Mail Stop 4561
June 15, 2006
Ms. Maria L. Bouvette
President and Chief Executive Officer
Porter Bancorp, Inc.
2500 Eastpoint Parkway
Louisville, Kentucky 40223
Re: Porter Bancorp, Inc.
Amendment Number One to Registration Statement on Form S-1
File No. 333-133198
Filed May 24, 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.
Overview, page 1
1. We note that although you have not provided the number of
shares
being sold and the number and percentage of shares that will be
held
by your two major shareholders, you have added disclosure, on page
17, indicating that they will retain an interest in excess of
fifty
percent and that your directors will not be independent. Please
include a statement to that effect in the Overview and summarize
that
disclosure in a separate section in the summary.
History and Growth, page 1
2. We note the data you added. Please disclose actual results,
not
compound annual growth since your growth has not been constant
each
year. In addition, please provide data for interest income and
interest expense. Substantiate your claim that you have
"experienced
substantial net income ...growth" by providing data regarding net
income.
The Offering, page 6
3. Please tell us how you plan to account for the conversion of
your
shares of convertible non-voting common stock to shares of voting
common stock.
Risk Factors
4. We note your addition of a risk factor, on pages 13-14,
addressing
competition. Please revise this disclosure as follows:
* address the risk you will lose business to larger financial
institutions which because of they have far greater resources than
you and greater efficiencies than you will raise interest rates on
deposits above the rates you offer and lower interest rates on
loans
below the rates you offer;
* address the risk that you will loss business to larger financial
institutions because larger financial institutions are able to
offer
a broader range of services than you do; and
* discuss the increasing competition in the banking industry and
in
online banking in particular.
5. We note your response to comment 10 of our letter to you dated
May
8, 2006. Please revise your discussion, on page 17, of the risks
associated with your Chairman and CEO controlling your company as
follows:
* as we requested, 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 they may control 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
such
as those investing in this offering.
6. We note your addition of a risk factor, on page 17, addressing
your exemption from Nasdaq corporate governance rules. Please
provide more detail and revise this disclosure as follows:
* explain in the caption and in more detail in the text that the
consequence of your not complying is that the controlling
shareholders will have greater control to make decisions in their
own
self interest and against the interests of other shareholders and
that investors and other shareholders will have fewer procedural
and
substantive protections against this control;
* clarify, on the fourth line, that you currently do not and after
the offering will not comply with the requirements;
* list, using bullet points, those Nasdaq requirements with which
you
will not comply; and
* please make this disclosure consistent with that on pages 78-79.
7. We note your addition of a risk factor, on pages 17 and 18,
regarding dilution. Please revise this disclosure as follows:
* clarify whether "some" or all existing shareholders paid less
than
your offering price; and
* provide dilution data, in the last sentence, assuming all
outstanding options were exercised.
Board Composition, page 78
8. We note your response to comment 15 of our letter to you dated
May
8,2006. Please revise this section as follows:
* revise the caption to include the concept of control of the
Board
and the Company by Mr. Porter and Ms. Bouvette and Mr. Porter`s
brother;
* disclose in the first paragraph that each of your directors was
selected by Mr. Porter and Ms. Bouvette;
* disclose that after the offering because of the percentage of
stock
that they own, Mr. Porter and Ms. Bouvette will be able to
determine
who serves as a director;
* disclose whether there are any corporate actions that would
require
the approval of any shareholders other than Mr. Porter and Ms.
Bouvette and Mr. Porter`s brother; and
* disclose those actions that you can take by written consent
without
prior notice to shareholders.
Certain Relationships and Related Transactions, page 86
9. We note your response to comment 16 of our letter to you dated
May
8, 2006. Most of the disclosure that you added relates to your
acquisition of Ascencia. As we requested, please provide similar
disclosure relating to your acquisition of a seventy five percent
interest in BBA, Inc from related parties and your acquisition of
a
thirty three percent interest from a related party. In addition,
please revise the section as follows:
* disclose the amount and percentage of stock owned by the related
parties;
* revise your statement, on page 87, that federal and stare bank
regulatory authorities "approved" the financial and other terms of
each of the three transactions to explain the limited nature of
the
"approval" and to clarify that none of the authorities expressed
an
opinion as to the fairness of the consideration paid to
shareholders;
* disclose, on page 88, the name of the financial advisor and
disclose whether it had any relationship with any of the related
parties.
