Mortgage Servicing Rights (“MSRs”)

The Bank sells a predominant share of the mortgage loans it originates into the secondary market while retaining servicing of such loans. MSRs included in other assets in the condensed consolidated financial statements as of June 30, 2013 and December 31, 2012 are accounted for at the lower of origination value less accumulated amortization or current fair value. The net carrying value of MSRs at June 30, 2013 and December 31, 2012 was $1.8 million and $1.3 million, respectively, which includes valuation allowances of $0.2 million.

The following table presents activity in MSRs for the periods shown (dollars in thousands):



	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Balance at beginning of period	$	1,546	$	300	$	1,308	$	—
Additions	141		431		307		731
Amortization	99		43		171		43
Change in valuation allowance	—		—		—		—
Balances at end of period	$	1,786	$	774	$	1,786	$	774

Mortgage banking income, net, consisted of the following for the periods shown (dollars in thousands):



	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Origination and processing fees	$	123		$	184		$	296		$	282
Gain on sales of mortgage loans, net	918			1,025			1,882			1,559
MSR valuation allowance	—			—			—			—
Servicing fees	118			30			213			46
Amortization	(99		)	(43		)	(171		)	(43		)
Mortgage banking income, net	$	1,060		$	1,196		$	2,220		$	1,844