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[PROVIDENT BANKSHARES CORPORATION LETTERHEAD]
November 23, 2005
Mr. Amit Pande
Assistant Chief Accountant
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
RE: PROVIDENT BANKSHARES CORPORATION
FORM 8-K
FILED NOVEMBER 14, 2005
FILE NO. 000-16421
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Dear Mr. Pande:
This letter serves as the response of Provident Bankshares Corporation
("Provident" or the "Company") to the Staff's comment letter dated November 17,
2005 regarding the above-referenced filing. The Form 8-K filed on November 14,
2005 that is the subject of the Staff's comment letter is referred to in this
response as the "Form 8-K." To aid in your review, we have repeated the Staff's
comments followed by the Company's responses.
COMMENT NO. 1
WE NOTE THAT YOU INTEND TO FILE RESTATED FINANCIAL STATEMENTS. PLEASE
SPECIFICALLY TELL US HOW AND WHEN YOU WILL FILE THEM.
RESPONSE TO COMMENT NO. 1
As disclosed in Item 4.02(a) of the Form 8-K, the Company intends to
file amended quarterly reports on Form 10-Q for the periods ended June 30, 2005
and March 31, 2005, and an amended annual report on Form 10-K for the period
ended December 31, 2004. These reports will contain restated financial
statements for the periods covered by the reports, and, in the case of the
amended quarterly reports on Form 10-Q for the periods ended June 30, 2005 and
March 31, 2005, the comparable prior year interim period and year- to-date
amounts. The Company expects to file the amended reports during the week of
December 26, 2005 but no later than January 3, 2006. Please note that the
Company's Form 10-Q for the period ended September 30, 2005 (filed with the SEC
on November 17, 2005) discloses all material adjustments to be made to the
Company's restated financial statements for the periods to be covered by the
amended reports. This information may be found on pages 10-12 of the September
30, 2005 Form 10-Q.
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Mr. Amit Pande
November 23, 2005
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COMMENT NO. 2
PLEASE REVISE TO INCLUDE A STATEMENT OF WHETHER THE AUDIT COMMITTEE OR
THE BOARD OF DIRECTORS IN THE ABSENCE OF AN AUDIT COMMITTEE, OR AUTHORIZED
OFFICER OR OFFICERS DISCUSSED THE MATTERS DISCLOSED IN YOUR FILING WITH YOUR
INDEPENDENT AUDITORS.
RESPONSE TO COMMENT NO. 2
The requested disclosure is included in the last paragraph of Item
4.02(a) of the Company's Form 8-K filed on November 15, 2005, which reads as
follows:
"Management and the Audit Committee have discussed the matters
disclosed in this Form 8-K with KPMG LLP, who served as Provident's independent
registered public accounting firm for all affected periods, regarding the
matters disclosed in this Form 8-K and in reaching the conclusion to restate the
financial statements for the above-mentioned periods."
Accordingly, the Company does not believe it is necessary to amend the
Form 8-K for this purpose.
COMMENT NO. 3
WE NOTE THAT YOU HAVE BEEN ENTERING INTO THE INTEREST RATE SWAP
TRANSACTIONS SINCE 2003. PLEASE TELL US HOW YOU CONCLUDED THAT THE FINANCIAL
STATEMENTS FOR THE PERIOD ENDING DECEMBER 31, 2003 SHOULD NOT BE RESTATED.
RESPONSE TO COMMENT NO. 3
As disclosed in Note 2 to the Company's Condensed Consolidated
financial statements included in the Form 10-Q for the period ended September
30, 2005, the need to restate prior period financial statements arose in
connection with the Company's application of the "short-cut" method of fair
value and cash flow hedge accounting under SFAS No. 133 to interest rate swaps
associated with certain of its brokered certificates of deposits, FHLB
Borrowings and Junior Subordinated Debentures.
For the year ended December 31, 2003, only a portion of the FHLB
Borrowing swaps did not qualify for the "short-cut" method of cash flow hedge
accounting under SFAS No. 133 because the maturity of the swaps exceeded the
maturity of the FHLB Borrowings. The corrections required by this
disqualification would have resulted in an aggregate increase to net income of
$223,221, or $0.01 per share, for the year ended December 31, 2003, which
represents less than 1% of the Company's net income for the year ended December
31, 2003.
Mr. Amit Pande
November 23, 2005
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The impact on the individual quarters for the year ended December 31,
2003 was as follows:
-------------- -------------- ---------- -------------------
QUARTER IMPACT ON PER % OF QUARTERLY
ENDING QUARTER SHARE NET INCOME
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03/31/03 $ 0 $ 0.00 0.0%
-------------- -------------- ---------- -------------------
06/30/03 $(681,596) $(0.03) (5.9)%
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09/30/03 $ 447,817 $ 0.02 3.3%
-------------- -------------- ---------- -------------------
12/31/03 $ 457,000 $ 0.02 3.1%
-------------- -------------- ---------- -------------------
Provident concluded that the impact to the financial statements for the
year ended December 31, 2003, or for any of the 2003 interim period or
year-to-date amounts, as well as the impact on the financial statements of the
subsequent period in which the adjustment was made, is not material when
considered in combination with the following qualitative factors:
- It is not believed the misstatement masks a change in earnings or
other trends.
- It is not believed the misstatement hides a failure to meet analysts'
consensus expectations for the Company.
- The misstatement has no impact on regulatory compliance.
- The misstatement has no impact on management's compensation.
- The misstatement does not conceal an unlawful transaction.
- The Company does not believe the magnitude of this item is such that
it is probable that the judgment of a reasonable person relying upon
the financial reports would have been changed or influenced by the
inclusion or correction of the item.
Therefore, it is the opinion of Provident that the omission or
misstatement of the impact of the FHLB swaps in the Company's financial reports
is not material in light of the above quantitative and qualitative factors.
Accordingly, the Company has concluded that the financial statements for the
period ending December 31, 2003 should not be restated.
* * * * *
As requested, the Company acknowledges that: 1) it is responsible for
the adequacy of the disclosure in the filing; 2) staff comments or changes in
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to the filing; and 3) the Company may not assert
comments as a defense in any proceeding initiated by the Commission or any
person under the federal securities laws of the United States.
Mr. Amit Pande
November 23, 2005
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Please stamp the enclosed copy of this letter to indicate the date of
receipt and return it in the enclosed envelope. If you have any questions
concerning this submission, please telephone the undersigned at 410-277-2739, or
Dennis A. Starliper, Chief Financial Officer, at 410-277-2705, or, in our
absence, our counsel, Paul M. Aguggia at Muldoon Murphy & Aguggia LLP at (202)
362-0840.
Very truly yours,
PROVIDENT BANKSHARES CORPORATION
/s/ Gary N. Geisel
Gary N. Geisel
Chairman and Chief Executive Officer
Rebekah Moore, Staff Accountant, SEC
Dennis A. Starliper, Chief Financial Officer, Provident Bankshares Corporation
Paul M. Aguggia, Muldoon Murphy & Aguggia LLP