CHFC 2018 Annual Report

The following table summarizes the changes in Level 3 assets measured at fair value on a recurring basis. Year Ended December 31, 2018 2017 2016 (Dollars in thousands) Loan servicing rights Balance, beginning of period $ 63,841 $ 48,085 $ — Additions due to acquisition — — 42,462 Transfer in based on new accounting policy election (1) — 15,891 — Gains (losses): Recorded in earnings (realized): Recorded in "Net gain on sale of loans and other mortgage banking revenue" (1,054) (8,880) 4,593 New originations 8,226 8,745 1,030 Balance, end of period $ 71,013 $ 63,841 $ 48,085 (1) Refer to Note 1, Summary of Significant Accounting Policies, for further details. The Corporation has elected the fair value option for loans held-for-sale. These loans are intended for sale and the Corporation believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loans in accordance with the Corporation's policy on loans held for investment in "Interest and fees on loans" in the Consolidated Statements of Income. There were no loans held-for-sale on nonaccrual status or 90 days past due and on accrual status as of December 31, 2018 and 2017. The aggregate fair value, contractual balance (including accrued interest), and gain or loss for loans held-for-sale carried at fair value option was as follows: December 31, (Dollars in thousands) 2018 2017 Aggregate fair value $ 85,030 $ 52,133 Contractual balance 82,080 50,597 Unrealized gain 2,950 1,536 The total amount of gains from loans held-for-sale included in the Consolidated Statements of Income was as follows: Year Ended December 31, (Dollars in thousands) 2018 2017 2016 Interest income (1) $ 2,788 $ 2,540 $ 1,606 Change in fair value (2) 1,414 715 39 Net gain on sales of loans (2) 12,173 31,734 15,686 Total included in earnings $ 16,375 $ 34,989 $ 17,331 (1) Included in "Interest and fees on loans" in the Consolidated Statements of Income. (2) Included in "Net gain on sale of loans and other mortgage banking revenue" in the Consolidated Statements of Income. Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis Investment securities: Investment securities classified as held to maturity are recorded at fair value if the value is below amortized cost and the Corporation has determined that such unrealized loss is an other-than-temporary impairment. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are generally measured using independent pricing models or other model-based valuation techniques that include market inputs, such as benchmark yields, reported trades, broker dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data and industry and economic events. Chemical Financial Corporation Notes to Consolidated Financial Statements December 31, 2018 109