Loan Servicing

Park serviced sold mortgage loans of $1.37 billion at both March 31, 2018 and at December 31, 2017 and $1.33 billion at March 31, 2017. At March 31, 2018, $2.8 million of the sold mortgage loans were sold with recourse, compared to $3.0 million at December 31, 2017 and $3.6 million at March 31, 2017. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At March 31, 2018 and December 31, 2017, management had established reserves of $43,000 and $270,000, respectively, to account for expected losses on loan repurchases.

When Park sells mortgage loans with servicing rights retained, these 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 with respect to 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. The amortization of MSRs is included within other service income in the consolidated condensed statements of income.

Activity for MSRs and the related valuation allowance follows:



	Three Months Ended March 31,
(In thousands)	2018			2017
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	9,688		$	9,266
Additions	328			354
Amortization	(352		)	(358		)
Changes in valuation allowance	305			59
Carrying amount, net, end of period	$	9,969		$	9,321

Valuation allowance:
Beginning of period	$	630		$	735
Changes in valuation allowance	(305		)	(59		)
End of period	$	325		$	676

Servicing fees included in other service income were $0.9 million for both the three months ended March 31, 2018 and the three months ended March 31, 2017.