UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No.
)
Filed by
the Registrant
x
Filed by a
Party other than the Registrant
o
Check the
appropriate box:
x
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Preliminary
Proxy Statement
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o
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Porter
Bancorp, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of
Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which the transaction
applies:
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(2)
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Aggregate
number of securities to which the transaction
applies:
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(3)
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Per
unit price or other underlying value of the transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of the
transaction:
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Fee
paid previously with preliminary
materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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To our
shareholders:
You are
cordially invited to attend the 2009 annual meeting of shareholders of Porter
Bancorp, Inc. The meeting will be held on Thursday, May 21, 2009, at 9:00
a.m. EDT in the Conference Center on the second floor of our main office located
at 2500 Eastpoint Parkway, Louisville, Kentucky 40223.
The
enclosed Notice and Proxy Statement contain information about the matters to be
voted on at the annual meeting.
We hope
you can attend the annual meeting. Whether or not you plan to attend,
please complete, sign and return the enclosed proxy card in the envelope
provided to ensure your shares are represented and voted at the annual
meeting.
We
appreciate your interest and investment in Porter Bancorp and look forward to
seeing you at the annual meeting.
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By
order of the Board of Directors,
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Maria
L. Bouvette
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President
and CEO
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NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
OF
PORTER BANCORP, INC.
THURSDAY,
MAY 21, 2009
To our
shareholders:
Notice is
hereby given that the annual meeting of shareholders of Porter Bancorp, Inc.
will be held on Thursday, May 21, 2009, at 9:00 a.m. EDT in the Conference
Center on the second floor of our main office located at 2500 Eastpoint Parkway,
Louisville, Kentucky 40223, to consider and act upon the following
matters:
1.
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Election
of six nominees as directors;
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2.
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Proposal
to approve, in a non-binding advisory vote, the compensation of the
company’s executives as disclosed in the accompanying proxy statement;
and
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3.
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Such
other business as may properly come before the
meeting.
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The close
of business on April 9, 2009 is the record date for determining the shareholders
entitled to notice of, and to vote at, the Annual Meeting of
Shareholders.
Whether or
not you plan to attend the meeting, please sign, date and promptly return the
enclosed proxy. If for any reason you desire to revoke your proxy, you may
do so at any time before the voting as described in the accompanying proxy
statement.
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By
order of the Board of Directors,
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Maria
L. Bouvette
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President
and CEO
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April 21,
2009
2009
ANNUAL MEETING OF SHAREHOLDERS
NOTICE
OF ANNUAL MEETING AND PROXY STATEMENT
QUESTIONS
AND ANSWERS
IMPORTANT
NOTICE REGARDING THE AVAILABLILITY OF PROXY MATERIALS FOR THE SHAREHOLDER
MEETING TO BE HELD ON MAY 21, 2009:
The
proxy statement, annual report on Form 10-K, and shareholder letter are
available at
www.pbibank.com
under
“Investor Relations.”
Why am I receiving these
materials?
We are
sending this Proxy Statement and the accompanying proxy card to our shareholders
beginning on or about April 21, 2009. These materials are for use at the 2009
Annual Meeting of Porter Bancorp Shareholders which will be held on May 21,
2009, at 9:00 a.m. EDT in the Conference Center on the second floor of our main
office located at 2500 Eastpoint Parkway, Louisville, Kentucky 40223. Our Board
of Directors is soliciting proxies to give all shareholders of record an
opportunity to vote on matters to be presented at the Annual Meeting. In
the following pages of this Proxy Statement, you will find information on
matters to be voted upon at the Annual Meeting of Shareholders or any
adjournment of that meeting.
Who Can Vot
e?
You are
entitled to vote if you were a shareholder of record of Porter Bancorp stock as
of the close of business on April 9, 2009. Your shares can be voted at the
meeting only if you are present or represented by a valid
proxy.
What constitutes a quorum and how
many shares are outstanding?
A majority
of the votes entitled to be cast by the holders of the outstanding shares of
Porter Bancorp stock must be present, either in person or represented by proxy,
in order to conduct the Annual Meeting of Porter Bancorp Shareholders. On April
9, 2009, there were 8,337,217 shares of Porter Bancorp stock
outstanding.
Who
is entitled to vote?
Holders of
Porter Bancorp stock are entitled to one vote on each matter submitted to a vote
of shareholders for each share of Porter Bancorp stock owned on April 9,
2009. All shares entitled to vote and represented in person or by
properly completed proxies received before the polls are closed at the Annual
Meeting, and not revoked or superseded, will be voted in accordance with
instructions indicated on those proxies.
You are
voting on the election of six directors and the non-binding approval of our
executive compensation program. Our board recommends that you vote
your shares
“FOR”
each
of the nominees for the board and
“FOR”
the approval of our
executive compensation. We are not aware of any other business to be
acted upon at the annual meeting.
How many v
otes
are required for
approval?
Directors
are elected by a plurality of the votes cast, which means the six nominees who
receive the largest number of properly executed votes will be elected as
directors. Cumulative voting is not permitted. Shares that are represented by
proxies marked “withhold authority” for the election of one or more director
nominees will not be counted in determining the number of votes cast for those
persons. The remaining matters to be considered at the meeting will be adopted
if the number of votes cast in favor of the matter is greater than the number
opposing it.
You may
vote by proxy or in person at the meeting. To vote by proxy, simply mark
your proxy card, date and sign it and return it in the postage-paid envelope
provided. The Board has designated two individuals to vote the shares
represented by proxies solicited by the Board at the Annual Meeting. If
you properly submit a proxy but do not specify how you want your shares to be
voted, your shares will be voted by the designated proxies
“FOR”
the election of all of
the director nominees and
“FOR”
the approval of our
executive compensation. The designated proxies will vote in their discretion on
any other matter that may properly come before the meeting. At the date the
Proxy Statement went to press, we did not anticipate that any other matters
would be raised at the Annual Meeting.
How
can I revoke my proxy?
If you
vote by proxy, you may revoke that proxy at any time before it is voted at the
meeting. You may do this by (a) signing another proxy card with a later
date and returning it to us before the meeting or (b) attending the meeting
in person and casting a ballot.
How
may I obtain Porter Bancorp’s 10-K and other financial information?
A copy of
our 2008 Annual Report on Form 10-K, is enclosed. Shareholders and
prospective investors may request a free copy of our 2008 Annual Report on Form
10-K by writing to:
C.
Bradford Harris
Corporate
General Counsel
Porter
Bancorp, Inc.
2500
Eastpoint Parkway
Louisville,
Kentucky 40223
502-499-4800
The
Form 10-K is also available at www.pbibank.com. Click on “Investor
Relations” and “SEC Filings.”
Who can help answer my
questions?
If you
have questions or would like to receive additional copies of this proxy
statement or voting materials, please contact C. Bradford Harris, Corporate
General Counsel, as described above.
PROPOSAL
NO. 1 – ELECTION OF DIRECTORS
Our Board
of Directors is comprised of six directors who serve for a one-year term or
until their successors are elected and qualified. Our articles of
incorporation and bylaws provide for a board of directors consisting of not less
than two nor more than 15 members, with the actual number of directors to be set
by the board of directors. The number of directors is currently fixed
at six. The Nominating Committee and the Board of Directors has nominated the
following individuals for election as directors: J. Chester Porter, Maria
L. Bouvette, David L. Hawkins, W. Glenn Hogan, Sidney L. Monroe and Stephen
A. Williams. Each of the nominees is a current member of the Board of
Directors.
Neither
the Nominating Committee nor the Board of Directors has reason to believe that
any nominee for director is unwilling or unable to serve following election.
However, if that were to occur, the holders of the proxies solicited hereby will
vote for such substitute nominees as the Nominating Committee or the Board of
Directors may recommend.
The
following table provides biographical information for each nominee and our one
other executive officer:
Nominee
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Age
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Principal Occupation and Other
Information
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Director Since
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J.
Chester Porter
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68
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Mr. Porter
is our chairman of the board and general counsel. He also serves as a
director of two affiliated banks. Mr. Porter is a partner in the law
firm Porter & Associates and has practiced law for over 30 years.
Mr. Porter is a member and the chairman of the University of
Louisville board of trustees, and chairman of the University of Louisville
Foundation Board. He has also served on Campbellsville University’s board
of trustees and executive committee since 1985. Mr. Porter serves on our
nominating and corporate governance committee.
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1988
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Maria
L. Bouvette
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52
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Ms. Bouvette
is our president and chief executive officer. She also serves as chief
financial officer and a director of two affiliated banks.
Ms. Bouvette is a member of the board of trustees of Norton
Healthcare, a not-for-profit integrated healthcare delivery organization.
Before joining Porter, Ms. Bouvette served as a manager of Deloitte
Haskins & Sells (now Deloitte & Touche). She is a
certified public accountant and has over 25 years of banking and
management experience. Ms. Bouvette serves on our executive
compensation committee.
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1988
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David
L. Hawkins
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54
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Mr.
Hawkins is a farmer and private investor. He served as
president and chief executive officer of Pioneer Bank, Canmer, Kentucky
from 1982 until 1994, when it was acquired by us. Before
becoming president and chief executive officer of Pioneer Bank, Mr.
Hawkins was a partner in Taylor, Polson, Woosley and Hawkins, a public
accounting firm in Glasgow, Kentucky. he is a certified public
accountant. Mr. Hawkins serves as the chairman of our audit
committee and is a member of our nominating and corporate governance
committee. Mr. Hawkins has also served as a director of PBI
Bank or one of its predecessors since 1994.
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2006
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W.
Glenn Hogan
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47
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Mr.
Hogan is founder, president and chief executive officer of Hogan Real
Estate, a full service commercial real estate development company
headquartered in Louisville, Kentucky. Hogan Real Estate
provides real estate services for retailers, institutional and private
property owners and investors. Mr. Hogan has over twenty years
of real estate development experience and has developed over five million
square feet of retail space in the Midwest and Southeast. Mr.
Hogan is a certified commercial investment member and is past president of
the Kentucky State CCIM Chapter. Mr. Hogan serves as a member
of our executive compensation and nominating and corporate governance
committees.
