Loan Servicing

Park serviced sold mortgage loans of $1.35 billion at June 30, 2013, compared to $1.31 billion at December 31, 2012 and $1.29 billion at June 30, 2012. At June 30, 2013, $12.3 million of the sold mortgage loans were sold with recourse compared to $20.3 million at June 30, 2012. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At June 30, 2013, management had established a $265,000 reserve to account for future loan repurchases.

When Park sells mortgage loans with servicing rights retained, servicing rights are initially recorded at fair value. Park selected the “amortization method” as permissible within U.S. GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income of the underlying loan. At the end of each reporting period, the carrying value of mortgage servicing rights (“MSRs”) is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value.

Activity for MSRs and the related valuation allowance follows:



	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2013			2012			2013			2012
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	8,121		$	8,975		7,763			9,301
Additions	688			697			1,799			1,259
Amortization	(727		)	(817		)	(1,542		)	(1,705		)
Changes in valuation allowance	178			(46		)	240			(46		)
Carrying amount, net, end of period	$	8,260		$	8,809		$	8,260		$	8,809

Valuation allowance:
Beginning of period	$	2,262		$	1,021		2,324			1,021
Changes in valuation allowance	(178		)	46			(240		)	46
End of period	$	2,084		$	1,067		$	2,084		$	1,067

Servicing fees included in other service income were $0.9 million and $1.8 million for the three and six months ended June 30, 2013 and 2012, respectively.