7. MORTGAGE SERVICING ACTIVITIES AND MORTGAGE BANKING INCOME

At December 31, 2013, 2012 and 2011, the Bank was servicing loans for others having principal balances outstanding of approximately $247,263, $361,820, and $486,514, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, paying taxes and insurance, and processing foreclosure. In connection with loans serviced for others, the Bank held borrowers' escrow balances of approximately $4,378 and $6,758 at December 31, 2013 and 2012, respectively.

There are no restrictions on the Company's consolidated assets or liabilities related to loans sold with servicing rights retained. Upon sale of these loans, the Company recorded an MSR, and has elected to account for the MSR under the "amortization method" prescribed under GAAP. The aggregate MSR balance was$628 at December 31, 2013, $1,115 at December 31, 2012 and $1,604 at December 31, 2011, respectively.

Net mortgage banking income presented in the consolidated statements of operations was comprised of the following items:

	Year Ended December 31,
	2013		2012		2011
Gain on the sale of loans originated for sale	$	13	$	68	$	5
Credit to reduce the liability for the First Loss Position		305		1,286		-
Mortgage banking fees		155		414		564
Net mortgage banking income	$	473	$	1,768	$	569