0000902664-11-001650.txt : 20111129 0000902664-11-001650.hdr.sgml : 20111129 20111129062139 ACCESSION NUMBER: 0000902664-11-001650 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20111129 DATE AS OF CHANGE: 20111129 GROUP MEMBERS: CLINTON GROUP INC. GROUP MEMBERS: GEORGE HALL GROUP MEMBERS: SBAV GP LLC GROUP MEMBERS: SBAV LP FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CLINTON GROUP INC CENTRAL INDEX KEY: 0001134119 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 32 OLD SLIP 5TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128250400 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Porter Bancorp, Inc. CENTRAL INDEX KEY: 0001358356 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 611142247 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-82055 FILM NUMBER: 111229595 BUSINESS ADDRESS: STREET 1: 2500 EASTPOINT PARKWAY CITY: LOUISVILLE STATE: KY ZIP: 40223 BUSINESS PHONE: 502-499-4800 MAIL ADDRESS: STREET 1: 2500 EASTPOINT PARKWAY CITY: LOUISVILLE STATE: KY ZIP: 40223 SC 13D/A 1 p11-1883sc13da.htm PORTER BANCORP, INC. p11-1883sc13da.htm


SECURITIES AND EXCHANGE COMMISSION
 
   
Washington, D.C. 20549
 
_______________
 
   
SCHEDULE 13D/A
(Rule 13d-101)
 
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 4)*
 
Porter Bancorp, Inc.
(Name of Issuer)
 
Common Stock, no par value
(Title of Class of Securities)
 
736233107
(CUSIP Number)
 
 
with a copy to:
Marc Weingarten and David E. Rosewater
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
(212) 756-2000
 
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
 
November 23, 2011
(Date of Event which Requires
Filing of this Schedule)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ]

NOTE:  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.
 
(Continued on following pages)
 
(Page 1 of 9 Pages)
 
--------------------------
* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
 
 

 
CUSIP No.  736233107
 
SCHEDULE 13D
Page 2 of 9 Pages



1
NAME OF REPORTING PERSON
SBAV LP
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) ¨
(b) x
3
SEC USE ONLY
4
SOURCE OF FUNDS*
WC
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
- 0 -
8
SHARED VOTING POWER
1,130,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
9
SOLE DISPOSITIVE POWER
- 0 -
10
SHARED DISPOSITIVE POWER
1,130,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
1,130,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
9.4%
14
TYPE OF REPORTING PERSON*
PN


 
 

 
CUSIP No.  736233107
 
SCHEDULE 13D
Page 3 of 9 Pages



1
NAME OF REPORTING PERSON
SBAV GP LLC
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) ¨
(b) x
3
SEC USE ONLY
4
SOURCE OF FUNDS*
AF
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
- 0 -
8
SHARED VOTING POWER
1,130,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
9
SOLE DISPOSITIVE POWER
- 0 -
10
SHARED DISPOSITIVE POWER
1,130,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
1,130,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
9.4%
14
TYPE OF REPORTING PERSON*
OO



 
 

 
CUSIP No.  736233107
 
SCHEDULE 13D
Page 4 of 9 Pages



1
NAME OF REPORTING PERSON
(ENTITIES ONLY)
Clinton Magnolia Master Fund, Ltd.
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) ¨
(b) x
3
SEC USE ONLY
4
SOURCE OF FUNDS*
WC
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
- 0 -
8
SHARED VOTING POWER
5,000 shares of Common Stock
9
SOLE DISPOSITIVE POWER
- 0 -
10
SHARED DISPOSITIVE POWER
5,000 shares of Common Stock
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
5,000 shares of Common Stock
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
0.0%
14
TYPE OF REPORTING PERSON*
CO


 
 

 
CUSIP No.  736233107
 
SCHEDULE 13D
Page 5 of 9 Pages



1
NAME OF REPORTING PERSON
George Hall
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) ¨
(b) x
3
SEC USE ONLY
4
SOURCE OF FUNDS*
AF
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
United States
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
- 0 -
8
SHARED VOTING POWER
1,135,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
9
SOLE DISPOSITIVE POWER
- 0 -
10
SHARED DISPOSITIVE POWER
1,135,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
1,135,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
9.4%
14
TYPE OF REPORTING PERSON*
IN



 
 

