Investment securities decreased $131.5 million, or 21.0%, year-over-year to $493.4 million at December 31, 2012, and were down $51.7 million sequentially from September 30, 2012. During the fourth quarter of 2012, the Company sold $24.9 million of investment securities resulting in a $1.5 million realized gain on sale of securities. The investment portfolio contains two pooled trust preferred securities with a book value of $5.1 million, and a market value of $357 thousand at December 31, 2012, for which the Company performs a quarterly analysis to determine whether any other than temporary impairment exists. The analysis includes stress tests on the underlying collateral and cash flow estimates based on the current and projected future levels of deferrals, defaults, and prepayments within each pool. There has been no recorded impairment loss for the year ended December 31, 2012, compared to an impairment loss of $732 thousand for the same time period in 2011.
Loans, net of allowance for loan losses, increased $22.6 million, or 1.1%. Non-farm, non-residential real estate loans increased $22.3 million, or 2.0%, one-to-four family residential increased $26.9 million or 7.2%, multifamily real estate loans increased $1.9 million, or 2.5%, C&I loans were up $8.6 million, or 3.4%, and ADC loans fell by $44.4 million, or 13.6%, from December 31, 2011, to December 31, 2012. Sequentially, loans, net of allowance for loan losses, increased $40.3 million, or 1.9%. The sequential increase in loans was primarily attributable to a $31.1 million increase in C&I loans, a $21.1 million increase in ADC loans and a $19.2 million increase in owner-occupied non-farm, non-residential loans partially offset by a $22.7 million decline in non-owner-occupied non-farm, non-residential loans and an $8.4 million decrease in multi-family residential loans. The sequential increase in C&I loans was driven by a combination of new term funding for several significant business expansion transactions, increased credit line usage partly attributable to year-end tax planning and borrowings in anticipation of changes in the tax code. The rise in ADC loans represented increased funding of new and ongoing construction projects, primarily consisting of single family and multi-family residential properties. The sequential increase in owner-occupied non-farm, non-residential loans represented the refinance of several new business and non-profit clients’ operating facilities. The sequential decreases in non-owner-occupied non-farm, non-residential loans and multi-family loans primarily represented early payoffs, scheduled principal amortization and maturities in excess of new loan generation. The orientation of loan generation efforts and loan mix continues to be reflective of the Bank’s strategic emphasis on building greater market share in commercial lending, owner-occupied commercial real estate and residential real estate lending, while focusing ADC lending and non-owner-occupied commercial real estate lending on select transactions in key markets with solid economic metrics.