<PAGE>1

                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

                                    ----------


                                    FORM 10-Q


                   Quarterly Report Under Section 13 or 15(d) of
                        The Securities Exchange Act of 1934


For Quarter Ended                                        Commission File Number
September 30, 1996                                               0-16421

                         PROVIDENT BANKSHARES CORPORATION
                         --------------------------------
               (Exact Name of Registrant as Specified in its Charter)


           Maryland                                              52-1518642
-------------------------------                               ----------------
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                                Identification  
                                                                   Number)


                114 East Lexington Street, Baltimore, Maryland 21202
                ----------------------------------------------------
                      (Address of Principal Executive Offices)


                                    (410) 281-7000 
                ----------------------------------------------------
                (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of The Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements  for the past 90 days. Yes  X   No 
                                        ---     --- 

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

Common  Stock,  par value  $1.00 per  share,  8,459,492  shares  outstanding  at
November 1, 1996.


<PAGE>2

                 PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES


                                  TABLE OF CONTENTS
                                                                           Page
PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Statement of Condition--
         September 30, 1996 and 1995 and  December 31, 1995                   3

         Consolidated Statement of Income--
         Three and Nine Months Ended September 30, 1996 and 1995              4

         Consolidated Statement of Cash Flows--
         Nine Months Ended September 30, 1996 and 1995                        5

         Notes to Consolidated Financial Statements                           6


Item 2.  Management's Discussion and Analysis
         of Results of Operations and Financial Condition                    10


PART II - OTHER INFORMATION                                                  14

Item 1.  Legal Proceedings

Item 2.  Changes in Securities

Item 3.  Defaults upon Senior Securities

Item 4.  Submission of Matters to a Vote of Security Holders

Item 5.  Other Information

Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES                                                                   15


EXHIBIT INDEX                                                                16


                                       2



<PAGE>3



PART I.  FINANCIAL INFORMATION

CONSOLIDATED STATEMENT OF CONDITION
Provident Bankshares Corporation and Subsidiaries
<TABLE>
<CAPTION>
                                                           September 30    December 31    September 30
(dollars in thousands)                                             1996           1995            1995
------------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>               <C>      
ASSETS
Cash and Due From Banks                                       $  47,549    $    49,891       $  50,124
Short-Term Investments                                            6,755          2,710           3,523
Mortgage Loans Held for Sale                                     54,116         86,326          87,995
Securities Available for Sale                                   871,062      1,017,697         356,695
Securities Held to Maturity (Market Value $31,372, $31,018
  and $434,869 at September 30, 1996, December 31, 1995,
  and September 30, 1995, respectively)                          32,148         31,420         424,738
Loans:
   Consumer                                                   1,075,038        778,467         725,639
   Commercial Business                                          235,686        205,876         184,128
   Real Estate -- Construction                                  118,727         77,896          63,887
   Real Estate -- Mortgage                                      278,676        270,549         552,627
------------------------------------------------------------------------------------------------------
     Total Loans                                              1,708,127      1,332,788       1,526,281
Less:  Allowance for Loan Losses                                 23,370         21,462          21,100
------------------------------------------------------------------------------------------------------
     Net Loans                                                1,684,757      1,311,326       1,505,181
------------------------------------------------------------------------------------------------------
Premises and Equipment, Net                                      32,368         33,059          31,034
Accrued Interest Receivable                                      19,317         16,778          15,981
Other Assets                                                     25,273         13,754          23,745
------------------------------------------------------------------------------------------------------
Total Assets                                               $  2,773,345   $  2,562,961  $    2,499,016
======================================================================================================

