Loans are summarized as follows:



	December 31,
(Dollar amounts in thousands)	2017			2016
Commercial	$	1,139,490		$	1,106,182
Residential	436,143			423,911
Consumer	327,976			305,881
Total gross loans	1,903,609			1,835,974
Deferred costs, net	3,152			3,206
Allowance for loan losses	(19,909		)	(18,773		)
TOTAL	$	1,886,852		$	1,820,407

Loans in the above summary include loans totaling $4.3 million and $5.1 million at December 31, 2017 and 2016 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, 2017 and 2016, loans held for sale included $4.1 million and $6.1 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 2017, the aggregate dollar amount of these loans to directors and executive officers who held office amounted to $59.1 million at the beginning of the year. During 2017, advances of $26.9 million, repayments of $43.3 million were made with respect to related party loans for an aggregate dollar amount outstanding of $42.7 million at December 31, 2017.

Loans serviced for others, which are not reported as assets, total $484.4 million and $496.2 million at year-end 2017 and 2016. Custodial escrow balances maintained in connection with serviced loans were $2.8 million and $2.7 million at year-end 2017 and 2016.

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



	December 31,
(Dollar amounts in thousands)	2017			2016			2015
Servicing rights:
Beginning of year	$	1,549		$	1,746		$	1,863
Additions	477			480			531
Amortized to expense	(592		)	(677		)	(648		)
End of year	$	1,434		$	1,549		$	1,746

Third party valuations are conducted periodically for mortgage servicing rights. Based on these valuations, fair values were approximately $2.3 million and $2.6 million at year end 2017 and 2016. There was no valuation allowance in 2017 or 2016.

Fair value for 2017 was determined using a discount rate of 13%, prepayment speeds ranging from 112% to 250%, depending on the stratification of the specific right. Fair value at year end 2016 was determined using a discount rate of 12%, prepayment speeds ranging from 108% to 316%, depending on the stratification of the specific right. Mortgage servicing rights are amortized over 8 years, the expected life of the sold loans.