The following table presents the recorded investment and unpaid principal for loans at December 31, 2018 and 2017:

	December 31, 2018								December 31, 2017
	Recorded			Unpaid					Recorded			Unpaid
(Dollars in thousands)	Investment			Principal		Difference			Investment			Principal		Difference
Commercial real estate	$	992,080		$	999,887	$	(7,807	)	$	745,893		$	753,803	$	(7,910	)
Construction, land development, land		179,591			183,664		(4,073	)		134,812			138,045		(3,233	)
1-4 family residential properties		190,185			191,852		(1,667	)		125,827			127,499		(1,672	)
Farmland		170,540			173,583		(3,043	)		180,141			184,006		(3,865	)
Commercial		1,114,971			1,118,028		(3,057	)		920,812			924,133		(3,321	)
Factored receivables		617,791			620,103		(2,312	)		374,410			376,046		(1,636	)
Consumer		29,822			29,956		(134	)		31,131			31,144		(13	)
Mortgage warehouse		313,664			313,664		—			297,830			297,830		—
Total		3,608,644		$	3,630,737	$	(22,093	)		2,810,856		$	2,832,506	$	(21,650	)
Allowance for loan and lease losses		(27,571	)							(18,748	)
	$	3,581,073							$	2,792,108

The difference between the recorded investment and unpaid principal balance is primarily (1) premiums and discounts associated with acquisition date fair value adjustments on acquired loans (both PCI and non-PCI) totaling $19,514,000 and $18,706,000 at December 31, 2018 and 2017, respectively, and (2) net deferred origination and factoring fees totaling $2,579,000 and $2,944,000 at December 31, 2018 and 2017, respectively.

As of December 31, 2018, most of the Company’s non-factoring business activity is with customers located within certain states. The states of Texas (24%), Colorado (27%), Illinois (15%), and Iowa (7%), make up 73% of the Company’s gross loans, excluding factored receivables. Therefore, the Company’s exposure to credit risk is affected by changes in the economies in these states. At December 31, 2017, the states of Texas (24%), Colorado (26%), Illinois (17%), and Iowa (7%) made up 74% of the Company’s gross loans, excluding factored receivables.

A majority (79%) of the Company’s factored receivables, representing approximately 14% of the total loan portfolio as of December 31, 2018, are receivables purchased from trucking fleets, owner-operators, and freight brokers in the transportation industry. At December 31, 2017, 77% of our factored receivables, representing approximately 10% of our total loan portfolio, were receivables purchased from trucking fleets, owner-operators, and freight brokers in the transportation industry.

At December 31, 2018 and 2017, the Company had $58,566,000 and $32,459,000, respectively, of customer reserves associated with factored receivables. These amounts represent customer reserves held to settle any payment disputes or collection shortfalls, may be used to pay customers’ obligations to various third parties as directed by the customer, are periodically released to or withdrawn by customers, and are reported as deposits in the consolidated balance sheets.

Loans with carrying amounts of $847,523,000 and $596,230,000 at December 31, 2018 and 2017, respectively, were pledged to secure Federal Home Loan Bank borrowing capacity.

During the year ended December 31, 2018, a related party loan with a carrying amount of $9,781,000 was transferred to loans held for sale as the Company made the decision to sell the loan. The loan was subsequently sold at its par value for no gain or loss. See Note 16 – Related Party Transactions for further information regarding the sale of the related party loan. During the year ended December 31, 2017, loans with a carrying amount of $3,914,000 were transferred to loans held for sale as the Company made the decision to sell the loans. These loans were subsequently sold resulting in proceeds of $3,834,000 and a loss on sale of loans of $80,000, which was recorded as other noninterest income in the consolidated statements of income. During the year ended December 31, 2016, loans with a carrying amount of $24,384,000 were transferred to loans held for sale as the Company made the decision to sell the loans. These loans were subsequently sold resulting in proceeds of $24,538,000 and a gain on sale of loans of $154,000, which was recorded as other noninterest income in the consolidated statements of income.

