Loan Servicing

Park serviced sold mortgage loans of $1.27 billion at September 30, 2014, compared to $1.33 billion at December 31, 2013 and $1.34 billion at September 30, 2013. At September 30, 2014, $7.6 million of the sold mortgage loans were sold with recourse compared to $10.7 million at December 31, 2013 and $11.5 million at September 30, 2013. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At September 30, 2014 and December 31, 2013, management had established reserves of $178,000 and $1.0 million, respectively, 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 September 30,						Nine Months Ended September 30,
(In thousands)	2014			2013			2014			2013
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	8,662		$	8,260		9,013			7,763
Additions	275			392			713			2,191
Amortization	(421		)	(533		)	(1,249		)	(2,075		)
Changes in valuation allowance	116			1,013			155			1,253
Carrying amount, net, end of period	$	8,632		$	9,132		$	8,632		$	9,132

Valuation allowance:
Beginning of period	$	992		$	2,084		1,031			2,324
Changes in valuation allowance	(116		)	(1,013		)	(155		)	(1,253		)
End of period	$	876		$	1,071		$	876		$	1,071

Servicing fees included in other service income were $0.8 million and $2.6 million for the three and nine months ended September 30, 2014, respectively, compared to $0.9 million and $2.7 million for the three and nine months ended September 30, 2013, respectively.