Mail Stop 0408
May 8, 2006
Ms. Maria L. Bouvette
President and Chief Executive Officer
Porter Bancorp, Inc.
2500 Eastpoint Parkway
Louisville, Kentucky 40223
Re: Porter Bancorp, Inc.
Registration Statement on Form S-1
File No. 333-133198
Filed April 11, 2006
Dear Ms. Bouvette:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Table of Contents
1. Please delete the last sentence in the third paragraph. It is
inappropriate to suggest that you are not responsible for the
accuracy of the information that you have included in the
prospectus.
Prospectus Summary, page 1
2. Please revise your Introduction which states that "this summary
highlights only some of the information..." to state that the
summary
highlights "the key aspects of the offering," as required by Item
503(a).
3. Please revise the introduction and the entire summary to comply
with Item 503(a) and the instruction which requires that you
"provide
a brief overview of the key aspects of the offering" and that you
"identify those aspects of the offering that are the most
significant." We note that much of the Summary has been copied
verbatim from the Business Section.
4. We note your various claims in this section and elsewhere that
you
have experienced "significant" or "substantial" growth. Please
revise this section to differentiate between growth that has
occurred
through your numerous acquisitions and growth that has occurred
through an increase in your business including but not limited to
the
following:
* revise your statement that "Our customer service-oriented
operating
philosophy...has been the cornerstone of our significant growth"
to
indicate the extent to which your growth is attributable to
acquisitions rather than your philosophy or other business
practices;
* revise your statistics, on page 1, regarding "compound annual
growth rate" to disclose the amount of this growth attributable to
acquisitions and the amount attributable to other causes; and
* revise your statement, on page 1, that your management team has
"continue[d] our organic growth" and that you "also have grown
though
acquisitions" to more accurately describe the respective roles of
organic growth and growth through acquisitions.
5. We note that almost all of the summary addresses your operating
strengths and your ability and plans for growth. Please revise
the
summary to provide a balanced presentation of your strengths and
weaknesses. For example, disclose that more than 87 percent of
your
loan portfolio is secured by real estate and that over one quarter
of
them are construction loans which have a higher degree of risk.
In
addition, state the risk of the fact that over 38 percent of your
deposits are derived from your online banking division.
6. Please revise the section entitled "Operating Strengths, on
pages
2-3," as follows:
* explain the significance of "efficiency ratio," to which you
refer
on page 2 and the standard for evaluating the ratio;
* explain how your efficiency ratio will be effected by the
consolidation of three banks into PBI bank on December 31, 2005,
your
becoming a public company and your change in tax status from a
subchapter S to a subchapter C company; and
* revise your claim, on page 2, that you have a "successful
integration history" to reflect your risk factor, on page 16, that
you may be unsuccessful in integrating these banks you
consolidated
in 2005 and your risk factor, on page 12, that you may not be able
to
manage your growth effectively.
7. Please update, on page 6, the number of shares outstanding to
the
date of the registration statement.
Risk Factors
8. Please reorder your risk factors to place the most important
first. Please group related risks together. For example, the
risks
of dilution on page 17 should be next to the risk of dilution on
page
19. In addition, please ensure that each subheading reflects the
risk that you discuss in the text and succinctly states the risks
that result from the facts or uncertainties;
9. Please revise your discussion, on page 15, of the risk of an
interruption or breach in security to address the risks associated
with the fact that you operate an internet bank which generates
over
38 percent of your deposits but, as you state on page 3, you do
not
rely on third party venders or consultants for information
technology
support.
10. Please revise your discussion, on page 17, of the risks
associated with your Chairman and CEO controlling your company as
follows:
* discuss the fact that you plan to issue options to them that
would
increase their percentage of ownership and disclose by how much;
* disclose whether, given their percentage of ownership and with
the
shares owned by your Chairman`s brother, they will in fact be able
to
determine who serves as directors and officers and major actions
such as amending the articles of incorporation and approving
mergers; and
* explain how their interests "may differ" from other shareholders
and the consequences of these differences to other shareholders.
Our Dividend Policy, page 22
11. Indicate whether or not you currently intend to pay a
dividend.
Management`s Discussion and Analysis of Financial Condition and
Results of Operation, page 28
12. Please revise the Overview considering Release No. 33-8350.
Please include insight into material opportunities, challenges and
risks, such as those presented by known material trends and
uncertainties, on which the company`s executives are most focused
for
both the short and long term, as well as the actions they are
taking
to address these opportunities, challenges and risks. For
instance,
please revise your statement, in the penultimate paragraph on page
28, that "Interest rate fluctuations...affect our interest
income"
to describe how interest income has been affected by rising
interest
rates including the extent to which you have loans that are fixed
or
floating and long term or short term. Address the challenges of
integrating the six banks you consolidated in 2005 and what you
are
doing to minimize the problems.
13. Please revise the MD&A section to comply with Instruction 3 to
Item 303(a) which provides that "the discussion and analysis shall
focus specifically on material events and uncertainties known to
management that would cause reported financial information not to
be
necessarily indicative of future operating results or of future
financial condition." Please include analysis of the anticipated
impact of the following:
* change of tax rate from 0 percent to 35 percent,
* change of tax status and its effect on dividends;
* costs of being a public company;
* costs of issuing stock options;
* costs of changes in executive compensation; and
* consolidation of three subsidiary banks on December 31, 2005 and
two others earlier in 2005.
14. On pages 31-33, where you indicate that a change is
attributable
to more than one cause, please quantify the relative contribution
for
each cause.
Board Composition, page 66
15. Please name any additional directors, to which you refer.
Please
define the term "independent" as you use the term in your
statement
that "We intend that the majority of our directors will be
independent...." Explain how they can be independent if they are
elected by the two sole shareholders who also serve as the
Chairman,
President, CEO and General Counsel.
Certain Relationships and Related Transactions, page 73
16. We note that on December 31, 2005 you purchased a seventy five
percent interest in BBA, Inc from the two persons that are your
only
shareholders, your only directors and who serve as your Chairman,
President, CEO and General Counsel and a trust in the name of a
third
person who is the brother of one of your two shareholders.
Please
disclose how you determined the value of the stock of BBA and
Porter.
Please also disclose how you determined the consideration for the
other transactions in the reorganization.
Beneficial Stock Ownership, page 76
17. Please revise the table as follows:
* designate the "Non-Voting Stock" as "Convertible Non-voting
stock;"
and
* add a footnote to each citation to the "Convertible Non-voting
stock" stating that by its terms the "Convertible Non-voting
stock"
will be automatically converted into common stock at the closing
of
this offering.
* * * * * * * * * * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company and each filing person
acknowledging that:
* the company or filing person is responsible for the adequacy and
accuracy of the disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company or filing person may not assert staff comments as a
defense in any proceeding initiated by the Commission or any
person
under the federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Lisa A. Haynes at (202) 551-3424 or John P.
Nolan at 202-551-3492 if you have questions regarding comments on
the
financial statements and related matters. Please contact either
Jonathan E. Gottlieb at (202) 551-3416 or me at (202) 551-3491
with
any other questions.
Sincerely,
Todd K. Schiffman
Assistant Director
cc. Alan K. MacDonald, Esquire
Frost Brown Todd LLC
Suite 3200
400 West Market Street
Louisville, Kentucky 40202
Ms. Maria L. Bouvette
Porter Bancorp, Inc.
May 8, 2006
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