 
CUSIP No.  736233107
 
SCHEDULE 13D
Page 6 of 9 Pages



1
NAME OF REPORTING PERSON
Clinton Group, Inc.
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) ¨
(b) x
3
SEC USE ONLY
4
SOURCE OF FUNDS*
AF
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
¨
6
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH
7
SOLE VOTING POWER
- 0 -
8
SHARED VOTING POWER
1,135,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
9
SOLE DISPOSITIVE POWER
- 0 -
10
SHARED DISPOSITIVE POWER
1,135,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
1,135,791 shares of Common Stock (including warrants to purchase 228,261 shares of Common Stock)
12
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
¨
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5)
9.4%
14
TYPE OF REPORTING PERSON*
IA; CO





 
 

 
CUSIP No.  736233107
 
SCHEDULE 13D
Page 7 of 9 Pages



This Amendment No. 4 to Schedule 13D ("Amendment No. 4") amends and supplements the statement on Schedule 13D filed with the Securities and Exchange Commission (the “SEC”) on July 11, 2011 (the "Original Schedule 13D"), Amendment No. 1 to the Original Schedule 13D filed with the SEC on August 5, 2011 (“Amendment No. 1”), Amendment No. 2 to the Original Schedule 13D filed with the SEC on October 24, 2011 (“Amendment No. 2”), Amendment No. 3 to the Original Schedule 13D filed with the SEC on October 26, 2011 ("Amendment No. 3" and together with the Original Schedule 13D, Amendment No. 1, Amendment No. 2 and this Amendment No. 4, the “Schedule 13D”) with respect to the common stock, no par value (the "Shares") of Porter Bancorp, Inc., a Kentucky corporation (the "Issuer" or "Bank").  Capitalized terms used herein and not otherwise defined in this Amendment No. 4 have the meanings set forth in the Schedule 13D.  This Amendment No. 4 amends Items 3, 4, 5 and 7 as set forth below.


Item 3.
SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

Item 3 is hereby amended and restated in its entirety as follows:
 
Funds for the purchase of the Shares reported herein were derived from available working capital of CMAG and SBAV.  A total of approximately $6,303,297 was paid to acquire such Shares.
 

Item 4.
PURPOSE OF TRANSACTION.

Item 4 is hereby amended by the addition of the following:
 
Pursuant to its letter, dated November 28, 2011, to Mr. Stephen A. Williams, Clinton Group, Inc., on behalf of the Reporting Persons, expressed its concern with respect to the investigation conducted by the Bank's Risk Policy and Oversight Committee (the "Committee") of the accuracy of representations made by the Bank to its investors. The Reporting Persons noted that, based on the trading price of the Company’s stock, it is evident that public market participants do not credit the Company’s stated book value. Noting that the Bank had a higher concentration of non-performing loans but a lower ratio of reserves to non-performing loans than its peers, the Reporting Persons questioned whether the Bank was appropriately reserved. In addition, in the letter, the Reporting Persons indicated that the Bank had under-performed its peers in a number of critical respects over many years and questioned why the Committee was not able to identify any underlying cause. The Reporting Persons urged the Committee to correct the marks on the Bank's most recent balance sheet, replace the Bank's management team and raise capital. The letter also indicated that neither Ms. Bouvette nor Mr. Porter had responded to the Reporting Persons' multiple attempts to discuss the Reporting Persons' prior offer to purchase stock from the Bank at a price equal to the Bank's accurate book value.
 
The summary of the letter, dated November 28, 2011, from the Reporting Persons to Mr. Williams is qualified in its entirety by reference to the full text of the letter, which is filed as Exhibit 11 to Amendment No. 4 and is incorporated by reference herein.
 
Item 5.
INTEREST IN SECURITIES OF THE COMPANY.

Paragraphs (a) – (c) of Item 5 are hereby amended and restated as follows:
 
(a) The aggregate percentage of Shares beneficially owned by the Reporting Persons is based upon 12,058,522 Shares outstanding, which includes 11,830,261 Shares outstanding as of October 31, 2011, as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the SEC on November 10, 2011, and as adjusted to take account for the warrants held by the Reporting Persons. The Reporting Persons may be deemed the beneficial owners of an aggregate of 1,135,791 Shares, constituting approximately 9.4% of the Shares outstanding.


 
 

 
CUSIP No.  736233107
 
SCHEDULE 13D
Page 8 of 9 Pages


(b) By virtue of an investment management agreement with CMAG and SBAV, CGI has the power to vote or direct the voting, and to dispose or direct the disposition, of all of the 1,135,791 Shares beneficially owned by CMAG and SBAV. By virtue of it being the general partner of SBAV, SBAV GP may be deemed to have shared voting power and shared dispositive power with respect to all of the 1,130,791 Shares beneficially owned by SBAV. By virtue of his direct and indirect control of each of CGI, CMAG, SBAV and SBAV GP, Mr. Hall may be deemed to have shared voting power and shared dispositive power with respect to all Shares as to which each of CGI, CMAG, SBAV and SBAV GP has voting power or dispositive power.
 
(c) Other than the transfer of 386,656 Shares from CMAG to SBAV, which occurred on November 23, 2011, all transactions in the Shares effected by the Reporting Persons since the filing of Amendment No. 3 are set forth below. Unless otherwise indicated, all such transactions were effected in the open market.
 
CLINTON MAGNOLIA MASTER FUND, LTD.

Trade Date
Shares Purchased (Sold)
Price Per Share ($)
11/08/2011
8,100
$2.8663
11/08/2011
(1,295)
$3.0137
11/09/2011
(133)
$3.1186
11/09/2011
4,119
$3.0485
11/11/2011
(135)
$3.00
11/23/2011
(500)
$2.03
11/23/2011
(500)
$2.046


Item 7.
MATERIAL TO BE FILED AS EXHIBITS.

Item 7 is hereby amended and supplemented by the addition of the following:

Exhibit
Description
11
Letter, dated November 28, 2011.
12
Joint Filing Agreement, dated November 29, 2011.


 
 

 
CUSIP No.  736233107
 
SCHEDULE 13D
Page 9 of 9 Pages



SIGNATURES
 
After reasonable inquiry and to the best of his or its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
 
Dated:  November 29, 2011

 
Clinton Group, Inc.
 
       
       
 
By:
/s/ Francis Ruchalski
 
 
Name:
Francis Ruchalski
 
 
Title:
Chief Financial Officer
 
       
       
 
Clinton Magnolia Master Fund, Ltd.
 
       
 
By:
Clinton Group, Inc., its investment manager
 
       
       
 
By:
/s/ Francis Ruchalski
 
 
Name:
Francis Ruchalski
 
 
Title:
Chief Financial Officer
 
       
       
 
SBAV LP
 
       
 
By:
SBAV GP LLC, its general partner
 
       
       
 
By:
/s/ George Hall
 
 
Name:
George Hall
 
 
Title:
Managing Member
 
       
       
 
SBAV GP LLC
 
       
 
By:
/s/ George Hall
 
 
Name:
George Hall
 
 
Title:
Managing Member
 
       
       
 
/s/ George Hall
 
 
George Hall
 


EX-99 2 p11-1883exhibit11.htm EXHIBIT 11 p11-1883exhibit11.htm
EXHIBIT 11

Letter, dated November 28, 2011

CLINTON GROUP, INC.
9 West 57th Street, 26th Floor
New York, New York 10019

 
November 28, 2011
 

 
By Facsimile and Fedex
 
Mr. Stephen A. Williams
Lead Director, Board of Directors
Porter Bancorp, Inc.
2500 Eastpoint Parkway
Louisville, Kentucky 40223

RE:  The Role of the Non-Controlling Shareholder Directors
 
Dear Mr. Williams:
 
Clinton Group, Inc. and its affiliates (“Clinton”), on behalf of which I write, own equity and warrants in Porter Bancorp, Inc. (“Porter” or the “Company”).

I have written in the past to express concern over the accuracy of representations made by the Company to investors such as Clinton, both at the time of our investment and since. We have thoroughly reviewed the Company’s most recent quarterly filing and appreciate the efforts of the Risk Policy and Oversight Committee (“Committee”) in investigating our concerns.

We believe the Committee’s conclusions are incorrect and that the Company continues to obfuscate problem assets on its balance sheet, threaten the safety and soundness of the bank, and operate in a manner contrary to the interests of its public shareholders.

Public market participants clearly agree with us. With the stock trading below $2.50 per share, the valuation afforded by sophisticated investors is just 0.3x tangible book value. This puts the Company in the bottom six percent of all publicly traded banks with assets between $1.25 billion and $5 billion.1 It appears that the market simply does not believe that book value is accurate.

We have offered to purchase stock from the Company at a price equal to the Company’s accurate book value. The Street is aware of this and undoubtedly believes if the Company’s current stated book value ($8.38 per share) were accurate, the Company would have already taken us up on the offer. After all, no less than three regulators (the FDIC, State of Kentucky Department of Financial Institutions and the Federal Reserve Bank) have suggested, in their respective orders affecting the bank or the Company, that one or both entities need more capital. Instead, despite our many efforts to reach both Ms. Bouvette and Mr. Porter to discuss our offer, no one has even called us back. The Company’s refusal to seriously entertain our proposal signals more to the Street about the accuracy of the Company’s financial statements than all the reports the Committee might write.

Moreover, if the books were accurate, we would expect the members of the Committee, management and the rest of the Board themselves to be aggressively buying stock in the market, while there is an open trading window. As best we can tell from public disclosures, however, you and they are not.

In fact, no one seems to be a buyer of the stock. As you know, an institutional investor recently dumped a relatively large block of stock at just $2 per share. What must that seller have thought about the Company’s book value? More generally, buyers seem unwilling – even at 0.3x book value – to put their financial fate in the hands of this management team. The stock is thus down 78% over the last year (compared with median performance of -2% among the peer banks), putting Porter in the bottom two percent among its peers. The Company and bank have simply lost all credibility with investors.

Despite the work the committee has done, we now firmly believe the Company’s balance sheet is overstated. The bank clearly made a lot of bad loans. Today, the bank is beset by a very high level of NPAs and NPLs relative to assets (top 3% and 2% among its national peers, respectively). Among the 18 Kentucky banks with more than $600 million in assets, the bank has the highest such ratio. Yet, even with these high levels of NPAs and NPLs, there is reason to believe the “performing” loan book is still not cleansed or categorized correctly: just this quarter, $10 million of “performing” loans went straight into OREO.2

Given the poor asset quality and repeated surprises on categorization and valuation, we would have thought the bank would be carrying fairly high levels of reserves. Yet, the Company has one of the lowest ratios of reserves to NPLs, falling in the bottom 12% of banks in the national peer group. Among the 18 Kentucky banks, PBI’s ratio is barely half the median. The same is true among the national peers. We doubt that the bank – with more than four times the rate of bad loans as the median bank – will experience losses on those loans and the rest of its “performing” book at a rate only half the median. We believe there will be more “surprises” in the loan book and OREO.

The bank should therefore have reserves relative to its NPLs at least in line with the median of the peer banks. If Porter were to do that, the bank would have to take an additional reserve of approximately $35 million. Even if the bank were just to return to its ratio of reserves to NPLs from one year ago,3 it would have to take an additional provision of $19 million. But of course, such a hit to capital would throw the bank (again) below its required 9.0% capital ratio and would surely require raising equity to preserve the safety and soundness of the bank.

Such a capital raise would be highly dilutive at today’s stock price to the current shareholders, chief among them, Ms. Bouvette and Mr. Porter. As you know, those two shareholders / managers own just enough stock to control the affairs of the Company and are responsible for public disclosures made by the Company.  Could it be that the market is concerned that in their interest to maintain that control (for its own sake and in order to continue to control the public disclosures reflecting on their management), Ms. Bouvette and Mr. Porter may be causing the Company to misstate the quality of its assets and book value?

Recent accounting maneuvers provide support for this hypothesis. The Company’s claim that it has taken two consecutive extraordinary write-downs on OREO because of a change in asset disposition strategy is nonsensical. First, the marks should have always been at “fair market value” – the price that a willing buyer and a willing seller today would agree upon. A change in strategy that involves “accelerating” the disposition of those assets should only ensure that the carrying value will be achieved, not that the book value needs to be lowered. Second, the most recent rationale (putatively justifying another $15 million write down on the very same assets) appears to be the same as the prior rationale. If acceleration of one’s disposition plans cannot change the fair market value of assets, then really, really accelerating does not justify a write-down either.

Instead, we believe those assets were incorrectly marked from the time they were placed into the OREO account. We note that Kentucky real estate prices are up year-over-year and quarter-over-quarter.4 GDP in Kentucky was up significantly in 2010 over 2009, performing in the top quintile of States, and Louisville was much stronger than Kentucky overall.5 And, personal income in Kentucky has been up each of the last five quarters, according to federal government data.6

Yet, the bank has taken dramatic write-downs on assets in the face of this positive economic news and real estate valuation trends. We believe these write-downs are nothing short of an admission that the books were mismarked previously, including at the time we invested, thinly veiled in a nonsensical rationale.

We also could not help but notice that the effect of the two write-downs was to put the bank just barely below its required capital ratio. The Company had enough cash to solve that deficiency, though with little cushion. These write-downs thus appear to have been engineered to a level that the Company could handle without raising additional capital (and jeopardizing the control of its two current controlling shareholders), but not necessarily to a level that fully acknowledges and corrects the significant valuation misstatement of that real estate on the Company’s books over the many prior quarters. We thus have no confidence that the assets are now properly marked.

Based on our view that the bank’s balance sheet had incorrect marks that were incorrectly marked-down and which, nevertheless, remain incorrect, you will surely appreciate that we do not take much solace from the report of the Committee. Whatever its intention, we are not comforted by a Committee process that cannot identify anything wrong at a Company whose stock is down more than 89% in the last five years, whose net loss in the last twelve months exceeds all but 3% of its peers, whose NPAs relative to assets are higher than 97% of its national peers, that has been forced to defer dividends and interest payments on its preferred stock and subordinated debentures to “minimize the need to raise capital”, and whose operations, management, controls and underwriting is under strict scrutiny from its three government regulators. The Committee’s most independent and courageous statement – that “opportunities for procedural improvements existed”7 – is at best a begrudging, tepid, Nixonian admission (ala “mistakes were made”) that, contrary to the goals of the Committee process, causes us to worry further about the objectivity of our directors.

We know you serve at the pleasure of the controlling shareholders, but we nevertheless have high expectations for you and your fellow directors. As our fiduciaries, it is incumbent upon you to ensure that the controlling shareholders are not misusing their control of the Company. You and your fellow directors will be responsible to us and our fellow public market shareholders if the Company’s financial statements are proven inaccurate, if your failure to discharge your fiduciary duties has resulted, or does result, in the Company’s deterioration, or if the Company raises capital or is sold at a price lower than that at which we offered to invest.



 
1  All peer data in this letter is sourced from SNL.
 
2  Catherine Mealor and Frank Barlow, Keefe Bruyette & Woods, research report dated October 31, 2011.
 
3  Among the 18 Kentucky banks, there has been no change to the median ratio of reserves to NPLs over the past 12 months.
 
4  See, e.g., REIS Reports, Kentucky Market (Louisville and Lexington), available at http://www.reis.com/metroPages/index.cfm?event=metroPages.metroInfo&msa=LO.
 
5  Bureau of Economic Analysis, GDP by State and MSA available at http://www.bea.gov/newsreleases/regional/gdp_state/gspSE_glance.htm and http://www.bea.gov/newsreleases/regional/gdp_metro/2011b/xls/gdp_metro0211b.xls.
 
6 Bureau of Economic Analysis, Personal Income by MSA, available at  http://www.bea.gov/newsreleases/regional/spi//2011/xls/spi0911.xls.
 
7  Porter Bancorp Form 10-Q, September 30, 2011, at 31.

 
 

 


We believe the independent directors need to act immediately to preserve the safety and soundness of the bank and to save our Company. This is not the time for further studying, slow steps or a lack of temerity. We urge you to act now to correct the marks, replace the management team and raise capital.

We would be pleased to discuss our views with the directors of the Company at a Board meeting, in executive session or individually. I can always be reached at (212) 825-0093.

 
CLINTON GROUP, INC.
 
       
       
 
By:
/s/ George E. Hall
 
   
George E. Hall
 
   
Chief Executive Officer
 
       
       

cc:            Members of the Board of Directors, Porter Bancorp, Inc.

EX-99 3 p11-1883exhibit12.htm EXHIBIT 12 p11-1883exhibit12.htm
EXHIBIT 12

Joint Filing Agreement, dated October 26, 2011

PURSUANT TO RULE 13d-1(k)

The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D may be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him or it contained herein and therein, but shall not be responsible for the completeness and accuracy of the information concerning the others, except to the extent that he or it knows that such information is inaccurate.

Dated: November 29, 2011

 
Clinton Group, Inc.
 
       
       
 
By:
/s/ Francis Ruchalski
 
 
Name:
Francis Ruchalski
 
 
Title:
Chief Financial Officer
 
       
       
 
Clinton Magnolia Master Fund, Ltd.
 
       
 
By:
Clinton Group, Inc., its investment manager
 
       
       
 
By:
/s/ Francis Ruchalski
 
 
Name:
Francis Ruchalski
 
 
Title:
Chief Financial Officer
 
       
       
 
SBAV LP
 
       
 
By:
SBAV GP LLC, its general partner
 
       
       
 
By:
/s/ George Hall
 
 
Name:
George Hall
 
 
Title:
Managing Member
 
       
       
 
SBAV GP LLC
 
       
 
By:
/s/ George Hall
 
 
Name:
George Hall
 
 
Title:
Managing Member
 


 
/s/ George Hall
 
 
George Hall