Loan Servicing

Park serviced sold mortgage loans of $1.26 billion at March 31, 2015, compared to $1.27 billion at December 31, 2014 and $1.30 billion at March 31, 2014. At March 31, 2015, $6.3 million of the sold mortgage loans were sold with recourse compared to $7.0 million at December 31, 2014 and $9.3 million at March 31, 2014. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At March 31, 2015 and December 31, 2014, management had established reserves of $171,000 and $379,000, 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 March 31,
(In thousands)	2015			2014
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	8,613		$	9,013
Additions	313			158
Amortization	(392		)	(393		)
Changes in valuation allowance	(222		)	—
Carrying amount, net, end of period	$	8,312		$	8,778

Valuation allowance:
Beginning of period	$	826		$	1,031
Changes in valuation allowance	222			—
End of period	$	1,048		$	1,031

Servicing fees included in other service income were $0.8 million and $0.9 million for the three months ended March 31, 2015 and 2014, respectively.