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2006
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Nominee
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Age
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Principal Occupation and Other
Information
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Director Since
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Sidney
L. Monroe
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68
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Mr.
Monroe is a retired certified public accountant. From 1990 to
2001, Mr. Monroe was a partner in Kent, Gay and Monroe, an audit and
consulting services firm that primarily advised small and medium-sized
businesses. Before 1990, he held numerous positions during a 20
year career at Deloitte Haskins & Sells (now Deloitte & Touche),
including partner in charge of several offices, including the Louisville
office. While at Deloitte, Mr. Monroe was designated as a
specialist in the financial institutions field. Mr. Monroe
serves as a member of our audit committee.
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2006
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Stephen
A. Williams
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58
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Mr.
Williams is the president and chief executive officer of Norton
Healthcare, a not-for-profit integrated healthcare delivery organization
that is the largest healthcare provider and third largest employer in
Louisville, Kentucky. Norton Healthcare owns and operates four
hospitals plus one under construction, 12 immediate care centers, 280
employed medical providers at some 50 locations, and has approximately
$1.5 billion in assets. Mr. Williams serves as a member of our
audit and executive compensation committees and as the lead independent
director.
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2006
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Other Executive Officers
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David
B. Pierce
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49
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Mr. Pierce
is our chief financial officer and the chief strategic officer of PBI
Bank. From 1984 to 1989, Mr. Pierce served as a manager at
Coopers & Lybrand (now PricewaterhouseCoopers) where he was
responsible for audits of public and private entities including financial
institutions. Before 1984, Mr. Pierce was a senior accountant at
Deloitte Haskins & Sells (now Deloitte & Touche). He is
a certified public accountant and has over 20 years of banking and
management experience. Mr. Pierce also serves as a director of PBI
Bank.
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C.
Bradford Harris
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38
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Mr.
Harris is our executive vice president and corporate general
counsel. He joined Porter Bancorp as corporate general counsel
in October 2006. Prior to joining Porter Bancorp, Mr. Harris
was a member of Frost Brown Todd LLC, where he specialized in banking,
securities, mergers and acquisitions and general corporate
law. Mr. Harris has over 10 years of banking
experience.
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The
Board recommends that you vote “FOR” the election of the six
nominees.
CORPORATE
GOVERNANCE
Corporate
Governance Principles
Our board
of directors has adopted corporate governance principles that address the role
and composition of our board of directors and the functions of our board and the
board’s committees.
We
expect to revise our corporate governance principles from time to time in
response to changing regulatory requirements, evolving best practices and
concerns expressed by our shareholders and other constituents. Our corporate
governance principles are available on our website at www.pbibank.com under
“Investor Relations” and “Corporate Governance.”
Controlled
Company Status and Director Independence
We are a
“controlled company” within the meaning of the NASDAQ corporate governance rules
by virtue of the voting control of Mr. Porter and Ms. Bouvette, who
together own more than 50% of our sole class of voting stock. A
“controlled company” may elect not to comply with the following NASDAQ corporate
governance rules:
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•
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A
majority of its board of directors must consist of “independent
directors,” as defined by the NASDAQ rules;
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•
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Decisions
regarding the compensation paid to executive officers must be made either
by a compensation committee composed entirely of independent directors or
by a majority of the independent directors;
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•
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Nominations
for election to the board of directors must be made either by a nominating
committee composed entirely of independent directors with a written
charter addressing the committee’s purpose and responsibilities or by a
majority of the independent
directors.
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We rely on
our controlled company status to have Mr. Porter serve on our nominating
and governance committee and to have Ms. Bouvette serve on our compensation
committee. The “controlled company” exception does not modify requirements under
the Securities Exchange Act of 1934, SEC rules and the NASDAQ corporate
governance rules that we have an audit committee comprised of at least three
directors, all of whom must be independent as defined by the Exchange Act and
the SEC and NASDAQ rules. We anticipate that in the future, at least one member
of our audit committee will always qualify as an audit committee financial
expert.
Our
principles provide that it is our policy that a majority of the members of the
Board be independent from management. For this purpose, the Board has
adopted Director Independence Standards that meet the listing standards of the
NASDAQ corporate governance rules. In accordance with our Corporate Governance
Guidelines, the Nominating and Corporate Governance Committee undertakes an
annual review of director independence during the first quarter of each year.
During this review, the Board considers any and all commercial and
charitable relationships of directors, including transactions and relationships
between each Director or any member of his or her immediate family and the
Company and its subsidiaries. Following the review in 2009, the Board
affirmatively determined that each of the directors nominated for election
at this Annual Meeting, except our Chairman, Mr. Porter, and our President and
Chief Executive Officer, Ms. Bouvette, is independent of the Company and its
management in that none have any relationship that would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director, in accordance with the NASDAQ corporate governance
rules.
Code
of Business Conduct and Ethics
Our Board
has adopted the Code of Business Conduct and Ethics that sets forth important
company policies and procedures in conducting our business in a legal, ethical
and responsible manner. These standards are applicable to all of our directors
and employees. In addition, the Board has adopted the Code of Ethics for CEO and
Senior Financial Officers that supplements the Code of Business Conduct and
Ethics by providing more specific requirements and guidance on certain topics.
The Code of Ethics for CEO and Senior Financial Officers applies to the
Company’s Chairman, Chief Executive Officer, Chief Financial Officer and PBI
Bank’s Chief Financial Officer. The Code of Ethics for CEO and Senior Financial
Officers is available on our website at
www.pbibank.com
under
“Investor Relations” and “Corporate Governance.” We will post any material
amendments to, or waivers from, our Code of Ethics for CEO and Senior Financial
Officers on our website.
Employees
must report any conduct they believe in good faith to be an actual or apparent
violation of our Code of Conduct. In addition, as required under the
Sarbanes-Oxley Act of 2002, the Audit Committee has established confidential
procedures to receive, retain and treat complaints received regarding
accounting, internal accounting controls, or auditing matters and the
confidential, anonymous submission by company employees of concerns regarding
questionable accounting or auditing matters.
Stock
Ownership Guidelines
Our
Corporate Governance Guidelines require all non-employee directors to hold at
least 1,000 of our shares while serving as a director of the
Company. Shares that may be acquired through the exercise of stock
options are included in calculating the number of shares of ownership to
determine whether this minimum ownership requirement has been met.
All directors are expected
to be in compliance with the stock ownership guidelines within five years of
becoming a director.
Board
Structure and Committee Composition
Our board
of directors has established standing committees in connection with the
discharge of its responsibilities. These committees will include an audit
committee, a compensation committee and a nominating and governance
committee. Our committee charters are available on our website at
www.pbibank.com
under “Investor Relations” and “Corporate Governance.”
Audit
Committee
Our audit
committee is comprised of Messrs. Hawkins, Monroe and Williams. Our board of
directors has determined that Messrs. Hawkins, Monroe and Williams currently
meet the independence requirements of the NASDAQ corporate governance rules and
relevant federal securities laws and regulations. The audit committee assists
our board in monitoring the integrity of the financial statements, the
qualifications and independence of our independent registered public accounting
firm, the performance of our internal audit function and our independent
registered public accounting firm and our compliance with legal and regulatory
requirements. Mr. Hawkins and Mr. Monroe each qualifies as an audit committee
financial expert.
Compensation
Committee
Our
compensation committee is comprised of Mr. Hogan, Mr. Williams and Ms. Bouvette.
The compensation committee has overall responsibility for evaluating and
approving our executive officer incentive compensation, benefit, severance,
equity-based or other compensation plans, policies and programs. The
compensation committee is also responsible for producing an annual report on
executive compensation for inclusion in our proxy statement.
Nominating
and Governance Committee
Our
nominating and governance committee is comprised of Mr. Hogan, Mr. Hawkins and
Mr. Porter. The nominating and governance committee assists our board of
directors in promoting our best interests and the best interests of our
shareholders through the implementation of sound corporate governance principles
and practices. In furtherance of this purpose, the nominating and governance
committee identifies individuals qualified to become board members and recommend
to our board of directors the director nominees for the next annual meeting of
shareholders. It also reviews the qualifications and independence of the members
of our board of directors and its various committees on a regular basis and
makes any recommendations the committee members may deem appropriate from time
to time concerning any recommended changes in the composition of our
board.
Meeting
Attendance
During
2008, our board of directors met thirteen times. No director attended
fewer than 75 percent of the total number of meetings of the board of directors
and the committees on which he or she served. All directors and
director nominees are expected to attend each annual meeting of shareholders,
unless an emergency prevents them from doing so.
Board
Compensation
Compensation of Directors
Each
director receives $1,250 for each board meeting attended and each non-employee
director receives $500 for each committee meeting attended. Our
executives who serve on the boards of directors of Porter Bancorp and PBI Bank
are paid the same cash director fees as those paid to non-employee directors.
Although paying cash director fees to “inside” executives who serve on boards of
directors is not the prevalent market practice, it has been the historical
practice at Porter Bancorp for many years and constitutes a small portion of
affected executive’s total compensation amount. Directors J. Chester
Porter, Maria L. Bouvette and David L. Hawkins also serve as directors of PBI
Bank. Each bank director receives $500 for each board meeting
attended. The directors fees paid to Mr. Porter and Ms. Bouvette are
included in the “All Other Compensation” column of the Summary Compensation
Table.
In
addition to the board and committee fees, non-employee directors are granted
restricted shares of common stock on annual basis. Pursuant to our
Amended and Restated 2006 Non-Employee Directors Stock Ownership Incentive Plan,
non-employee directors of Porter Bancorp are automatically granted 500
restricted shares and non-employee directors of PBI Bank are automatically
granted 100 restricted shares on the first day of the month after our annual
meeting of shareholders, which is on or about June 1, 2009.