10. Once you have determined the estimated initial public offering
price of your common stock, please revise to describe each of the
significant factors contributing to the difference between your
estimated IPO price per share and the fair value per share of your
convertible non-voting common stock at the time you acquired the
minority interests of Ascencia, BBA, and Mammoth (which you
disclose
as $25.50 per share on page 87).
Consolidated Financial Statements
Consolidated Balance Sheets, page F-15
11. Please revise your description of non-voting common stock
throughout the filing to provide an indication of its convertible
nature.
Consolidated Statements of Income, page F-16
12. As a result of your reorganization and additional taxes to be
incurred as a result of your termination of subchapter S
corporation
status for federal income tax purposes, please revise to disclose
pro-forma tax expense and earnings per share on the face of the
income statement for the periods ended December 31, 2005 and your
most recent interim period.
Note 1 - Summary of Significant Accounting Policies, page F-20
13. Please revise the second paragraph of this footnote to more
fully
describe the differences between economic and control rights
associated with your voting and non-voting common stock. Please
also
revise to more fully describe the circumstances under which non-
voting common stock is convertible into voting common stock.
Refer
to Rule 9-03.21 and 5-02.30 of Regulation S-X.
14. Please tell us why you have issued two classes of common stock
in
the past and how you have historically accounted for the
differences
in value between voting and non-voting shares attributable to the
different rights associated with the two types of stock.
Note 15 - Loan Commitments and Other Related Activities, page F-35
15. We note your response to comment 21 from our letter dated May
8,
2006. Please revise to disclose the current carrying amount of
the
liability, if any, for your guarantor obligations under standby
letters of credit. Please also disclose the nature of any
recourse
provisions and any assets held as collateral associated with your
standby letters of credit. Refer to paragraphs 13(c) and (d) of
FIN
45. If you believe these disclosures are not applicable to you,
please specifically describe the reasons why.
Note 17 - Business Combination, page F-36
16. We note your revised disclosures on page 87 in response to
comment 16 from our letter dated May 8, 2006. Please revise your
financial statement footnotes to more fully describe the names and
ownership percentages of the related parties from whom the
minority
interests were acquired.
17. As a related matter, please also revise to disclose the
methods
used to account for each acquisition and the reasons why. For
example, it is not clear from your financial statements that both
the
historical cost and purchase methods were used to account for
various
portions of your BBA minority interest acquisition.
18. We note your response to comment 23 from our letter dated May
8,
2006. Please provide us with specific examples (other than the
negotiation of the Mammoth Bancorp, Inc. and BBA, Inc.
transactions)
to support your assertion that the past relationship between J.
Chester Porter and William G. Porter suggests that the brothers do
not manage their ownership relationships together or vote in
concert
with one another.
19. Please explain the relationship between the voting and non-
voting
interests of your shareholders and your assertion that J. Chester
Porter and William G. Porter do not manage their ownership
relationships together or vote in concert with one another.
20. We note your disclosure on page F-37 that the aggregate
purchase
price of BBA was $20.2 million. However, if a $6.5 million note
payable and 868,224 shares of your non-voting common stock were
issued at a fair value of $25.50 per share, it appears the
aggregate
purchase price of BBA would be $28.6 million. Please tell us how
you
determined the aggregate purchase price of BBA to be $20.2 million
or
revise your filing as necessary.
21. We note your disclosure on page F-38 that the $25.50 per share
value of your non-voting common stock was based upon management`s
assessment of the company`s financial results, its prospects, and
publicly available data about the banking industry. Furthermore,
it
appears that none of the aggregate purchase prices for each of
your
minority interest acquisitions were based upon independent third
party valuations. With a view toward improved disclosure in your
next amendment, please specifically describe, in detail, how
management determined the fair values of minority interests
acquired.
Your response should also describe how you and your auditors were
able to conclude that the methods used to determine fair value
were
consistent with the provisions of paragraph 23 of SFAS 141.
Note 18 - Earnings Per Share, page F-38
22. We note your response to comment 20 from our letter dated May
8,
2006. Please revise your filing on page F-38 to disclose the
number
of stock options that were not considered in computing diluted
earnings per share for 2003 because they were antidilutive.
* * * * * * * * * * * * *
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 Donald
A.
Walker at 202-551-3490 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.
June 15, 2006
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