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The following table summarizes the activity on loans held for sale for the years ended December 31, <br />2011 and 2010: <br />(dollars in thousands) <br />Loans originated for sale <br />Loans transferred to held for sale <br />Loans sold during the year <br />Net gains on sale of loans recorded in <br />noninterest income <br />2011 <br />Commercial <br />$ _ <br />259,037 <br />87,745 <br />2010(') <br />Mortgage Mortgage <br />$1,092,515 $1,052,128 <br />42,136 <br />1,112,958 1,046,169 <br />1,908 17,069 20,142 <br />(I) We did not have any commercial loans held for sale in 2010. <br />For the years ended December 31, 2011 and 2010, the Bank did not record any adjustments to record <br />loans held for sale at the lower of cost or fair value. <br />Our mortgage loan servicing activities include collecting principal, interest, tax and insurance <br />payments from borrowers while accounting for and remitting payments to investors, taxing authorities and <br />insurance companies. We also monitor delinquencies and execute foreclosure proceedings. Due to similar <br />risks underlying the residential mortgages and nature of assumptions for estimating the fair value of <br />servicing assets, management has determined that there is a single recognized class of servicing asset. <br />Mortgage servicing income is recorded in noninterest income as a part of other service charges and <br />fees and is reported net of the amortization of the servicing assets. The unpaid principal amount of <br />mortgage loans serviced for others was $2.5 billion and $1.6 billion for the years ended December 31, 2011 <br />and 2010, respectively. Gross servicing fees include contractually specified fees, late charges and ancillary <br />fees, and were $5.1 million and $2.6 million for the years ended December 31, 2011 and 2010, <br />respectively. <br />The changes in MSRs using the amortization method including valuation allowance were: <br />(dollars in thousands) <br />Carrying amount, balance at beginning of year <br />Additions° : <br />Assumption of servicing obligations resulting from asset <br />transfers <br />Subtractions° : <br />Amortization <br />Application of valuation allowance to adjust carrying <br />values of servicing assets <br />Carrying amount, balance at end of year <br />2011 2010 <br />$14,384 $ 6,929 <br />10,594 10,015 <br />(4,634) (2,547) <br />(1,110) (13) <br />$19,234 $14,384 <br />Valuation allowance for servicing assets: 2011 2010 <br />Beginning balance $ 24 $ 11 <br />Provisions 1,110 13 <br />Balance at end of year $ 1,134 $ 24 <br />The Bank did not purchase or sell any servicing obligations during the years ended December 31, 2011 and 2010. <br />Additionally, there was no other -than -temporary impairment recorded and no other changes that affected the balance <br />during the years ended December 31, 2011 and 2010. <br />The MSR asset class is stratified based on loan term and interest rate for purposes of determining <br />impairment. Each stratum is evaluated to determine if the amortized cost basis of the MSR exceeds the fair <br />value. The fair value of each stratum is determined using a present value of expected cash flows model, <br />which is based upon assumptions for future net servicing income. The model incorporates significant <br />inputs classified as Level 3. Those inputs reflect assumptions that market participants use in estimating <br />m <br />-21- <br />2011 Bank of the West Annual Report <br />