LIABILITIES
Deposits:
  Noninterest-Bearing                                      $    141,517   $    132,479  $      121,256
  Interest-Bearing                                            1,567,606      1,436,860       1,416,354
------------------------------------------------------------------------------------------------------
    Total Deposits                                            1,709,123      1,569,339       1,537,610
------------------------------------------------------------------------------------------------------
Short-Term Borrowings                                           571,761        517,641         501,785
Long-Term Debt                                                  276,738        267,865         262,917
Other Liabilities                                                27,286         23,708          25,563
------------------------------------------------------------------------------------------------------
    Total Liabilities                                         2,584,908      2,378,553       2,327,875
------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY
Common Stock (Par Value $1.00) Authorized 30,000,000 Shares,
  Issued 8,686,909, 8,125,403 and 8,112,480 Shares at 
  September 30, 1996, December 31, 1995 and September 30,
  1995, respectively                                              8,687          8,125           8,112
Capital Surplus                                                  94,552         78,951          78,721
Retained Earnings                                                92,735         93,031          89,138
Net Unrealized Gain (Loss) on Debt Securities                    (5,047)         6,791          (2,340)
Treasury Stock at Cost--228,066 Shares at September 30, 1996,
  December 31, 1995 and September 30, 1995                       (2,490)        (2,490)         (2,490)
------------------------------------------------------------------------------------------------------
  Total Stockholders' Equity                                    188,437        184,408         171,141
------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                  $ 2,773,345   $  2,562,961    $  2,499,016
======================================================================================================
</TABLE>



                                       3
<PAGE>4

CONSOLIDATED STATEMENT OF INCOME
Provident Bankshares Corporation and Subsidiaries

<TABLE>
<CAPTION>

                                                         Three Months Ended         Nine Months Ended
                                                            September 30               September 30
-----------------------------------------------------------------------------------------------------
(in thousands, except per share data)                    1996         1995          1996         1995            
-----------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>           <C>          <C> 
INTEREST INCOME
Interest and Fees on Loans                           $ 34,981     $ 30,992      $ 96,784     $ 86,013
Interest on Securities                                 15,440       14,358        47,876       44,381
Tax-Advantaged Interest                                   586          383         2,087        1,270
Interest on Short-Term Investments                         98           69           179          192
-----------------------------------------------------------------------------------------------------
   Total Interest Income                               51,105       45,802       146,926      131,856
-----------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on Deposits                                   16,643       14,346        47,153       41,171
Interest on Short-Term Borrowings                       7,018        7,307        20,295       20,483
Interest on Long-Term Debt                              4,185        3,408        11,839        9,221
-----------------------------------------------------------------------------------------------------
   Total Interest Expense                              27,846       25,061        79,287       70,875
-----------------------------------------------------------------------------------------------------
  Net Interest Income                                  23,259       20,741        67,639       60,981
Less: Provision for Loan Losses                         1,838          300         7,613          545
-----------------------------------------------------------------------------------------------------
  Net Interest Income After Provision for Loan Losses  21,421       20,441        60,026       60,436
-----------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service Charges on Deposit Accounts                     4,888        3,508        13,084        8,858
Mortgage Banking Activities                             4,807        2,075        11,316        5,515
Commissions and Fees                                      734          455         2,272        1,622
Net Securities Gains (Losses)                              42           19         5,047       (2,757)
Other Non-Interest Income                               1,181        1,642         3,415        6,963
-----------------------------------------------------------------------------------------------------
   Total Non-Interest Income                           11,652        7,699        35,134       20,201
-----------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and Employee Benefits                         12,219       11,017        36,491       31,792
Occupancy Expense, Net                                  2,081        2,033         6,024        5,752
Furniture and Equipment Expense                         1,632        1,346         4,710        3,924
External Processing Fees                                2,750        1,910         7,459        5,360
Other Non-Interest Expense                              4,840        4,194        13,622       14,237
-----------------------------------------------------------------------------------------------------
   Total Non-Interest Expense                          23,522       20,500        68,306       61,065
-----------------------------------------------------------------------------------------------------
Income Before Taxes                                     9,551        7,640        26,854       19,572
Income Tax Expense                                      3,646        2,830        10,039        6,647
-----------------------------------------------------------------------------------------------------
Net Income                                           $  5,905     $  4,810     $  16,815    $  12,925
-----------------------------------------------------------------------------------------------------
Net Income Per Share                                 $   0.67     $   0.56     $    1.92    $    1.51
-----------------------------------------------------------------------------------------------------
</TABLE>