Restricted
shares are shares of our common stock that may not be transferred, and are
subject to forfeiture, during a specified period. Directors that are
granted restricted shares will have all of the same rights as a shareholder,
including the right to vote the restricted shares and the right to receive
dividends. One-sixth of the restricted shares of common stock will
vest on each six month anniversary of the date of grant as long as the director
is continuing to serve on the board of directors. If a director
ceases to serve on the board of directors for any reason, the director will
automatically forfeit the unvested portion of the restricted
shares. In the event of a change in control, the restriction on the
sale of any unvested restricted shares will end. Under the 2006
Directors Plan, a change in control means (i) the disposal of our business or
the business of PBI Bank pursuant to a liquidation, sale of assets or otherwise,
(ii) any person, group or entity acquiring or gaining ownership or control of
more than 50% of our outstanding shares or the outstanding shares of PBI Bank,
other than any trustee or other fiduciary holding shares under any employee
benefit plan, or (iii) during any period of two consecutive years, individuals
who were our directors at the beginning of that period cease to constitute a
majority of the board of directors, unless the election of each new director was
approved by at least two-thirds of the directors then still in office who were
directors at the beginning of the period.
Before
2008, the 2006 Directors Plan automatically granted an option for 5,000 shares
of common stock to each non-employee director of Porter Bancorp and 1,000 shares
of common stock to each non-employee director of PBI Bank in office on the first
day of the month after our annual meeting of shareholders. The exercise price
was equal to the closing sale price of our shares of common stock as reported on
the NASDAQ Global Market on the date of grant. Each option granted became
exercisable with respect to one-sixth of the shares of common stock subject to
the option on each six month anniversary of the date of grant as long as the
director continued to serve on the board of directors. If a director ceases to
serve on the board of directors for any reason, the director will automatically
forfeit the unvested portion of the option. Each option expired on the fifth
anniversary of the date on which it was granted.
The following table provides
information on 2008 compensation for non-employee directors.
Name
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Fees Earned
or
Paid in
Cash ($)
(1)
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Stock
Awards($)
(2)
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Option
Awards($)
(3)
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All
Other
Compensation
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Total
($)
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David
L. Hawkins
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$
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19,250(4)
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$
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2,074
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$
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14,344
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$
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6,000(9)
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$
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41,668
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W.
Glenn Hogan
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$
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16,500(5)
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$
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1,729
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$
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5,852
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$
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24,081
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Michael
E. Miller
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$
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9,500
(6)
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$
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0
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$
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0
|
|
|
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$
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9,500
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Sidney
L. Monroe
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$
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18,750(7)
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|
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$
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1,729
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|
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$
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11,952
|
|
|
|
|
|
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$
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32,431
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Stephen
A. Williams
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$
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18,500(8)
|
|
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$
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1,729
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|
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$
|
11,952
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|
|
|
|
|
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$
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32,181
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(
1
)
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Each
director receives $1,250 for each board meeting attended and $500 for each
committee meeting attended.
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(
2
)
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Each
non-employee director received a restricted stock award of 500 shares on
June 2, 2008. The restricted shares vest in one-sixth increments every
six-month anniversary of the grant date over three years. The table shows
the 2008 compensation expense calculated in accordance with SFAS 123(R).
As of December 31, 2008, each director had the following aggregated
number of restricted shares: David L. Hawkins, 524; W. Glenn Hogan, 437;
Sidney L. Monroe, 437; and Stephen A. Williams, 437.
|
(3)
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|
The
amounts presented in this column for the 2008 year represent the 2008
compensation expense related to the expense from grants of stock options
from 2006 and 2007. The options vest over three years and have a life of
five years. The table shows the 2008 compensation expense calculated in
accordance with SFAS 123(R). As of December 31, 2008, each director
had the following aggregated number of options: David L. Hawkins, 12,600;
W. Glenn Hogan, 5,250; Sidney L. Monroe, 10,500; and Stephen A. Williams,
10,500. See Note 2 of the Notes to our audited financial
statements in our 2008 Form 10-K for the assumptions used in calculating
compensation expense.
|
(4)
|
|
Mr.
Hawkins received $2,500 for attendance at Audit Committee meetings and
$500 for Corporate Governance Committee meetings during
2008.
|
(5)
|
|
Mr.
Hogan received $2,500 for attendance at Executive Compensation Committee
meetings and $1,500 for Nominating and Corporate Governance Committee
meetings in 2008.
|
(6)
|
|
Mr.
Miller received $1,000 for attendance at Executive Compensation Committee
meetings and $1,000 for Nominating and Corporate Governance Committee
meetings in 2008. Mr. Miller resigned from the board effective
August 4, 2008.
|
(7)
|
|
Mr.
Monroe received $2,500 for attendance at Audit Committee meetings during
2008.
|
(8)
|
|
Mr.
Williams received $2,000 for attendance at Audit Committee meetings and
$1,500 for Compensation Committee meetings during 2008.
|
(9)
|
|
Mr.
Hawkins received $6,000 in PBI Bank director fees.
|
|
|
|
STOCK
OWNERSHIP OF DIRECTORS, OFFICERS,
AND
PRINCIPAL SHAREHOLDERS
The
following table shows, as of March 1, 2009, the number and percentage of shares
of common stock held by (1) Porter Bancorp’s directors and nominees,
(2) each of the named executive officers set forth in the Summary
Compensation Table and (3) current directors and named executive officers
as a group. The information provided in the table is based on our
records, information filed with the SEC, and information provided to us, except
where otherwise noted. Except for our two controlling shareholders,
each of whom is a director and an executive officer, we know of no other
shareholder who beneficially owns 5% or more of our common stock.
Under SEC
rules, a person is deemed to beneficially own any shares as to which the entity
or individual has the right to acquire within 60 days of March 1, 2009
through the exercise of
any stock option or other right. Unless otherwise indicated, each person has
sole voting and investment power (or shares these powers with his or her spouse)
with respect to the shares set forth in the following table.
Name and
Address of Beneficial Owner
(
1)
|
|
Amount and Nature of
Beneficial
Ownership
|
|
|
Percent
of Class
|
Directors
and Nominee
|
|
|
|
|
|
J.
Chester Porter
(
2)
|
|
|
2,906,746
|
|
|
|
35.0
|
%
|
|
Maria
L. Bouvette
(
3)
|
|
|
2,586,
278
|
|
|
|
31.2
|
|
|
David
L. Hawkins
(
4)
|
|
|
13,756
|
|
|
|
*
|
|
|
W.
Glenn Hogan
(
5)
|
|
|
15,159
|
|
|
|
*
|
|
|
Sidney
L. Monroe
(
6)
|
|
|
14,445
|
|
|
|
*
|
|
|
Stephen
A. Williams
(
7)
|
|
|
11,376
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
David
B. Pierce
(
8)
|
|
|
100,732
|
|
|
|
1.2
|
|
|
C.
Bradford Harris
(
9)
|
|
|
8,638
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Named
Executive Officers and Directors as a Group
|
|
|
5,657,130
|
|
|
|
67.1
|
|
|
* Represents
beneficial ownership of less than 1%
|
|
|
|
|
|
|
____________
(
1
)
|
|
The
business address for these referenced individuals is c/o Porter Bancorp,
Inc., 2500 Eastpoint Parkway, Louisville, Kentucky
40223.
|
(
2
)
|
|
Includes
4,119 shares of common stock held by a company of which Mr. Porter is the
sole owner and 10,296 shares of common stock which may be acquired
pursuant to stock options that are exercisable within sixty days of March
1, 2009.
|
(
3
)
|
|
Includes
10,296 shares of common stock which may be acquired pursuant to stock
options that are exercisable within sixty days of March 1,
2009.
|
(
4
)
|
|
Includes
1,050 shares that are jointly held with his spouse, 1,575 shares that are
held in an individual retirement account and 10,501 shares of common stock
which may be acquired pursuant to stock options that are exercisable
within sixty days of March 1, 2009.
|
(
5
)
|
|
Includes
3,501 shares of common stock which may be acquired pursuant to stock
options that are exercisable within sixty days of March 1,
2009.
|
(6)
|
|
Includes
8,751 shares of common stock which may be acquired pursuant to stock
options that are exercisable within sixty days of March 1,
2009.
|
(7)
|
|
Includes
8,751 shares of common stock which may be acquired pursuant to stock
options that are exercisable within sixty days of March 1,
2009.
|
(8)
|
|
Includes
1,050 shares that are held by Mr. Pierce as trustee for a living trust and
92,658 shares of common stock which may be acquired pursuant to stock
options that are exercisable within sixty days of March 1,
2009.
|
(9)
|
|
Includes
4,376 shares of common stock which may be acquired pursuant to stock
options that are exercisable within sixty days of March 1,
2009.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with Related Parties
Our Audit
Committee has the responsibility to review and ratify all transactions, other
than loans and extensions of credit, between the Company and related parties,
including without limitation, fees and commissions for services, purchases or
sales of assets, rental arrangements and any other financial
arrangement.
As a bank,
we are not subject to Section 402 of the Sarbanes-Oxley Act of 2002, which
prohibits any issuer to extend, renew or arrange for the extension of credit in
the form of a personal loan to or for any director or executive officer of that
issuer. However, loans must be made:
|
•
|
|
in
the ordinary course of our consumer credit business;
|
|
|
|
|
|
•
|
|
of a
type we generally make available to the public; and
|
|
|
|
|
|
•
|
|
on
market terms, or terms that are no more favorable than those offered by
the issuer to the general
public.
|
We have
long-standing policies and procedures governing our extension of credit to
related parties in compliance with the insider lending restrictions of
Section 22(h) of the Federal Reserve Act or the Federal Reserve’s
Regulation O. All loans to directors and executive officers or their
affiliates are approved by the Board of Directors of PBI Bank. As of
December 31, 2008, the aggregate amount of all loans outstanding to our
executive officers and directors, the executive officers and directors of PBI
Bank and the firms and corporations in which they have at least a ten percent
beneficial interest was approximately $1.7 million.
Our
officers, directors and principal shareholders and their affiliates and certain
of the officers and directors of PBI Bank and their affiliates have conducted
banking transactions with PBI Bank from time to time, including investments in
certificates of deposit. All such investments have been made, and
will continue to be made, only in the ordinary course of business of PBI Bank on
substantially the same terms as those prevailing at the time for comparable
transactions with unaffiliated persons.
