5.	Mortgage Banking

Mortgage Loans Held for Sale (LHFS), at fair value

A summary of the unpaid principal balances of mortgage loans held-for-sale (“LHFS”) for which the fair value option has been elected, by type, is presented below:


(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Government	$	5,798	$	16,902
Conventional		3,040		10,805
Jumbo		1,757		20,514
Fair value adjustment		77		2,269

Total mortgage loans held-for-sale at fair value	$	10,672	$	50,490

We did not have any delinquent or nonaccrual LHFS as of June 30, 2013.

Gains on LHFS for the six months ended June 30, 2013 and 2012 are as follows:


	Three Months Ended						Six Months Ended
(Dollars in thousands)	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Gain on sale of mortgage loans	$	1,424		$	9,290		$	5,333		$	13,995
Net loan servicing		296			(13	)		494			(17	)
Unrealized gains (losses) from derivative financial statements		584			461			393			1,513
Realized gains (losses) derivative financial instruments		367			(255	)		519			(291	)
Mark-to-market (loss) gain on LHFS		(610	)		4,726			(2,192	)		6,418
Direct origination (expenses) fees, net		(964	)		(5,948	)		(1,943	)		(8,830	)
Provision for repurchases		(32	)		(411	)		(83	)		(438	)

Total gain on LHFS	$	1,065		$	7,850		$	2,521		$	12,350

Repurchase Reserves

We maintain reserves for possible repurchases that we may be required to make of certain of the mortgage loans which we sell due to deficiencies or defects that may be found to exist in such loans. The following table sets forth information, at June 30, 2013 and December 31, 2012, with respect to such reserves:


(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Beginning balance	$	906	$	115
Provision for repurchases		83		791
Settlements		—		—

Total repurchases reserve	$	989	$	906

We did not repurchase any loans in the six months ended June 30, 2013 or six months ended June 30, 2012. We review the repurchase reserves throughout the year for adequacy.

Mortgage Servicing Rights

We sometimes retain mortgage servicing rights on mortgage loans that we sell. Such rights represent the net positive cash flows generated from the servicing of such mortgage loans and we recognize such rights as assets on our statements of financial condition based on their estimated fair values. We receive servicing fees, less any subservicing costs, on the unpaid principal balances of such mortgage loans. Those fees are collected from the monthly payments made by the mortgagors or from the proceeds of the sale or foreclosure and liquidation of the underlying real property collateralizing the loans. We also generally receive various mortgagor-contracted fees, such as late charges, collateral reconveyance charges and nonsufficient fund fees. In addition, we generally are entitled to retain interest earned on funds held pending remittance (or float) related to the collection of principal, interest, taxes and insurance payments on the mortgage loans which we service. At June 30, 2013 and December 31, 2012, mortgage servicing rights totaled $3.8 million and $2.8 million, respectively, and are included in other assets in the accompanying consolidated statement of financial condition.

The following table sets forth the principal amounts of the mortgage loans we were servicing, categorized by type of loan, at June 30, 2013 and December 31, 2012, we were servicing approximately $488 million, and $456 million, respectively, in principal amount of mortgage loans with the following characteristics:


	Unpaid Principal Balance
(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Government	$	401,509	$	396,951
Conventional		86,401		58,867

Total loans serviced	$	487,910	$	455,818