                                                     4



<PAGE>5

CONSOLIDATED STATEMENT OF CASH FLOWS
Provident Bankshares Corporation and Subsidiaries


<TABLE>
<CAPTION>

                                                                           Nine Months Ended September 30
---------------------------------------------------------------------------------------------------------
(in thousands)                                                                     1996            1995    
---------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>            

OPERATING ACTIVITIES:
   Net Income                                                               $    16,815       $  12,925  
   Adjustments to Reconcile Net Income to
     Net Cash Provided (Used) by Operating Activities:
        Depreciation and Amortization                                             4,937           3,965 
        Provision for Loan Losses                                                 7,613             545 
        Provision for Deferred Income Tax (Benefit)                                (495)          8,486 
        Realized Net Securities (Gains) Losses                                   (5,047)          2,757 
        Loans Originated or
          Acquired and Held for Sale                                           (358,760)       (274,283) 
        Proceeds from Sales of Loans                                            395,120         231,988 
        Gain on Sales of Loans                                                   (4,150)           (154) 
        Other Operating Activities                                               (6,957)          2,215 
---------------------------------------------------------------------------------------------------------
  Total Adjustments                                                              32,261         (24,481) 
---------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                 49,076         (11,556) 
---------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
   Principal Collections and Maturities of Securities Available for Sale        137,087          75,871 
   Principal Collections and Maturities of Securities Held to Maturity            3,277          37,163 
   Proceeds on Sales of Securities Available for Sale                           232,693         177,923 
   Purchases of Securities Held to Maturity                                      (4,047)        (18,924) 
   Purchases of Securities Available for Sale                                  (238,117)       (185,096) 
   Loan Originations and Purchases
    Less Principal Collections                                                 (376,859)       (253,247) 
   Purchases of Premises and Equipment                                           (3,236)         (4,881) 
---------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES                                          (249,202)       (171,191) 
---------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
   Net Increase in Deposits                                                     139,784          89,033 
   Net Increase in Short-Term Borrowings                                         54,120          22,535 
   Proceeds from Long-Term Debt                                                 131,750          90,750 
   Payments and Maturities of Long-Term Debt                                   (122,877)        (15,033) 
   Issuance of Common Stock                                                       3,633           4,821  
   Cash Dividends on Common Stock                                                (4,581)         (3,086)  
---------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                       201,829         189,020  
---------------------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS                                             1,703           6,273  
   Cash and Cash Equivalents at Beginning of Year                                52,601          47,374  
---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                    $  54,304      $   53,647  
=========================================================================================================

SUPPLEMENTAL DISCLOSURES
---------------------------------------------------------------------------------------------------------
Interest Paid, Net of Amount Capitalized                                      $  44,139      $   38,671 
Income Taxes Paid (Received)                                                     11,752          (5,373)
Stock Dividend                                                                   12,530           8,278
</TABLE>

                                                       5
<PAGE>6



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1996

NOTE A - BASIS OF PRESENTATION

        The accompanying  unaudited  consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not
include  all of  the  information  and  notes  required  by  generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  all  adjustments  (consisting  of only normal  recurring  accruals)
considered  necessary  for a fair  presentation  have been  included.  Operating
results for the nine month period ended  September 30, 1996 are not  necessarily
indicative of the results that may be expected for the year ending  December 31,
1996. For further  information,  refer to the consolidated  financial statements
and notes thereto included in the  Corporation's  Annual Report on Form 10-K for
the year ended  December  31,  1995 as filed with the  Securities  and  Exchange
Commission on March 18, 1996.


