(6) Mortgage Servicing Rights

We own rights to service mortgage loans for investors with aggregate unpaid principal balances of $1.44 billion at December 31, 2012 and $1.45 billion at December 31, 2011, which are not reflected in the accompanying consolidated statements of financial condition. As described in Note 1, we outsource our residential mortgage loan servicing to a third party under a sub-servicing agreement.

The estimated fair value of our MSR was $6.9 million at December 31, 2012 and $8.1 million at December 31, 2011. The fair value of MSR is highly sensitive to changes in assumptions. See Note 17 for a description of the assumptions used to estimate the fair value of MSR.

MSR activity is summarized as follows:

	For the Year Ended December 31,
(In Thousands)	2012			2011			2010
Carrying amount before valuation allowance at beginning of year	$	15,401		$	16,321		$	16,670
Additions – servicing obligations that result from transfers of financial assets	3,651			2,330			3,101
Amortization	(3,909		)	(3,250		)	(3,450		)
Carrying amount before valuation allowance at end of year	15,143			15,401			16,321
Valuation allowance at beginning of year	(7,265		)	(7,117		)	(7,820		)
(Provision for) recovery of valuation allowance	(931		)	(148		)	703
Valuation allowance at end of year	(8,196		)	(7,265		)	(7,117		)
Net carrying amount at end of year	$	6,947		$	8,136		$	9,204

Mortgage banking income, net, is summarized as follows:

	For the Year Ended December 31,
(In Thousands)	2012		2011		2010
Loan servicing fees	$ 4,070		$ 4,095		$ 4,040
Net gain on sales of loans	7,590		3,716		4,929
Amortization of MSR	(3,909	)	(3,250	)	(3,450	)
(Provision for) recovery of valuation allowance on MSR	(931	)	(148	)	703
Total mortgage banking income, net	$ 6,820		$ 4,413		$ 6,222

At December 31, 2012, estimated future MSR amortization through 2017 was as follows: $3.4 million for 2013, $2.7 million for 2014, $2.1 million for 2015, $1.6 million for 2016 and $1.3 million for 2017. Actual results will vary depending upon the level of repayments on the loans currently serviced.