Porter Bancorp, Ky., Seeks to Increase Common Shares

Porter Bancorp (PBIB) has asked shareholders to approve a proposal that would drastically increase the number of common shares it could issue to help the company meet minimum capital ratios.

The $1.5 billion-asset company is currently authorized to issue up to 19 million shares of voting common stock and roughly 1.4 million shares of nonvoting common stock. Under the proposal, Porter would be able to issue up to 86 million shares of voting common stock and about 34.4 million shares of nonvoting common stock, the Louisville, Ky., company said in a proxy statement filed with the Securities and Exchange Commission on Friday.

On March 28, Porter had roughly 11.8 million outstanding shares of common stock.

Its capital levels currently fall below the 9% Tier 1 leverage ratio and 12% total risk-based capital ratio required by a consent order with regulators. At Dec. 31, its Tier 1 leverage ratio for the company’s bank, PBI Bank, was 6.23% and the bank’s total risk-based capital ratio totaled 10.86%.

Regulators have “strongly encouraged” the company to increase capital because of elevated levels of adversely classified assets, Porter said in the filing. But the company said that its ability to raise capital through a stock sale was limited because it currently has fewer than 5 million shares of common stock that it can sell.

Having additional shares available would increase the “company’s capacity to raise capital by issuing common stock,” Porter said.

Shareholders will vote on the change at Porter’s annual meeting on May 16.

In late March, Porter revised upward its loss for 2011 by $9 million, to $105.2 million, after adding to its loan-loss provision and recording a reversal in interest income.