                                         6



<PAGE>7



NOTE B - EARNINGS PER SHARE

        Net income per share is based on the number of weighted  average  common
shares outstanding for the three and nine month periods ended September 30, 1996
(8,808,011  and  8,774,548  shares  respectively)  which  includes  common stock
equivalents  resulting from outstanding stock options. The results for 1995 have
been given  retroactive  treatment to the  beginning of the year for the May 10,
1996 and May 12, 1995 stock dividends.  Exclusive of the retroactive restatement
for the stock  dividends,  earnings  per share were $.58 and $1.58 for the three
and nine month  periods ended  September 30, 1995.  For the three and nine month
periods ended  September 30, 1996,  respective  dividends of $.19 and $.52,  per
common share were declared and paid. 

NOTE C - INVESTMENT SECURITIES

        Effective  December  31,  1993  the  Corporation  adopted  Statement  of
Financial  Accounting  Standards No. 115 "Accounting for Certain  Investments in
Debt and Equity Securities" ("SFAS No. 115"). Under SFAS No. 115, the investment
portfolio is divided among three categories:  investment securities,  securities
available for sale and trading  account  securities.  Debt  securities  that the
Corporation  has the intent and  ability to hold to  maturity  are  included  in
securities held to maturity and,  accordingly,  are carried at cost adjusted for
amortization of premiums and accretion of discounts  using the interest  method.
Securities  available  for sale are  reported at fair value with any  unrealized
appreciation or depreciation in value reported directly as a separate  component
of  stockholders'  equity as an unrealized gain or loss on debt securities which
is  reflected  net of  applicable  taxes,  and  therefore,  has no effect on the
reported earnings of the Corporation.


                                       7



<PAGE>8

          The  aggregate  amortized  cost and  market  values of the  investment
securities portfolio at September 30 were as follows:


<TABLE>
<CAPTION>
                                                       September  30, 1996
                                          -----------------------------------------------
                                                        Gross        Gross
                                          Amortized   Unrealized   Unrealized   Market
(in thousands)                               Cost       Gains        Losses     Value
-----------------------------------------------------------------------------------------          
<S>                                       <C>         <C>          <C>         <C>      
SECURITIES HELD TO MATURITY
U.S. Treasury and Government
 Agencies and Corporations                $  15,941   $       --   $      --   $  15,941
Mortgage-Backed Securities                   16,207           --         776      15,431
-----------------------------------------------------------------------------------------
Total Securities Held to Maturity            32,148           --         776      31,372
-----------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE
U.S. Treasury and Government
 Agencies and Corporations                    5,011           16          --       5,027
Mortgage-Backed Securities                  827,165        3,513      12,139     818,539
Municipal Securities                         11,550          255         138      11,667
Other Debt Securities                        30,674           79          49      30,704
Equity Securities                             5,010          115          --       5,125
-----------------------------------------------------------------------------------------
Total Securities Available for Sale         879,410        3,978      12,326     871,062
-----------------------------------------------------------------------------------------
Total Investment Securities Portfolio     $ 911,558   $    3,978   $  13,102   $ 902,434
=========================================================================================

                                                       September  30, 1995
                                          -----------------------------------------------
                                                        Gross        Gross
                                          Amortized   Unrealized   Unrealized   Market
(in thousands)                               Cost       Gains        Losses     Value
-----------------------------------------------------------------------------------------          
SECURITIES HELD TO MATURITY 
U.S. Treasury and Government
 Agencies and Corporations                $  13,146   $       --   $      --   $  13,146
Mortgage-Backed Securities                  403,117       10,776         929     412,964
Municipal Securities                          8,475          340          56       8,759
-----------------------------------------------------------------------------------------
Total Securities Held to Maturity           424,738       11,116         985     434,869
-----------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE
U.S. Treasury and Government
 Agencies and Corporations                   27,235          512         475      27,272
Mortgage-Backed Securities                  211,955        3,549         492     215,012
Other Debt Securities                       113,799        1,513         901     114,411
-----------------------------------------------------------------------------------------
Total Securities Available for Sale         352,989        5,574       1,868     356,695
-----------------------------------------------------------------------------------------
Total Investment Securities Portfolio     $ 777,727   $   16,690   $   2,853   $ 791,564
=========================================================================================
</TABLE>

