Loans are summarized as follows:



	December 31,
(Dollar amounts in thousands)	2014			2013
Commercial	$	1,044,522		$	1,042,138
Residential	469,172			482,377
Consumer	266,656			268,033
Total gross loans	1,780,350			1,792,548
Less (plus): deferred (fees) costs	1,078			(1,120		)
Allowance for loan losses	(18,839		)	(20,068		)
TOTAL	$	1,762,589		$	1,771,360

Loans in the above summary include loans totaling $7.3 million and $18.5 million at December 31, 2014 and 2013 that are subject to the FDIC loss share arrangement (“covered loans”) discussed in footnote 6.

The Corporation periodically sells residential mortgage loans it originates based on the overall loan demand of the Corporation and the outstanding balances in the residential mortgage portfolio. At December 31, 2014 and 2013, loans held for sale included $3.0 million and $3.3 million, respectively, and are included in the totals above.

In the normal course of business, the Corporation’s subsidiary banks make loans to directors and executive officers and to their associates. In 2014, the aggregate dollar amount of these loans to directors and executive officers who held office amounted to $55.6 million at the beginning of the year. During 2014, advances of $13.7 million, repayments of $28.5 million and decreases of $0.2 million resulting from changes in personnel were made with respect to related party loans for an aggregate dollar amount outstanding of $40.6 million at December 31, 2014.

Loans serviced for others, which are not reported as assets, total $521.7 million and $539.0 million at year-end 2014 and 2013. Custodial escrow balances maintained in connection with serviced loans were $2.59 million and $2.61 million at year-end 2014 and 2013.

Activity for capitalized mortgage servicing rights (included in other assets) was as follows:



	December 31,
(Dollar amounts in thousands)	2014			2013			2012
Servicing rights:
Beginning of year	$	2,065		$	2,225		$	2,429
Additions	414			588			868
Amortized to expense	(616		)	(748		)	(1,072		)
End of year	$	1,863		$	2,065		$	2,225

Third party valuations are conducted periodically for mortgage servicing rights. Based on these valuations, fair values were approximately $2.9 million and $3.0 million at year end 2014 and 2013. There was no valuation allowance in 2014 or 2013.

Fair value for 2014 was determined using a discount rate of 10%, prepayment speeds ranging from 112% to 403%, depending on the stratification of the specific right. Fair value at year end 2013 was determined using a discount rate of 10%, prepayment speeds ranging from 110% to 550%, depending on the stratification of the specific right. Mortgage servicing rights are amortized over 8 years, the expected life of the sold loans.