Loan Servicing

12 Months Ended

Dec. 31, 2023

Transfers and Servicing of Financial Assets [Abstract]

Transfers and Servicing of Financial Assets [Text Block]

Loan Servicing

Park serviced sold mortgage loans of $1,934 million at December 31, 2023, compared to $2,051 million at December 31, 2022 and $2,132 million at December 31, 2021. At December 31, 2023, $2.9 million of the sold mortgage loans were sold with recourse compared to $3.2 million at December 31, 2022 and $3.3 million at December 31, 2021. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. As of December 31, 2023 and 2022, management had established reserves of $54,000 and $59,000, respectively, to account for future loan repurchases. Custodial escrow balances maintained in connection with serviced sold mortgage loans were $19.2 million and $17.9 million at December 31, 2023 and 2022, respectively.

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)	2023		2022		2021
MSRs:
Carrying amount, net, beginning of year	$	15,792	$	15,264	$	12,210
Additions	535		1,455		4,945
Amortization	(1,759)		(2,313)		(3,512)
Change in valuation allowance	88		1,386		1,621
Carrying amount, net, end of year	$	14,656	$	15,792	$	15,264
Valuation allowance:
Beginning of year	$	182	$	1,568	$	3,189
Change in valuation allowance	(88)		(1,386)		(1,621)
End of year	$	94	$	182	$	1,568

The fair value of MSRs was $16.7 million and $17.4 million at December 31, 2023 and 2022, respectively. The fair value of MSRs at December 31, 2023 was established using a discount rate of 12% and constant prepayment speeds ranging from 6.12% to 27.50%. The fair value of MSRs at December 31, 2022 was established using a discount rate of 12% and constant prepayment speeds ranging from 6.96% to 19.14%.

Servicing fees included in "Other service income" were $5.2 million, $5.4 million and $5.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.