     At September 30, 1996 a net  unrealized  loss of $5.0 million was reflected
as a separate component of Stockholders' Equity in the Consolidated Statement of
Condition as compared to a net  unrealized  gain of $6.8  million on  Securities
Available  for Sale at  December  31,  1995.  For details  regarding  investment
securities at December 31, 1995, refer to Note 3 of the  Consolidated  Financial
Statements incorporated in the Corporation's 10-K filed March 18, 1996.

                                          8



<PAGE>9



NOTE D - MORTGAGE SERVICING RIGHTS

        The  Corporation  adopted  the  provisions  of  Statement  of  Financial
Accounting  Standards No. 122 "Accounting for Mortgage Servicing  Rights" ("SFAS
No. 122") effective January 1, 1996. SFAS No. 122 requires that a portion of the
cost of originating a mortgage loan be allocated to the mortgage servicing right
based on its fair value of the servicing rights. The Corporation used the market
prices under comparable servicing sales contracts to determine the fair value of
the servicing  rights created  during the first quarter.  SFAS No. 122 precludes
retroactive application to previously reported periods. Accordingly, amounts for
the nine months ended  September 30, 1995 were  accounted for under the original
SFAS No.  65.  Therefore,  results  for the  first  nine  months of 1996 are not
comparable to the results for the first nine months of 1995.

        Originated loan servicing  rights,  net of accumulated  amortization and
impairment at September 30, 1996 were as follows:
<TABLE>
<CAPTION>

                                                        Mortgage
                                                        Servicing
                                                         Rights
------------------------------------------------------------------
<S>                                                      <C>     
Balance at January 1, 1996                               $    --
Additions                                                  2,633
Amortization                                                 181
Sales of Servicing Rights                                  1,580
------------------------------------------------------------------
Balance at September 30, 1996                            $   872
------------------------------------------------------------------
</TABLE>




                                       9
<PAGE>10

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF 
OPERATIONS AND FINANCIAL CONDITION

PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES

FINANCIAL REVIEW

EARNINGS SUMMARY

        Provident  recorded a 23%  increase in net income over the same period a
year ago. Net income for the quarter  ended  September 30, 1996 was $5.9 million
or $.67 per  share,  compared  to $4.8  million  or $.56 per share for the third
quarter of the prior year.  The higher  earnings in 1996 were mainly due to loan
growth and increased fee income. Consumer loans outstanding grew $349 million as
total loans increased 11.9% to $1.71 billion. Total loans would have been higher
except for $281 million in residential  mortgage loans that were securitized and
reclassified as investments in the fourth quarter of 1995.  Non-interest  income
increased  51% over the third quarter of 1995,  driven by fee based  services on
higher account  volume and mortgage  banking  income.  Higher account volume and
continued investment in business initiatives  contributed to a 14.7% increase in
operating  expenses.  There was a $1.8 million  provision for loan losses during
the quarter with net charge-offs of $201 thousand. 

NET INTEREST INCOME

        Resulting  from growth in average  earning  assets,  tax-equivalent  net
interest  income  rose to $23.5  million for the third  quarter of 1996,  a $2.6
million increase over the prior year.  Income growth was partially offset by a 1
basis point drop in net interest margin.

        Provident's interest income on earning assets rose $5.3 million from the
third quarter of 1995, the result of a $301 million expansion in average earning
asset  balances  offset in part by a 7 basis point  decline in yield.  Growth in
total  average  earning  assets was  provided by  increases  of $374  million in
consumer loans,  $53 million in commercial  business loans,  $54 million in real
estate  construction  and $8 million in commercial  mortgage loans.  Investments
increased $103 million.  Residential mortgage loans declined $289 million as the
Corporation  securitized  $281 million of residential real estate mortgage loans
during  the  fourth  quarter  of 1995.  The  decrease  in the yield  was  mainly
attributable to the lower interest rate environment.

