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LOANS

12 Months Ended

Dec. 31, 2023

5. LOANS:

Loans are summarized as follows:


	December 31,
(Dollar amounts in thousands)	2023		2022
Commercial	$	1,817,526	$	1,798,260
Residential		695,788		673,464
Consumer		646,758		588,539
Total gross loans		3,160,072		3,060,263
Deferred costs, net		7,749		7,175
Allowance for credit losses		(39,767)		(39,779)
TOTAL	$	3,128,054	$	3,027,659

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, 2023 and 2022, loans held for sale were $2.5 million and $1.7 million, respectively, and are included in the totals above.

In the normal course of business, the Corporation’s subsidiary bank makes loans to directors and executive officers and to their associates. In 2023, the aggregate dollar amount of these loans to directors and executive officers who held office amounted to $46.1 million at the beginning of the year. During 2023, advances of $46.7 million, and repayments of $48.1 million were made with respect to related party loans for an aggregate dollar amount outstanding of $44.7 million at December 31, 2023.

Loans serviced for others, which are not reported as assets, total $462.6 million and $518.1 million at year-end 2023 and 2022. Custodial escrow balances maintained in connection with serviced loans were $2.1 million and $2.7 million at year-end 2023 and 2022.

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


	December 31,
(Dollar amounts in thousands)	2023		2022		2021
Servicing rights:
Beginning of year	$	1,767	$	1,959	$	1,601
Additions		—		489		1,094
Amortized to expense		(556)		(681)		(736)
End of year	$	1,211	$	1,767	$	1,959

Third party valuations are conducted periodically for mortgage servicing rights. Based on these valuations, fair values were approximately $2.9 million and $3.3 million at year end 2023 and 2022. There was no valuation allowance in 2023 or 2022.

Fair value for 2023 was determined using a discount rate of 12.5%, prepayment speeds ranging from 100% to 197%, depending on the stratification of the specific right. Fair value at year end 2022 was determined using a discount rate of 12.5%, prepayment speeds ranging from 113% to 238%, depending on the stratification of the specific right. Mortgage servicing rights are amortized over 8 years, the expected life of the sold loans.