Management
Service Agreements and Loan Participations with Banks Under Common
Control
Our
chairman, J. Chester Porter and his brother, William G. Porter, each own a 50%
interest in Lake Valley Bancorp, Inc., the parent holding company of The Peoples
Bank, Taylorsville, Kentucky, located approximately 25 miles southeast of
Louisville in Spencer County. J. Chester Porter, William G. Porter
and our president and chief executive officer, Maria L. Bouvette, serve as
directors of this bank.
Our
chairman, J. Chester Porter owns an interest of approximately 36.0% and his
brother, William G. Porter, owns an interest of 3.0% in Crossroads Bancorp,
Inc., the parent holding company of The Peoples Bank, Mount Washington,
Kentucky, located approximately 20 miles south of Louisville in Bullitt County.
PBI Bank also has banking offices in Bullitt County. J. Chester
Porter and our president and chief executive officer, Maria L. Bouvette, serve
as directors of this bank.
We have
entered into management services agreements with each of these banks. Each
agreement provides that our executives and employees provide management and
accounting services to the subject bank, including overall responsibility for
establishing and implementing policy and strategic planning. Maria Bouvette also
serves as chief financial officer of each of the banks. We received a $4,000
monthly fee from The Peoples Bank, Taylorsville and a $2,000 monthly fee from
The Peoples Bank, Mount Washington for these services in 2008. We receive a
$4,000 monthly fee from The Peoples Bank, Taylorsville and a $2,000 monthly fee
from The Peoples Bank, Mount Washington for these services in 2009.
From time
to time, these banks may also participate with PBI Bank in making loans to
certain borrowers when our executive officers believe it is mutually beneficial
to do so. As of December 31, 2008, we had $6.0 million of participations in real
estate loans purchased from, and $23.7 million of participations in real estate
loans sold, to these affiliate banks. We believe the terms of our
arrangements with these two banks in which J. Chester Porter and William G.
Porter have substantial ownership interests are fair and reasonable to us and to
the other banks. We have had the terms of our management services agreements
with these banks reviewed by an independent accounting firm from time to time.
In the future, the terms of these arrangements will also be subject to ongoing
review by the independent directors on our audit committee.
Other
Transactions in Which Related Parties Have an Interest
Our
chairman, J. Chester Porter is the owner of Porter & Associates, a law
firm that we retained during our last fiscal year and will retain in the future.
We paid $226,800 to Porter & Associates for legal services provided
during 2008. In addition, Porter & Associates received fees from borrowers
for its representation of PBI Bank in connection with loan
closings.
Keith
Griffee, the son-in-law of J. Chester Porter, is PBI Bank’s President of the
Bullitt County Market. Jennifer E. Porter, Mr. Porter’s daughter
and Mr. Griffee’s wife, serves as an advisory director of our Bullitt
County banking office. Jack C. Porter, Mr. Porter’s son, serves as an
advisory director of our Bullitt County banking office and from time to time
provides real estate related services to PBI Bank. Albert J. Bouvette, brother
of our president and chief executive officer, Maria L. Bouvette, is an employee
of PBI Bank’s information technology department. None of these individuals
received compensation in excess of $120,000 for their services in such
capacities during 2008.
In 1994,
J. Chester Porter and Maria L. Bouvette issued a promissory note to David L.
Hawkins, a director and chairman of our audit committee, in the principal amount
of $506,315.79 as part of the consideration paid to Mr. Hawkins in connection
with the acquisition of Pioneer Bank by a predecessor of our company. The
promissory note bears interest at the prime rate plus 1% per annum (currently
4.25%) and payments of interest only are due quarterly. The loan is secured by a
mortgage on real estate. The original term of the note has been extended from
January 1, 2007 to January 1, 2012.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires our directors,
executive officers, and persons who own more than 10 percent of our common
stock, to file reports of ownership and changes in ownership with the SEC.
Directors, executive officers, and greater than 10 percent beneficial owners,
referred to as “reporting persons,” are required by SEC regulations to furnish
us with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the us, we believe that during
2008 all reporting persons complied with the filing requirements of
Section 16(a), except that shares acquired by W. Glenn Hogan in 2007
through a general dividend reinvestment selection in Mr. Hogan’s account at a
brokerage firm were not reported until February 12, 2009.
COMPENSATION
DISCUSSION AND ANALYSIS
The
Compensation Committee of our Board of Directors is responsible for developing
specific policies regarding compensation of our executive officers, as well as
evaluating and approving our executive officer incentive compensation, benefit,
severance, equity-based or other compensation plans, policies and programs
implementing and administering all aspects of our benefit and compensation plans
and programs. Our compensation committee is comprised of Mr. Hogan,
Mr. Williams and Ms. Bouvette. Our board of directors has determined that
Mr. Hogan and Mr. Williams currently meet the independence requirements of
the NASDAQ corporate governance rules and relevant federal securities laws and
regulations. As previously discussed, we are a “controlled company”
within the meaning of the NASDAQ corporate governance rules. A
controlled company may elect not to comply with certain NASDAQ corporate
governance rules, including the requirement that decisions regarding the
compensation paid to executive officers must be made either by a compensation
committee composed entirely of independent directors or by a majority of the
independent directors. We rely on our controlled company status to
have Ms. Bouvette serve on our compensation committee. As a
practical matter, our controlled company status also gives Mr. Porter and Ms.
Bouvette the ability to assert significant influence over executive compensation
decisions.
Executive
Compensation Philosophy and Objectives
Our
philosophy for executive compensation is to attract, retain and reward excellent
executives and align their interests with the interests of our
shareholders. To promote this philosophy, we have established the
following objectives:
·
|
provide
fair and competitive compensation to executives, based on their
performance and contributions to our company, that will attract, motivate
and retain individuals that will enable our company to successfully
compete with other financial institutions in our
markets;
|
·
|
provide
incentives that reward executives for attaining predetermined objectives
that promote and reward individual performance, company financial
performance, achievement of strategic goals and company stock
performance;
|
·
|
instill
in our executives a long-term commitment and a sense of ownership through
the use of equity-based compensation;
and
|
·
|
ensure
that the interests of our executives are aligned with our shareholders’
interests.
|
TARP
Compensation Standards
On
November 21, 2008, Porter Bancorp became a participant in the U.S.
Treasury’s Capital Purchase Program (“CPP”). As a result, we are required to
comply with a number of executive compensation standards during the period of
time in which the U.S. Treasury holds an equity position in Porter
Bancorp.
Initially,
there were four standards, which applied to our named executive officers. These
standards were in effect as of the end of 2008 and consisted of the
following:
|
•
|
|
Expansion of Golden Parachute
Rule.
The existing golden parachute rule applies if compensation
triggered by a change of control exceeds three times an employee's five
year average taxable compensation. If the limit is exceeded,
all compensation over one times average pay is not deductible and is
subject to a 20% excise tax. The CPP expands the rule to apply
to pay triggered by any involuntary termination (for example, termination
without cause or for good reason) and any termination in connection with
bankruptcy or insolvency, but only for the named executive
officers. We do not currently have any compensation agreements
or arrangements that are subject to the golden parachute
rule.
|
|
•
|
|
Clawback.
We are
required to be able to recover bonuses, retention awards and incentive
compensation paid to named executive officers if the compensation was
based on materially inaccurate financial statements or any other
materially inaccurate performance metric criteria (whether or not the
executive was at fault, any misconduct occurred or the financial
statements were restated).
|
|
•
|
|
No unnecessary and excessive
risk.
Our
Compensation Committee was required to review our compensation programs
with our senior risk officers and certify that the Company has made
reasonable efforts to ensure that the incentive compensation arrangements
do not encourage unnecessary and excessive risks that threaten our value.
The Committee’s certification relating to this review is contained in the
Compensation Committee Report that follows this
section.
|
|
•
|
|
Limited deductible
compensation.
We are prohibited from taking a tax deduction for
annual compensation over $500,000.
|
Each of
our current executive officers has agreed that their separation entitlements and
bonuses, retention awards and other incentive compensation will comply with
these standards.
On
February 17, 2009, the America Reinvestment and Recovery Act of 2009
(“ARRA”) required the U.S. Treasury to enact additional compensation standards.
Under ARRA, the compensation standards are required to include the
following:
|
•
|
|
Prohibition on severance.
ARRA standards will prohibit severance payments to our five most
highly-compensated employees, other than payments for services performed
or benefits accrued.
|
|
•
|
|
Prohibition on bonuses,
retention awards and other incentive compensation.
ARRA standards
will prevent us from paying or accruing any bonus, retention award or
incentive compensation to our five most highly-compensated employees
subject to certain exceptions. The exceptions are limited, although we
will be permitted to award long-term restricted stock that has a value not
exceeding one-third of the employee’s total annual compensation, so long
as such restricted stock does not fully vest during the period Porter
Bancorp participates in CPP.
|
|
|
|
|
|
•
|
|
Stricter clawback.
ARRA
standards will extend this recovery requirement to the next 20 most highly
compensated employees in addition to the named executive
officers.
|
|
•
|
|
Prohibition on compensation
plans that “encourage” earnings manipulation
. ARRA prohibits
participating companies from implementing any compensation plan that would
encourage manipulation of the reported earnings of the Company in order to
enhance the compensation of any of its
employees.
|
At this
time, the compensation standards under ARRA have not yet been developed.
However, we understand that the standards may require alterations to our
compensation program. The impact of ARRA on the retention of our existing, and
recruitment of future, senior officers cannot be assessed at this time, but may
negatively impact our ability to recruit and retain experienced qualified
executives.
Executive
Compensation Components
Our
compensation program is comprised of three components:
·
|
Base
salary that is competitive with levels paid by comparable financial
institutions;
|
·
|
Annual
incentive cash payments based on the attainment of targeted performance
goals; and
|
·
|
Equity-based
compensation, consisting of stock options and restricted stock, based on
the attainment of targeted performance
goals.
|
The
executive compensation plan provides a compensation package that is driven by
our overall financial performance and is competitive with the public and
non-public financial institutions in our market to enable us to attract and
retain executives who we believe are critical to our future
success. The plan establishes a range of percentages of total
compensation for each of the three components set forth above. For
each of our executives, base salary constitutes between 50% and 70% of each
executive’s total compensation, cash incentives constitutes between 10% and 20%
of each executive’s total compensation and equity based compensation constitutes
between 20% and 30% of each executive’s total compensation. The
Committee will establish the target percentage of compensation for each of the
three components at the beginning of each year.