The activity in the allowance for loan and lease losses (“ALLL”) is as follows:

(Dollars in thousands)	Beginning										Reclassification			Ending
Year ended December 31, 2018	Balance		Provision			Charge-offs			Recoveries		To Held For Sale			Balance
Commercial real estate	$	3,435	$	1,044		$	(90	)	$	104	$	—		$	4,493
Construction, land development, land		883		293			(59	)		17		—			1,134
1-4 family residential properties		293		23			(17	)		18		—			317
Farmland		310		425			(200	)		—		—			535
Commercial		8,150		10,052			(5,855	)		518		—			12,865
Factored receivables		4,597		3,857			(1,224	)		69		—			7,299
Consumer		783		457			(989	)		364		—			615
Mortgage warehouse		297		16			—			—		—			313
	$	18,748	$	16,167		$	(8,434	)	$	1,090	$	—		$	27,571

(Dollars in thousands)	Beginning										Reclassification			Ending
Year ended December 31, 2017	Balance		Provision			Charge-offs			Recoveries		To Held For Sale			Balance
Commercial real estate	$	1,813	$	1,822		$	(259	)	$	59	$	—		$	3,435
Construction, land development, land		465		825			(582	)		175		—			883
1-4 family residential properties		253		24			(31	)		47		—			293
Farmland		170		140			—			—		—			310
Commercial		8,014		5,785			(4,875	)		1,329		(2,103	)		8,150
Factored receivables		4,088		2,058			(1,667	)		118		—			4,597
Consumer		420		859			(1,004	)		508		—			783
Mortgage warehouse		182		115			—			—		—			297
	$	15,405	$	11,628		$	(8,418	)	$	2,236	$	(2,103	)	$	18,748

(Dollars in thousands)	Beginning										Reclassification			Ending
Year ended December 31, 2016	Balance		Provision			Charge-offs			Recoveries		To Held For Sale			Balance
Commercial real estate	$	1,489	$	313		$	(5	)	$	16	$	—		$	1,813
Construction, land development, land		367		92			—			6		—			465
1-4 family residential properties		274		(22	)		(84	)		85		—			253
Farmland		134		36			—			—		—			170
Commercial		5,276		5,390			(3,643	)		991		—			8,014
Factored receivables		4,509		315			(856	)		120		—			4,088
Consumer		216		689			(564	)		79		—			420
Mortgage warehouse		302		(120	)		—			—		—			182
	$	12,567	$	6,693		$	(5,152	)	$	1,297	$	—		$	15,405

The following table presents loans individually and collectively evaluated for impairment, as well as purchased credit impaired (“PCI”) loans, and their respective ALLL allocations:

(Dollars in thousands)	Loan Evaluation								ALLL Allocations
December 31, 2018	Individually		Collectively		PCI		Total loans		Individually		Collectively		PCI		Total ALLL
Commercial real estate	$	7,097	$	974,280	$	10,703	$	992,080	$	487	$	4,006	$	—	$	4,493
Construction, land development, land		91		172,709		6,791		179,591		21		1,113		—		1,134
1-4 family residential properties		2,333		186,664		1,188		190,185		125		192		—		317
Farmland		7,424		162,735		381		170,540		72		463		—		535
Commercial		17,153		1,096,813		1,005		1,114,971		1,958		10,903		4		12,865
Factored receivables		6,759		611,032		—		617,791		1,968		5,331		—		7,299
Consumer		355		29,467		—		29,822		22		593		—		615
Mortgage warehouse		—		313,664		—		313,664		—		313		—		313
	$	41,212	$	3,547,364	$	20,068	$	3,608,644	$	4,653	$	22,914	$	4	$	27,571

(Dollars in thousands)	Loan Evaluation								ALLL Allocations
December 31, 2017	Individually		Collectively		PCI		Total loans		Individually		Collectively		PCI		Total ALLL
Commercial real estate	$	1,013	$	735,118	$	9,762	$	745,893	$	123	$	3,312	$	—	$	3,435
Construction, land development, land		136		130,732		3,944		134,812		—		883		—		883
1-4 family residential properties		2,638		122,093		1,096		125,827		152		141		—		293
Farmland		3,800		176,232		109		180,141		—		310		—		310
Commercial		26,616		893,509		687		920,812		1,409		6,741		—		8,150
Factored receivables		4,726		369,684		—		374,410		949		3,648		—		4,597
Consumer		384		30,747		—		31,131		80		703		—		783
Mortgage warehouse		—		297,830		—		297,830		—		297		—		297
	$	39,313	$	2,755,945	$	15,598	$	2,810,856	$	2,713	$	16,035	$	—	$	18,748

The following is a summary of information pertaining to impaired loans. PCI loans that have not deteriorated subsequent to acquisition are not considered impaired and therefore do not require an ALLL and are excluded from these tables.

