Loan Servicing

9 Months Ended

Sep. 30, 2021

Transfers and Servicing of Financial Assets [Abstract]

Loan Servicing

Loan Servicing

Park serviced sold mortgage loans of $2.12 billion at September 30, 2021, $1.97 billion at December 31, 2020 and $1.79 billion at September 30, 2020. At September 30, 2021, $3.5 million of the sold mortgage loans were sold with recourse, compared to $1.7 million at December 31, 2020 and $2.0 million at September 30, 2020. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At September 30, 2021 and December 31, 2020, management had established reserves of $39,000 and $30,000, 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 has 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 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 September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Mortgage servicing rights:
Carrying amount, net, beginning of period	$	14,316	$	9,505	$	12,210	$	10,070
Additions	1,114		2,987		4,061		5,796
Amortization	(835)		(1,254)		(2,753)		(2,853)
Change in valuation allowance	(39)		(198)		1,038		(1,973)
Carrying amount, net, end of period	$	14,556	$	11,040	$	14,556	$	11,040
Valuation allowance:
Beginning of period	$	2,112	$	2,600	$	3,189	$	825
Change in valuation allowance	39		198		(1,038)		1,973
End of period	$	2,151	$	2,798	$	2,151	$	2,798

Servicing fees included in other service income were $1.4 million and $1.0 million for the three months ended September 30, 2021 and 2020, respectively, and were $4.0 million and $2.9 million for the nine months ended September 30, 2021 and 2020, respectively