Base Salary
. When
establishing base salaries for our executives, we consider the scope of
executive responsibilities and publicly available information concerning the
compensation paid to executives with similar levels of responsibility by other
comparable public and non-public financial institutions in our
market. Thereafter, our practice has been to increase base salaries
by between 3% and 5% annually to account for a cost of living adjustment,
considering an individual executive’s performance when determining the
percentage within the range.
For 2008,
the Committee reviewed 2006 publicly available national peer group data, the
most recent data available, to ensure that our base salaries, which total
compensation is derived from, were competitive with comparable financial
institutions. The publicly available data showed annual compensation,
which included base salary, annual bonus and other annual compensation and total
compensation, which included annual compensation plus, restricted stock awards,
performance units and other compensation paid due to long-term incentive
plans. The peer groups were: (i) the 54 financial institutions
in the Midwest with assets of $1 billion to $5 billion, (ii) the 52 financial
institutions nationwide with assets of $1 billion to $5 billion and a ROAE of
between 12.50% and 14.99%. As of December 31, 2007, we had total
assets of approximately $1.5 billion and our return on average equity for 2007
was approximately 12.4%.
The
Committee evaluated data on the chief executive officer compensation of the two
peer groups for Mr. Porter and Ms. Bouvette and the chief operating officer and
chief financial officer compensation of the two peer groups for Mr. Pierce. The
Committee evaluated data on the chief credit officer compensation of the two
peer groups for Mr. Harris because his level on the organization chart is the
most comparable to the chief credit officer in the public information that was
available.
The
following table shows the average annual compensation for 2006 paid to chief
executive officers, chief financial officers, chief operating officers and chief
credit officers of the two peer groups described above:
Position
|
Average
Annual Compensation of
Midwest
Financial Institutions with
Assets
of $1 billion to $5 billion
|
Average
Annual Compensation of
Financial
Institutions with Assets of
$1
billion to $5 billion and ROAE of
between
12.50% and 14.99%
|
CEO
|
$402,582
|
$457,942
|
CFO
|
223,173
|
230,604
|
COO
|
409,954
|
337,342
|
CCO
|
174,895
|
184,392
|
The
following table shows the average total compensation for 2006 paid to chief
executive officers, chief financial officers, chief operating officers and chief
credit officers of the two peer groups described above:
Position
|
Average
Total Compensation of
Midwest
Financial Institutions with
Assets
of $1 billion to $5 billion
|
Average
Total Compensation of
Financial
Institutions with Assets of
$1
billion to $5 billion and ROAE of
between
12.50% and 14.99%
|
CEO
|
$532,804
|
$649,500
|
CFO
|
264,499
|
285,248
|
COO
|
482,633
|
474,813
|
CCO
|
198,100
|
261,748
|
Based on
its evaluation of the peer group annual compensation and total compensation
data, the Committee determined not to change the 2008 base salaries for Mr.
Porter, Ms. Bouvette and Mr. Pierce. Instead, Mr. Porter, Ms.
Bouvette and Mr. Pierce were able to earn additional compensation in the form of
restricted stock based on our performance, which is more fully described
below. Mr. Harris’ salary was increased from $130,000 in 2007 to
$136,500 for 2008.
For 2009,
management and the Compensation Committee determined that it was in the
Company’s best interest to implement a company-wide salary freeze given the
sustained weakness in business and economic conditions generally in our
markets. Upon management’s recommendation, the Compensation Committee
agreed to hold salaries for all named executive officers at the same level for
2009. The Committee then used the same process for evaluating base
salaries for all of our named executives as has been used in previous
years. The Committee also reviewed 2007 publicly available national
peer group data, the most recent data available, to ensure that our base
salaries, which total compensation is derived from, were competitive with
comparable financial institutions. The publicly available data showed
annual compensation, which included base salary, annual bonus and other annual
compensation and total compensation, which included annual compensation plus,
restricted stock awards, performance units and other compensation paid due to
long-term incentive plans. The peer groups were: (i) the 61
financial institutions in the Midwest with assets of $1 billion to $5 billion,
(ii) the 40 financial institutions nationwide with assets of $1 billion to $5
billion and a ROAE of between 10.00% and 12.49%. As of December 31,
2008, we had total assets of approximately $1.6 billion and our return on
average equity for 2008 was approximately 10.6%.
The
following table shows the average annual compensation for 2007 paid to chief
executive officers, chief financial officers, chief operating officers and chief
credit officers of the two peer groups described above:
Position
|
Average
Annual Compensation of
Midwest
Financial Institutions with
Assets
of $1 billion to $5 billion
|
Average
Annual Compensation of
Financial
Institutions with Assets of
$1
billion to $5 billion and ROAE of
between
10.00% and 12.49%
|
CEO
|
$387,002
|
$399,541
|
CFO
|
208,476
|
219,380
|
COO
|
269,890
|
253,826
|
CCO
|
220,586
|
213,754
|
The
following table shows the average total compensation for 2006 paid to chief
executive officers, chief financial officers, chief operating officers and chief
credit officers of the two peer groups described above:
Position
|
Average
Total Compensation of
Midwest
Financial Institutions with
Assets
of $1 billion to $5 billion
|
Average
Total Compensation of
Financial
Institutions with Assets of
$1
billion to $5 billion and ROAE of
between
10.00% and 12.49%
|
CEO
|
$490,228
|
$566,443
|
CFO
|
243,769
|
274,966
|
COO
|
317,009
|
327,629
|
CCO
|
253,000
|
299,729
|
Based on
its evaluation of the peer group annual compensation and total compensation
data, the Committee determined that the current salaries of the named executive
officers was comparable to the peer groups described above.
Cash Incentives.
Under our
2008 cash incentive plan, our named executive officers, were able to earn up to
a maximum of 30% of their base salary based upon our attainment of
pre-established performance objectives. The performance criteria
objectives were earnings per share, return on average assets, return on average
equity, net interest margin and efficiency. We used these performance
criteria metrics because we believe that these are the metrics that (i) drive
shareholder value and (ii) are used by our investors to evaluate
us. We use corporate performance measures instead of individual
performance measures because our philosophy emphasizes teamwork.
The
performance components, except earnings per share, are measured against our
peers’ performance instead of budget, which had been used in previous
years. We believe that measuring our performance against our peers is
more appropriate because it (i) reduces the subjectivity that may exist in the
budgetary process, (ii) takes into consideration changes in business conditions
that affect the entire industry over the year and (iii) provides an incentive
for our executives to try to outperform our peers on a relative
basis. Our peer group includes:
·
|
Bank
of Kentucky Financial Corporation
|
·
|
Community
Bank Shares of Indiana, Inc.
|
·
|
Community
Trust Bancorp, Inc.
|
·
|
Farmers
Capital Bank Corporation
|
·
|
First
Financial Service Corporation
|
·
|
Integra
Bank Corporation
|
The peer group, which consists of
publicly traded bank holding companies of comparable size that compete in our
markets, was selected by management and the Compensation
Committee. Earnings per share will be measured against our prior year
performance because we believe that the measurement of earnings per share over a
one-year period is one of the most prevalent metrics for bank performance in the
marketplace. We also believe that this metric will further align the incentives
of our management with shareholders by providing an incentive for executives to
try to exceed our prior year’s performance.
Under our
2008 cash incentive plan, our named executive officers were able to earn up to a
maximum of 30% of their base salary based upon our attainment of pre-established
targets for the performance criteria components set forth in the table
below. The following table shows the pre-established 2008 targets and
the corresponding percentage of salary earned for attaining the
target:
Objective
|
|
|
Level
1 Target Goal
|
|
Cash
award as
percentage
of
Salary
|
|
|
Level
2 Target Goal
|
|
Cash
award as
percentage
of
Salary
|
|
Earnings
per share
|
|
|
105%
of 2007 EPS
|
|
|
3%
|
|
|
110%
of 2007 EPS
|
|
|
6%
|
|
Return
on average assets
|
|
|
100%
of peer median
|
|
|
3%
|
|
|
110%
of peer median
|
|
|
6%
|
|
Return
on average equity
|
|
|
100%
of peer median
|
|
|
3%
|
|
|
110%
of peer median
|
|
|
6%
|
|
Net
interest margin
|
|
|
100%
of peer median
|
|
|
3%
|
|
|
110%
of peer median
|
|
|
6%
|
|
Efficiency
ratio
|
|
|
100%
of peer median
|
|
|
3%
|
|
|
110%
of peer median
|
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
15%
|
|
|
|
|
|
30%
|
|
In 2008,
our named executive officers earned cash incentive bonuses totaling 18% of
salary. The following table shows Porter Bancorp’s CORE data
published by SNL and the individual bonus targets for our executives attained in
2008:
Objective
|
|
Porter
Bancorp
|
|
|
Actual
Level 1
Target
|
|
|
Actual
Level 2
Target
|
|
|
Cash
award as
percentage
of
Salary
|
|
Earnings
per share
|
|
|
$1.68
|
|
|
$1.86
|
|
|
$1.95
|
|
|
0.0%
|
|
Return
on average assets
|
|
|
0.90%
|
|
|
0.79%
|
|
|
0.87%
|
|
|
6.0%
|
|
Return
on average equity
|
|
|
10.73%
|
|
|
9.29%
|
|
|
10.21%
|
|
|
6.0%
|
|
Net
interest margin
|
|
|
3.17%
|
|
|
3.70%
|
|
|
4.06%
|
|
|
0.0%
|
|
Efficiency
ratio
|
|
|
49.50%
|
|
|
63.32%
|
|
|
57.56%
|
|
|
6.0%
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
18.0%
|
|
Each named
executive officer was also entitled to a supplemental senior leadership team
bonus of up to $5,000 if our earnings per share increased by 10% or more in 2008
from 2007. No supplemental bonuses were earned in 2008.
Before
ARRA was enacted, the Compensation Committee adopted the same cash incentive
plan for 2009 that was in place in 2008, with the maximum bonus for named
executive officers being 30% of base salary. If we are not required
by the forthcoming rules under ARRA to make changes to our cash incentive plan,
we expect to award cash bonuses at the end of the first quarter of 2010, after
2009 peer group data becomes available.
ARRA
directs the Treasury to adopt compensation standards that prevent us from paying
or accruing any bonus, retention award or incentive compensation to our five
most highly-compensated employees. As a result, once established, these new
compensation standards may preclude any payment of annual incentive compensation
and other short-term incentives to our five most highly-compensated employees
until Porter Bancorp no longer participates in the CPP. Accordingly, our 2009
cash incentive program, if any, may be different from the 2009 program that has
been adopted.
Equity-Based
Compensation
. In February 2006, we established the Porter
Bancorp, Inc. 2006 Stock Incentive Plan in anticipation of becoming a public
company. The 2006 Plan authorizes the issuance of up to 400,000
shares in the form of stock options and restricted stock awards.
The
Compensation Committee has the authority to award options and restricted stock
awards under the 2006 Plan and to determine the amounts and
awards. Although the 2006 Plan authorizes both stock options and
restricted stock grants, at this time, the Committee intends to award restricted
stock in lieu of stock options because the Committee believes that restricted
stock is a better currency to reward our executives and is reflective of current
market trends. Stock options also have a less favorable financial
impact. Grants of restricted stock are also intended to increase stock ownership
by our executives and further align the incentives of our management and
shareholders. The shares of restricted stock granted to our executives may not
be transferred, and, subject to a few exceptions, will be forfeited if the
recipient’s employment with us ends, for a period of up to five years after the
grant date. Because of the risk of forfeiture if the recipient’s employment ends
before the restrictions have terminated, restricted stock grants also serve as a
valuable retention tool.
The
Compensation Committee has established a process for determining the amount of
restricted stock grant awards to be made each year. The Committee
will initially set the maximum dollar value of equity incentive compensation as
a percentage of base salary. For 2008, the maximum dollar value of
equity incentive compensation as a percentage of base salary was 30%, which we
refer to as the “equity goal.” At the beginning of 2008, the
Compensation Committee determined to not increase the salaries for Mr. Porter,
Ms. Bouvette and Mr. Pierce for 2008, but each of Mr. Porter, Ms. Bouvette and
Mr. Pierce were entitled to receive 150% of the achieved equity goal received by
our other senior executives in the form of restricted stock. As a
result, the maximum dollar value of equity incentive compensation for Mr.
Porter, Ms. Bouvette and Mr. Pierce as a percentage of base salary was
45%.
This
maximum dollar value assumes we achieve our maximum performance level, which is
currently set at 125% of the peer average in each of the four equity incentive
components, which are return on average assets, return on average equity, net
interest margin and efficiency ratio. As with our cash incentive
plan, we use corporate performance measures instead of individual performance
measures because our philosophy emphasizes teamwork. The following
table provides the reward factors for the two levels of achievement for each of
the components for 2008:
Objective
|
Peer
Median
|
125%
of Peer Median
|
Return
on average assets
|
15%
|
25%
|
Return
on average equity
|
15%
|
25%
|
Net
interest margin
|
15%
|
25%
|
Efficiency
ratio
|
15%
|
25%
|
Total
|
60%
|
100%
|
The peer group for the calculation of
equity incentive awards is comprised of the same publicly traded bank holding
companies used for the cash incentive plan. The following table shows
the 2008 Porter Bancorp and peer computations using CORE Data published by SNL
and the corresponding reward factor awarded:
Objective
|
Peer
Median
|
125%
of
Peer
Median
|
Porter
Bancorp
|
Reward
Factor
|
Return
on average assets
|
0.79%
|
0.99%
|
0.90%
|
15%
|
Return
on average equity
|
9.29%
|
11.61%
|
10.73%
|
15%
|
Net
interest margin
|
3.70%
|
4.63%
|
3.17%
|
0%
|
Efficiency
ratio
|
63.32%
|
50.66%
|
49.50%
|
25%
|
Total
|
|
|
|
55%
|
Based on
the computations above, the Compensation Committee approved grants of shares of
restricted stock equal to 55% of the applicable equity goal (55% of 45% or 30%
of base salary is equal to 24.75% or 16.5% of base salary, respectively). Based
on the closing price of $11.39 on March 20, 2009, the named executive officers
were awarded the following shares of restricted stock:
Name
|
Base
Salary
|
Percentage
of
Salary
|
Dollar
Value of
Restricted
Shares
|
Number
of Shares
of
Restricted
Stock
Awarded
|
J.
Chester Porter
|
$350,000
|
24.75%
|
$86,625
|
7,605
|
Maria
L. Bouvette
|
350,000
|
24.75%
|
86,625
|
7,605
|
David
B. Pierce
|
245,000
|
24.75%
|
60,638
|
5,324
|
C.
Bradford Harris
|
136,500
|
16.50%
|
22,523
|
1,977
|
For the
year 2009, the Compensation Committee has approved the same formula for
calculation of restricted stock awards used in 2009 that was used in
2008. For 2009, the Compensation Committee set the equity goal as 30%
for senior executives and 45% for Mr. Porter, Ms. Bouvette and Mr.
Pierce. Equity incentive awards are expected to be granted at the end
of the first quarter or the beginning of the second quarter of each year once we
receive all of the peer data necessary to make the peer average
calculations.
As
previously discussed, ARRA directs the Treasury to adopt compensation standards
that include a prohibition on incentives other than a limited amount of
restricted stock. As a result, once established, these new compensation
standards may require us to revise our 2009 program that has been
adopted.
Other
Benefits
401(k) Plan
. All of our full-
and part-time employees, including our named executive officers, are eligible to
participate in our 401(k) Plan after 90 days of employment. Subject to certain
limitations imposed by federal tax laws, employees may contribute up to 15% of
their compensation per year. We contribute a safe-harbor matching contribution
equal to 50% of the participants’ first 4% of deferred compensation
contribution. At our discretion, we may make an additional contribution each
plan year.
Supplemental Executive Retirement
Plan
. PBI Bank has a Supplemental Executive Retirement Plan to
provide additional benefits for certain key officers. David B. Pierce
is the only named executive officer that participates in the SERP. It is not
currently anticipated that any other executives will be added to this
plan.
Pursuant
to the SERP, we are obligated to pay each participant, or his or her
beneficiaries, at the participant’s retirement or death, monthly retirement
income for 10 years equal to 30% of the participants projected
salary. Participants begin to vest in this benefit after five years
of service and fully vest after ten years of service. In addition, we
must pay benefits if the participant’s employment terminates before retirement
age (other than by death or for cause) or if the participant is terminated
within three years following a change-in-control. The payment of
benefits upon a change-in-control is described under the heading “Potential
Payments Upon Termination or Change-In-Control” in the Executive Compensation
section. The estimated cost of the plan is being accrued over the
period of active employment of the participants. We adopted this plan in 2004.
As of December 31, 2008, $717,000 had been accrued as a liability for the plan.
The amount charged to operations totaled $180,000 in 2008. In order
to provide earnings to offset plan expenses, PBI Bank purchased life insurance
on the plan participants. As of December 31, 2008, the cash surrender
value of the bank owned life insurance was approximately
$7.2 million. Income earned from the cash surrender value of the
life insurance totaled $300,000 in 2008.
COMPENSATION COMMITTEE
REPORT
Porter
Bancorp’s Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K with
management and, based on such review and discussions, has recommended to the
Board that the Compensation Discussion and Analysis be included in this Proxy
Statement.
In
addition, as required by the provisions of the U.S. Treasury’s Capital Purchase
Program, the Committee certifies that it has reviewed with the senior risk
officers of Porter Bancorp, the senior executive officer incentive compensation
arrangements, and has made reasonable efforts to ensure that such arrangements
do not encourage senior executive officers to take unnecessary and excessive
risks that threaten the value of the Company.
The
Compensation Committee
EXECUTIVE
COMPENSATION
The
following table discloses the compensation received by Porter Bancorp’s chief
executive officer, chief financial officer, and the other most highly paid
executive officers (all four of these individuals are referred to as the “named
executive officers”) during the year ended December 31, 2008.
Summary
Compensation Table
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
(1)
($)
|
Option
Awards
(2)
(
$)
|
Non-Equity
Incentive
Plan
Compensation
(3)
($
)
|
Change
in
Nonqualified
Deferred
Compensation
Earnings
(4)
($)
|
All
Other
Compensation
(5)
($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
J.
Chester Porter
|
2008
|
$350,000
|
-
|
$10,617
|
-
|
$63,000
|
-
|
$49,145
|
$472,762
|
Chairman
of the Board and General Counsel of Porter Bancorp and PBI
Bank
|
2007
2006
|
$350,000
$350,000
|
-
-
|
-
-
|
-
-
|
$40,750
$60,750
|
-
-
|
$36,165
$42,150
|
$426,915
$452,900
|
|
|
|
|
|
|
|
|
|
|
Maria
L. Bouvette
|
2008
|
$350,000
|
-
|
$10,617
|
-
|
$63,000
|
-
|
$41,430
|
$465,047
|
President
and CEO of Porter Bancorp and PBI Bank
|
2007
2006
|
$350,000
$350,000
|
-
-
|
-
-
|
-
-
|
$40,750
$60,750
|
-
-
|
$37,002
$39,052
|
$427,752
$450,127
|
|
|
|
|
|
|
|
|
|
|
David
B. Pierce
|
2008
|
$245,000
|
-
|
$
7,431
|
-
|
$44,000
|
$48,915
|
$39,225
|
$384,571
|
Chief
Financial Officer of Porter Bancorp and Chief Strategic Officer of PBI
Bank
|
2007
2006
|
$245,000
$245,000
|
-
-
|
-
-
|
-
-
|
$29,725
$43,425
|
$46,073
$43,378
|
$39,546
$39,052
|
$360,344
$370,855
|
|
|
|
|
|
|
|
|
|
|
C.
Bradford Harris
|
2008
|
$136,050
|
-
|
$
8,372
|
$5,500
|
$24,570
|
-
|
$15,573
|
$190,515
|
Executive
Vice President and Corporate General Counsel of Porter
Bancorp
|
2007
|
$130,000
|
-
|
$
4,428
|
$5,500
|
$17,650
|
-
|
$13,694
|
$161,344
|
____________
(
1
)
|
|
The
amounts reflected in this column are the amounts required to be expensed
in accordance with SFAS 123(R) for equity grants. Each of the
named executive officers was granted shares of restricted stock based on
the Company’s 2007 performance as more fully described in the Compensation
Disclosure and Analysis. Mr. Porter and Ms. Bouvette each
received a grant of restricted stock in 2008 with a total value of $73,500
(3,952 shares at a per share price of $18.5999); Mr. Pierce received a
grant of restricted stock in 2008 with a total value of $51,450 (2,766
shares at a per share price of $18.5999); and Mr. Harris received a grant
of restricted stock in 2008 with a total value of $27,300 (1,468 shares at
a per share price of $18.5999). Mr. Harris received a grant of
restricted stock in 2006 with a total value of $44,260 (2,000 shares at a
per share price of $22.13).
|
(
2
)
|
|
The
amount reflected in this column are the amounts required to be expensed in
accordance with SFAS 123(R) for grants of stock options. In
2006, Mr. Harris was granted an option to buy 5,000 shares of common stock
at a strike price of $25.50. The options vest over three years
in 1/6th increments on each six month anniversary of the
grant.
|
(
3
)
|
|
The
amounts reflect the cash awards paid to the named executives at the
beginning of March 2009 under the Cash Incentive Plan, which is discussed
in further detail under the heading “Cash Incentives,” under “Executive
Compensation Components.”
|
(
4
)
|
|
The
amounts reflect the increase in the present value of Supplemental
Executive Retirement Benefit accrual from the previous year for the named
executive officer’s benefit. Please see Pension Benefits table
for explanation of benefit and disclosure of present value of accumulated
benefit as of December 31, 2008.
|
(
5
)
|
|
All
other compensation for the named executive officers is set forth
below.
|
Name
|
|
|
Vehicle
Allowance
|
|
401(k)
Matching
Contribution
|
|
401(k)
Annual
Profit
Sharing
Contribution
|
|
|
Premiums
Paid
for Life
Insurance
For
Benefit of
Employee
|
Director Fees
|
Total
Other
Compensation
|
|
J.
Chester Porter
|
|
|
$ 16,342
|
|
$ 4,600
|
|
$ 5,953
|
|
|
-
|
22,250
|
$ 49,145
|
|
Maria
L. Bouvette
|
|
|
$ 9,320
|
|
$ 3,907
|
|
$ 5,953
|
|
|
-
|
22,250
|
$ 41,430
|
|
David
B. Pierce
|
|
|
$ 8,161
|
|
$ 4,600
|
|
$ 5,953
|
|
|
$ 14,511
|
6,000
|
$ 39,225
|
|
C.
Bradford Harris
|
|
|
$ 8,500
|
|
$ 3,083
|
|
$ 3,990
|
|
|
-
|
-
|
$ 15,573
|
|
Grants
of Plan-Based Awards
The
following table details all equity-based awards granted to each of the officers
named in the Summary Compensation Table in 2008.
Our equity
grants have been issued under the Porter Bancorp, Inc. 2006 Stock Incentive
Plan, which was established in February 2006 in anticipation of becoming a
public company. The 2006 Plan authorizes the issuance of up to
400,000 shares in the form of stock options and restricted stock
awards. Although the 2006 Plan authorizes both stock options and
restricted stock grants, at this time, the Company is awarding restricted stock
only. The method for granting restricted stock is more fully
described in the Compensation Disclosure and Analysis.
Grants
of Plan-Based Award
Name
|
Grant Date
|
Approval
Date
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or Units
(#)
(1)
|
Grant
Date
Fair
Value of
Stock Awards
|
J.
Chester Porter
|
April
11, 2008
|
April
10, 2008
|
3,952
|
$73,507
|
Maria
L. Bouvette
|
April
11, 2008
|
April
10, 2008
|
3,952
|
$73,507
|
David
B. Pierce
|
April
11, 2008
|
April
10, 2008
|
2,766
|
$51,448
|
C.
Bradford Harris
|
April
11, 2008
|
April
10, 2008
|
1,468
|
$27,305
|
____________
(1)
|
|
The
2008 equity-based awards for Mr. Porter, Ms. Bouvette,
Mr. Pierce and Mr. Harris were made under the 2006 Stock
Incentive Plan. Grants of restricted stock on April 11,
2008 were awarded based on the company’s performance in 2007, which was
equal to 21% of the named executive officer’s base salary. The
restricted shares are shares of our common stock that may not be
transferred, and are subject to forfeiture, over a specified
period. The named executive officers that are granted
restricted shares have all of the same rights as a shareholder, including
the right to vote the restricted shares and the right to receive dividends
The restricted stock vests at the rate of 20% on each one-year anniversary
of the grant date. If a named executive officer ceases to be
employed for any reason, the officer will automatically forfeit the
unvested portion of the restricted shares. In the event of a
change in control, the restriction on the sale of any unvested restricted
shares will end.
|
Outstanding
Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
1
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
Option
Exercise
Price($)
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or
Units
of
Stock
that
Have Not
Vested(#
)
|
|
Market
Value
of Shares
or
Units
of
Stock
That Have
Not
Vested ($
)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or
Other Rights
That
Have
Not
Vested(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested($)
|
J.
Chester Porter
|
|
10,296
(1)
|
|
-
|
|
-
|
|
$26.71
|
|
03/15/2010
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Maria
L. Bouvette
|
|
10,296
(1)
|
|
-
|
|
-
|
|
$26.71
|
|
03/15/2010
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
David
B. Pierce
|
|
92,658
(1)
|
|
-
|
|
-
|
|
$24.29
|
|
03/15/2010
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C.
Bradford Harris
|
|
3,501
(2)
|
|
1,749
(2)
|
|
|
|
$21.08
|
|
10/19/2011
|
|
1,680
(3)
|
|
$26,544
(4)
|
|
-
|
|
|
-
|
____________
|
|
The
options were issued under the Ascencia Bancorp stock option
plan. The number of shares has been adjusted to reflect a 5%
stock dividend paid on November 10, 2008.
|
(2)
|
|
The
options were issued under our Stock Incentive Plan on October 19,
2006. The options are exercisable as to one-sixth of the
underlying shares on each six month anniversary though October 19,
2009. The number of shares has been adjusted to reflect a 5%
stock dividend paid on November 10, 2008.
|
(3)
|
|
These
restricted shares were issued pursuant to the Porter Bancorp, Inc. 2006
Stock Incentive Plan on October 19, 2006. Generally, the
restrictions as to transferability of the shares will lapse as to 10% of
the shares on October 19 of each year through 2017.
|
(4)
|
|
Based
on the closing price of $15.80 of our common stock at December 31,
2008.
|
Option
Exercises and Stock Vested
|
|
Option
Awards
|
|
Stock
Awards
|
Name
|
|
Number
of Shares
Acquired
on
Exercise (#)
|
|
Value
Realized
on Exercise($)
|
|
Number
of Shares
Acquired
on
Vesting (#)
|
|
Value
Realized
on Vesting ($)
|
|
|
|
|
|
|
|
|
|
J.
Chester Porter
|
|
—
|
|
—
|
|
—
|
|
—
|
Maria
L. Bouvette
|
|
—
|
|
—
|
|
—
|
|
—
|
David
B. Pierce
|
|
—
|
|
—
|
|
—
|
|
—
|
C.
Bradford Harris
|
|
—
|
|
—
|
|
200
(1)
|
|
$3,950
(2)
|
____________
(1)
|
One-tenth
of the 2,000 restricted shares awarded on October 19, 2006 vested on
October 19, 2008.
|
(2)
|
Based
on the closing price of $19.75 of our common stock at October 19,
2008.
|
Pension
Benefits
The
following table sets forth, in specified years of credited service, the
estimated present value of accumulated benefits under the supplemental executive
retirement plan adopted by the Bank in July 2004.
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Number
of
Years
Credited
Service
(#)
|
|
Present
Value
of
Accumulated
Benefits
($)
(1)
|
|
Payments
During
Last
Fiscal Year
($)
|
David
B. Pierce
|
|
Supplemental
executive
retirement
plan
|
|
N/A
|
|
|
$ 195,865
|
|
—
|
____________
(1)
|
|
Reports
the present value of the obligation to Mr. Pierce upon retirement at age
62 as of the end of the fiscal year. The plan is designed to provide
monthly retirement income to Mr. Pierce for ten years equal to 30% of his
projected salary at age 62. This projected salary was determined at
plan inception. The present value utilizes a discount rate of
6%. The supplemental executive retirement plan is discussed in
further detail under the heading “Other Benefits” in the Compensation
Disclosure and Analysis section.
|
Potential
Payments upon Termination or Change-in-Control
We have no
agreements or understandings with our executive officers that provide for
payments upon termination of employment or a change-in-control of our Company,
except for the benefits that participants in the Supplemental Executive
Retirement Plan, including Mr. Pierce, may receive upon retirement or other
terminations of employment. Plan participants will not receive any benefits
under the SERP for termination of employment, other than as a result of a change
of control, until the year 2009.
Upon a
change of control followed within 36 months by the voluntary or involuntary
termination of employment, a plan participant will receive a lump sum payment
equal to the present value of the obligation such participant would be entitled
to receive upon retirement at age 62. A change of control is defined
under the Plan as (a) the acquisition of 50% or more of our capital stock, (b) a
change in the composition of a majority of our directors or (c) the adoption of
a merger, consolidation or reorganization plan by the board of directors in
which the Company is not the surviving entity. Under this change of
control provision, Mr. Pierce would have received a lump sum payment equal to
$493,679 if he had been terminated on December 31, 2008 and a change of control
of the Company had occurred within three years prior to such
date. The Supplemental Executive Retirement Plan is described in
further detail under the heading “Other Benefits” in the Compensation Disclosure
and Analysis section.
EQUITY
PLAN INFORMATION
The
following table provides information about our equity compensation plans as of
December 31, 2008.
Plan category
|
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise
price of
outstanding options,
warrants and rights
|
|
Number of securities
remaining available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected in
column (a))
|
Equity
compensation plans approved by shareholders
|
|
283,629
(1)
|
|
|
$
|
24.03
|
|
280,294
(2)
|
Equity
compensation plans not approved by shareholders
|
|
—
|
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
Total
|
|
283,629
|
|
|
$
|
24.03
|
|
280,294
|
|
|
|
|
|
|
|
|
|
____________
(1)
|
Includes
199,809 shares of common stock under the 2000 Stock Option Plan of
Ascencia Bank, Inc., 38,670 shares of common stock under the Porter
Bancorp, Inc. 2006 Stock Incentive Plan and 45,150 shares of common stock
under the Porter Bancorp, Inc. 2006 Non-employee Directors Stock Ownership
Incentive Plan.
|
|
|
(2)
|
249,285
of these shares may be issued under our 2006 Stock Incentive Plan as stock
options or restricted stock grants and 31,009 of these shares may be
issued under our Non-employee Directors Stock Ownership Incentive Plan as
stock options or grants of restricted
stock.
|
PROPOSAL
NO. 2 – NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
As
previously discussed in the Compensation Disclosure and Analysis, Congress
enacted ARRA in February 2009. ARRA imposes a number of requirements on
financial institutions, such as Porter Bancorp, that received an investment
under the Capital Purchase Program of the United States Treasury’s Troubled
Asset Relief Program. One of the requirements is that at each annual meeting of
shareholders during the period in which any obligation arising from TARP
financial assistance remains outstanding, TARP recipients must permit a separate
nonbinding “say on pay” shareholder vote to approve the compensation of
executives.
This
proposal gives you as a shareholder the opportunity to vote for or against the
following resolution:
“RESOLVED,
that the shareholders approve the compensation of Porter Bancorp’s executives
named in the Summary Compensation Table of this Proxy Statement, as disclosed
pursuant to the compensation disclosure rules of the Securities and Exchange
Commission, which disclosure includes the Compensation Discussion and Analysis,
the compensation tables and the related narratives and other materials in this
Proxy Statement.”
Because
your vote is advisory, it will not be binding upon the Board and may not be
construed as overruling any decision by the Board. However, the Compensation
Committee may, in its sole discretion, take into account the outcome of the vote
when considering future executive compensation arrangements.
Shareholders
are encouraged to carefully review the “Compensation Discussion and Analysis”
and “Executive Compensation” sections of this proxy statement for a detailed
discussion of the Company’s executive compensation.
Board
of Directors Recommendation
Our
overall executive compensation policies and procedures are described in the
Compensation Discussion and Analysis and the tabular disclosure regarding named
executive officer compensation (together with the accompanying narrative
disclosure) in this proxy statement. Our compensation policies and procedures
are centered on a pay-for-performance structure and are strongly aligned with
the long-term interests of our shareholders, as described in the Compensation
Discussion and Analysis. The Compensation Committee oversees our executive
compensation and regularly monitors our policies to ensure they continue to
emphasize programs that reward executives for results that are consistent with
shareholder interests.
Our Board
and our Compensation Committee believe that our commitment to these responsible
compensation practices justifies a vote by shareholders FOR the resolution
approving the compensation of our executives as disclosed in this proxy
statement.
The
Board unanimously recommends you vote “FOR” this Proposal 2. Proxies solicited
by the Board will be voted “FOR” this proposal unless otherwise instructed on
the proxy card.
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Engagement
of Independent Auditors
At its
meeting held on May 9, 2008, the Audit Committee selected Crowe Horwath, LLP to
serve as Porter Bancorp’s independent registered public accounting firm and
auditors for the fiscal year ending December 31, 2008. Crowe Horwath, LLP
or its predecessor has served as Porter Bancorp’s independent registered public
accounting firm since the 1988 fiscal year. Crowe Horwath, LLP
representatives are expected to attend the 2009 Annual Meeting and will be
available to respond to appropriate shareholder questions and will have the
opportunity to make a statement if they desire to do so.
Fees
Incurred by Porter Bancorp for Crowe Horwath, LLP
The
following table presents fees for professional services rendered by Crowe
Horwath, LLP for the audit of the Corporation’s annual financial statements for
2008 and 2007 and fees billed for audit-related services, tax services, and all
other services rendered by Crowe Horwath, LLP for 2008 and 2007.
|
|
2008
|
|
|
2007
|
|
Audit
Fees
|
|
$
|
217,359
|
|
|
$
|
188,117
|
|
Audit-Related
Fees
|
|
|
19,415
|
|
|
|
12,525
|
|
Tax
Fees
|
|
|
37,035
|
|
|
|
23,350
|
|
All
Other Fees
|
|
|
4,261
|
|
|
|
22,505
|
|
As defined
by the SEC, (i) “audit fees” are fees for professional services rendered by the
company’s principal accountant for the audit of the company’s annual financial
statements and review of financial statements included in the company’s Form
10-Q, or for services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for those fiscal years;
(ii) “audit-related fees” are fees for assurance and related services by
the company’s principal accountant that are reasonably related to the
performance of the audit or review of the company’s financial statements and are
not reported under “audit fees,” including fees related to the Company’s
registration on Form S-3 in 2008 and registrations on Form S-4 and S-8 in 2007;
(iii) “tax fees” are fees for professional services rendered by the company’s
principal accountant for tax compliance, tax advice, and tax planning; and (iv)
“all other fees” are fees for products and services provided by the company’s
principal accountant, other than the services reported under “audit fees,”
“audit-related fees,” and “tax fees.”
Under
applicable SEC rules, the Audit Committee is required to pre-approve the audit
and non-audit services performed by the independent auditors in order to ensure
that they do not impair the auditors’ independence. The SEC’s rules specify the
types of non-audit services that an independent auditor may not provide to its
audit client and establish the Audit Committee’s responsibility for
administration of the engagement of the independent auditors.
Consistent
with the SEC’s rules, the Audit Committee Charter requires that the Audit
Committee review and pre-approve all audit services and permitted non-audit
services provided by the independent auditors to us or any of our subsidiaries.
The Audit Committee may delegate pre-approval authority to a member of the Audit
Committee and if it does, the decisions of that member must be presented to the
full Audit Committee at its next scheduled meeting.
REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit
Committee of the Board of Directors is comprised of three directors, each of
whom the Board has determined to be an independent director as defined by the
NASDAQ corporate governance rules. The duties of the Audit Committee are
summarized in this Proxy Statement under “Committees of the Board” and are more
fully described in the Audit Committee charter adopted by the Board of
Directors.
It is the
responsibility of management to prepare the consolidated financial statements
and the responsibility of Crowe Horwath, LLP, Porter Bancorp’s independent
registered public accounting firm, to audit the consolidated financial
statements in accordance with the United States generally accepted auditing
standards.
In
connection with its review of Porter Bancorp’s consolidated financial statements
for 2008, the Audit Committee:
·
|
has
reviewed and discussed the audited consolidated financial statements with
management;
|
·
|
has
discussed with the independent registered public accounting firm, the
matters required to be discussed by Statement on Auditing Standard No. 61,
Communication with Audit
Committees, as amended, as adopted by the Public Company accounting
Oversight Board in Rule
3200T
;
|
·
|
has
received the written disclosures and the letter from the independent
registered public accounting firm required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with
Audit Committees
), and has discussed with the independent
registered public accounting firm, the independent registered public
accounting firm’s independence;
and,
|
·
|
has
approved the audit and non-audit services of the independent registered
public accounting firm for 2008.
|
Based upon
the review and discussions referred to in the preceding paragraph, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements for 2008 be included in Porter Bancorp’s Annual Report on
Form 10-K for the year ended December 31, 2008 filed with the
Securities and Exchange Commission.
Members
of the Audit Committee:
David L.
Hawkins, CPA, Chairman
Sidney L.
Monroe, CPA
Stephen A
Williams
SHAREHOLDER
PROPOSALS AND NOMINATIONS
In order
for a shareholder proposal to be brought before Porter Bancorp’s 2010 Annual
Meeting of Shareholders, the written proposal must be received by the Corporate
Secretary of Porter Bancorp at the address below no later than December 17,
2009. The notice of a proposed item of business must provide information
as required in our bylaws which, in general, require that the notice include for
each matter a brief description of the matter to be brought before the meeting;
the reason for bringing the matter before the meeting; your name, address, and
number of shares you own; and any material interest you have in the
proposal. In order for a shareholder proposal to be considered for
inclusion in our proxy statement for the 2010 Annual Meeting of Shareholders,
the proposal will also need to comply with the SEC’s regulations under
Rule 14a-8 regarding the inclusion of shareholder proposals in company
sponsored proxy materials. Proposals should be addressed to:
Porter
Bancorp, Inc.
Attn:
Corporate Secretary
2500
Eastpoint Parkway
Louisville,
Kentucky 40223
If you
want to nominate a person for election as a director, you must provide written
notice to the Corporate Secretary at the address above. The Corporate Secretary
must receive this notice not later than December 17, 2009. The notice of a
proposed director nomination must provide information as required in our bylaws
which, in general, require that the notice of a director nomination include your
name, address and a representation that you are a shareholder and entitled to
vote for directors; the information that would be required to be disclosed in
the solicitation of proxies for the election of a director under federal
securities laws. You must submit the nominee’s consent to be elected and to
serve. A copy of the bylaw requirements will be provided upon request made to
the Corporate Secretary at the address above.
A copy of
our 2008 Annual Report on Form 10-K is enclosed. Shareholders and
prospective investors may request a copy of our 2008 Annual Report on Form 10-K
by writing to C. Bradford Harris, Corporate General Counsel, Porter Bancorp,
Inc., 2500 Eastpoint Parkway, Louisville, Kentucky 40223. The Form 10-K is
also available from the SEC’s website at
www.sec.gov
or from
our website at
www.pbibank.com
. Click
on “Investor Relations” and “SEC Filings.”
Porter
Bancorp will pay the cost of soliciting proxies. Proxies may be solicited on
behalf of Porter Bancorp by directors, officers or employees by mail, in person
or by telephone, facsimile or other electronic means.
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