	Impaired Loans and PCI Impaired Loans						Impaired Loans
	With a Valuation Allowance						Without a Valuation Allowance
(Dollars in thousands)	Recorded		Unpaid		Related		Recorded		Unpaid
December 31, 2018	Investment		Principal		Allowance		Investment		Principal
Commercial real estate	$	5,610	$	5,614	$	487	$	1,487	$	1,520
Construction, land development, land		91		91		21		—		—
1-4 family residential properties		225		216		125		2,108		2,255
Farmland		914		900		72		6,510		6,979
Commercial		5,235		5,254		1,958		11,918		12,089
Factored receivables		6,759		6,759		1,968		—		—
Consumer		63		57		22		292		296
Mortgage warehouse		—		—		—		—		—
PCI		71		55		4		—		—
	$	18,968	$	18,946	$	4,657	$	22,315	$	23,139

	Impaired Loans and PCI Impaired Loans						Impaired Loans
	With a Valuation Allowance						Without a Valuation Allowance
(Dollars in thousands)	Recorded		Unpaid		Related		Recorded		Unpaid
December 31, 2017	Investment		Principal		Allowance		Investment		Principal
Commercial real estate	$	165	$	165	$	123	$	848	$	881
Construction, land development, land		—		—		—		136		136
1-4 family residential properties		237		235		152		2,401		2,519
Farmland		—		—		—		3,800		4,071
Commercial		9,194		9,191		1,409		17,422		17,605
Factored receivables		4,726		4,726		949		—		—
Consumer		271		267		80		113		115
Mortgage warehouse		—		—		—		—		—
PCI		—		—		—		—		—
	$	14,593	$	14,584	$	2,713	$	24,720	$	25,327

The following table presents average impaired loans and interest recognized on impaired loans:

	Years Ended
	December 31, 2018				December 31, 2017				December 31, 2016
	Average		Interest		Average		Interest		Average		Interest
(Dollars in thousands)	Impaired Loans		Recognized		Impaired Loans		Recognized		Impaired Loans		Recognized
Commercial real estate	$	4,055	$	86	$	1,234	$	33	$	1,090	$	46
Construction, land development, land		113		—		249		—		181		4
1-4 family residential properties		2,486		77		1,867		45		857		18
Farmland		5,612		197		2,567		45		667		45
Commercial		21,885		870		29,825		599		20,474		980
Factored receivables		5,742		—		3,951		—		3,299		—
Consumer		369		14		229		9		37		5
Mortgage warehouse		—		—		—		—		—		—
PCI		35		—		262		—		525		—
	$	40,297	$	1,244	$	40,184	$	731	$	27,130	$	1,098

	Past Due		Past Due 90
(Dollars in thousands)	30-89 Days		Days or More
December 31, 2018	Still Accruing		Still Accruing		Nonaccrual		Total
Commercial real estate	$	2,625	$	397	$	7,096	$	10,118
Construction, land development, land		1,003		—		91		1,094
1-4 family residential properties		2,103		—		1,588		3,691
Farmland		308		—		4,059		4,367
Commercial		3,728		999		14,071		18,798
Factored receivables		41,135		2,152		—		43,287
Consumer		1,005		11		355		1,371
Mortgage warehouse		—		—		—		—
PCI		788		—		3,525		4,313
	$	52,695	$	3,559	$	30,785	$	87,039

	Past Due		Past Due 90
(Dollars in thousands)	30-89 Days		Days or More
December 31, 2017	Still Accruing		Still Accruing		Nonaccrual		Total
Commercial real estate	$	1,374	$	—	$	1,012	$	2,386
Construction, land development, land		—		—		136		136
1-4 family residential properties		1,378		62		2,625		4,065
Farmland		250		109		3,412		3,771
Commercial		6,630		39		22,247		28,916
Factored receivables		20,858		1,454		—		22,312
Consumer		947		—		384		1,331
Mortgage warehouse		165		—		—		165
PCI		72		—		2,333		2,405
	$	31,674	$	1,664	$	32,149	$	65,487

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including: current collateral and financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes every loan and is performed on a regular basis. Large groups of smaller balance homogeneous loans, such as consumer loans, are analyzed primarily based on payment status. The Company uses the following definitions for risk ratings:

Loans classified as pass are loans with low to average risk and not otherwise classified as substandard or doubtful.

Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

At acquisition, PCI loans had the characteristics of substandard loans and it was probable, at acquisition, that all contractually required principal payments would not be collected. The Company evaluates these loans on a projected cash flow basis with this evaluation performed quarterly.

As of December 31, 2018 and 2017 based on the most recent analysis performed, the risk category of loans is as follows:

(Dollars in thousands)
December 31, 2018	Pass		Substandard		Doubtful		PCI		Total
Commercial real estate	$	977,548	$	3,829	$	—	$	10,703	$	992,080
Construction, land development, land		172,709		91		—		6,791		179,591
1-4 family residential		187,251		1,746		—		1,188		190,185
Farmland		161,565		8,594		—		381		170,540
Commercial		1,093,759		20,207		—		1,005		1,114,971
Factored receivables		612,577		3,544		1,670		—		617,791
Consumer		29,461		361		—		—		29,822
Mortgage warehouse		313,664		—		—		—		313,664
	$	3,548,534	$	38,372	$	1,670	$	20,068	$	3,608,644

(Dollars in thousands)
December 31, 2017	Pass		Substandard		Doubtful		PCI		Total
Commercial real estate	$	732,175	$	3,956	$	—	$	9,762	$	745,893
Construction, land development, land		130,732		136		—		3,944		134,812
1-4 family residential		122,044		2,687		—		1,096		125,827
Farmland		171,017		9,015		—		109		180,141
Commercial		878,957		41,168		—		687		920,812
Factored receivables		370,839		2,325		1,246		—		374,410
Consumer		30,739		392		—		—		31,131
Mortgage warehouse		297,830		—		—		—		297,830
	$	2,734,333	$	59,679	$	1,246	$	15,598	$	2,810,856

The Company had a recorded investment in troubled debt restructurings of $6,847,000 and $19,137,000 as of December 31, 2018 and 2017, respectively. The Company had allocated specific allowances for these loans of $286,000 and $535,000 at December 31, 2018 and 2017, respectively, and had not committed to lend additional amounts.

The following table presents the pre- and post-modification recorded investment of loans modified as troubled debt restructurings during the years ended December 31, 2018, 2017, and 2016. The Company did not grant principal reductions or interest rate concessions on any restructured loans.

	Extended
	Amortization		Payment		Total		Number of
(Dollars in thousands)	Period		Deferrals		Modifications		Loans
December 31, 2018
Commercial real estate	$	—	$	589	$	589		2
1-4 family residential properties		103		—		103		2
Farmland		263		—		263		1
Commercial		875		—		875		10
	$	1,241	$	589	$	1,830		15
December 31, 2017
Commercial	$	8,831	$	—	$	8,831		8

December 31, 2016
Commercial real estate	$	809	$	—	$	809		3
Farmland		793		—		793		1
Commercial		16,612		—		16,612		27
	$	18,214	$	—	$	18,214		31

There were no loans modified as troubled debt restructurings during the years ended December 31, 2018 and 2017 for which there was a payment default during the years then ended. The Company had one borrower relationship with a recorded investment of $2,011,000 at December 31, 2016, comprised of 14 individual commercial loans that were modified as troubled debt restructurings during the year ended December 31, 2016 for which there were payment defaults during the year then ended. The payment defaults did not result in incremental allowance allocations or charge-offs. Default is determined at 90 or more days past due.

At December 31, 2018, the Company had $926,000 in 1-4 family residential real estate loans for which formal foreclosure proceedings were in process.

The Company has loans that were acquired for which there was, at acquisition, evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected. The outstanding contractually required principal and interest and the carrying amount of these loans included in the balance sheet amounts of loans receivable are as follows:

The changes in accretable yield in regard to loans transferred at acquisition for which it was probable that all contractually required payments would not be collected are as follows: