,315	$	301	$	32,600	$	800

The unrealized losses on investments in U.S. Agency and non-agency MBS and U.S Agency asset-backed securities are primarily due to elevated yield/rate spreads at June 30, 2011 and December 31, 2010 as compared to yield/spread relationships prevailing at the time specific investment securities were purchased. Management expects the fair value of these investment securities to recover as market volatility lessens, and/or as securities approach their maturity dates. Accordingly, management does not believe that the above gross unrealized losses on investment securities are other-than-temporary. Accordingly, no impairment adjustments have been recorded.

Management intends to hold the investment securities classified as held-to-maturity until they mature, at which time the Company will receive full amortized cost value for such investment securities. Furthermore, as of June 30, 2011, management did not have the intent to sell any of the securities classified as available-for-sale in the table above and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost.