Loan Servicing

Park serviced sold mortgage loans of $1.35 billion at June 30, 2017, $1.33 billion at December 31, 2016 and $1.29 billion at June 30, 2016. At June 30, 2017, $3.4 million of the sold mortgage loans were sold with recourse, compared to $4.1 million at December 31, 2016 and $4.5 million at June 30, 2016. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At June 30, 2017 and December 31, 2016, management had established reserves of $301,000 and $266,000, respectively, to account for expected losses on 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)	2017			2016			2017			2016
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	9,321		$	8,949		$	9,266		$	9,008
Additions	521			555			875			871
Amortization	(407		)	(415		)	(765		)	(790		)
Changes in valuation allowance	41			(209		)	100			(209		)
Carrying amount, net, end of period	$	9,476		$	8,880		$	9,476		$	8,880

Valuation allowance:
Beginning of period	$	676		$	542		$	735		$	542
Changes in valuation allowance	(41		)	209			(100		)	209
End of period	$	635		$	751		$	635		$	751

Servicing fees included in other service income were $0.9 million for the three months ended June 30, 2017 and $0.8 million for the same period of 2016 and were $1.8 million for the six months ended June 30, 2017 and $1.7 million for the same period of 2016.