Loan Servicing

12 Months Ended

Dec. 31, 2021

Transfers and Servicing of Financial Assets [Abstract]

Loan Servicing

Loan Servicing

Park serviced sold mortgage loans of $2,132 million at December 31, 2021, compared to $1,972 million at December 31, 2020 and $1,447 million at December 31, 2019. At December 31, 2021, $3.3 million of the sold mortgage loans were sold with recourse compared to $1.7 million at December 31, 2020 and $2.3 million at December 31, 2019. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. As of December 31, 2021 and 2020, management had established a reserve of $57,000 and $30,000, 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 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 Statements of Income.

Activity for MSRs and the related valuation allowance follows:

December 31 (In thousands)	2021		2020		2019
MSRs:
Carrying amount, net, beginning of year	$	12,210	$	10,070	$	10,178
Additions	4,945		8,627		2,355
Amortization	(3,512)		(4,123)		(1,870)
Change in valuation allowance	1,621		(2,364)		(593)
Carrying amount, net, end of year	$	15,264	$	12,210	$	10,070
Valuation allowance:
Beginning of year	$	3,189	$	825	$	232
Change in valuation allowance	(1,621)		2,364		593
End of year	$	1,568	$	3,189	$	825

The fair value of MSRs was $15.3 million and $12.2 million at December 31, 2021 and 2020, respectively. The fair value of MSRs at December 31, 2021 was established using a discount rate of 12% and constant prepayment speeds ranging from 11.10% to 27.90%. The fair value of MSRs at December 31, 2020 was established using a discount rate of 12% and constant prepayment speeds ranging from 13.20% to 27.54%.

Servicing fees included in other service income were $5.3 million, $4.1 million and $3.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.