Loans are summarized as follows:



	December 31,
(Dollar amounts in thousands)	2016			2015
Commercial	$	1,106,182		$	1,043,980
Residential	423,911			444,447
Consumer	305,881			272,896
Total gross loans	1,835,974			1,761,323
Deferred costs, net	3,206			2,485
Allowance for loan losses	(18,773		)	(19,946		)
TOTAL	$	1,820,407		$	1,743,862

Loans in the above summary include loans totaling $5.1 million and $6.5 million at December 31, 2016 and 2015 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, 2016 and 2015, loans held for sale included $6.1 million and $5.9 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 2016, the aggregate dollar amount of these loans to directors and executive officers who held office amounted to $50.6 million at the beginning of the year. During 2016, advances of $37.9 million, repayments of $29.4 million were made with respect to related party loans for an aggregate dollar amount outstanding of $59.1 million at December 31, 2016.

Loans serviced for others, which are not reported as assets, total $496.2 million and $511.4 million at year-end 2016 and 2015. Custodial escrow balances maintained in connection with serviced loans were $2.7 million and $2.8 million at year-end 2016 and 2015.

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



	December 31,
(Dollar amounts in thousands)	2016			2015			2014
Servicing rights:
Beginning of year	$	1,746		$	1,863		$	2,065
Additions	480			531			414
Amortized to expense	(677		)	(648		)	(616		)
End of year	$	1,549		$	1,746		$	1,863

Third party valuations are conducted periodically for mortgage servicing rights. Based on these valuations, fair values were approximately $2.6 million and $3.1 million at year end 2016 and 2015. There was no valuation allowance in 2016 or 2015.

Fair value for 2016 was determined using a discount rate of 12%, prepayment speeds ranging from 108% to 316%, depending on the stratification of the specific right. Fair value at year end 2015 was determined using a discount rate of 10%, prepayment speeds ranging from 105% to 385%, depending on the stratification of the specific right. Mortgage servicing rights are amortized over 8 years, the expected life of the sold loans.