                                       10

<PAGE>11


        Total  interest  expense was $2.8 million above a year ago, the combined
result  of a  decrease  of 2 basis  points in the  average  rate paid and a $253
million  increase  in  the  average   outstanding  balance  of  interest-bearing
liabilities.  Included in this  increase  were $151 million in matched  maturity
brokered deposits, $31 million in interest-bearing demand/money market deposits,
$23 million in savings and $50 million of borrowings.

        As a result of off-balance sheet transactions undertaken to insulate the
bank from  interest  rate  risks,  interest  income has been  decreased  by $513
thousand and interest  expense has been  increased  by $89  thousand,  for a net
decrease of $602 thousand for the quarter  ending  September  30, 1996.  For the
nine months ending  September 30, 1996,  interest  income has been  decreased by
$1.65 million and interest expense has been reduced $646 thousand for a decrease
in net interest  income of $1.0  million.  Included in this net interest  income
decrease were  amortization of closed positions which reduced interest income by
$263  thousand and increased  interest  expense $275 thousand (a net decrease of
$538  thousand)  for the current  quarter  and  decreased  interest  income $783
thousand and increased  interest expense $480 thousand ( a net decrease of $1.26
million) for the nine months ending September 30, 1996. Without the amortization
of closed positions, off-balance sheet positions reduced net interest income $64
thousand for the current quarter and increased net interest income $260 thousand
for the nine months ended  September 30, 1996. The forward yield curve indicates
that short-term  rates will increase by 50 basis points and long-term rates will
increase 25 basis points over the next twelve months. The Corporation's analysis
indicates that if management does not adjust its September 30, 1996  off-balance
sheet positions and the forward yield curve assumptions occur, off-balance sheet
positions  would  increase net interest  income by $479  thousand  over the next
twelve  months.  This  compares  to a decrease  in net  interest  income of $2.5
million should interest rates remain unchanged.

PROVISION FOR LOAN LOSSES

        The  Corporation  recorded a $1.8 million  provision for loan losses for
the quarter.  Net charge-offs were $201 thousand  compared to net charge-offs of
$131  thousand  for the third  quarter of 1995.  The  Corporation  continues  to
emphasize loan quality and closely monitors potential problem credits.


                                         11
<PAGE>12

        Senior  managers meet at least  monthly to review the credit  quality of
the loan portfolios and at least  quarterly with executive  management to review
the adequacy of the allowance for loan losses.  The allowance for loan losses at
September 30, 1996 was $23.4  million,  up from the $21.1 million a year ago. At
September 30, 1996, the allowance  represented  1.37% of total loans and 190% of
non-performing loans. Total non-performing loans were $12.3 million at September
30,  1996  unchanged  from  September  30,  1995.   Residential  mortgage  loans
represented $4.0 million while consumer loans  represented $8.1 million of total
non-performing loans at September 30, 1996. Non-performing loans as a percent of
loans  outstanding at September 30, 1996 were .72% compared to .81% at September
30, 1995.

NON-INTEREST INCOME

        Non-interest  income  totaled $11.7 million in the third quarter of 1996
compared to $7.7 million in 1995. This increase was driven by fee based services
on higher account volume and mortgage  banking income.  Mortgage  banking income
increased  $2.7 million  fueled by $2.03 million in gains from sales of mortgage
servicing rights. Mortgage originations were $98.1 million for the third quarter
of 1996 compared to $126 million for the third quarter of 1995.  Deposit service
fees continued their upward trend,  increasing 39% over the prior year following
a 24% rise in the  number  of  retail  demand  deposit  accounts  from the third
quarter  of 1995 and a change  in the fee  structure.  Commercial  deposit  fees
increased 4% and commercial  loan fees increased 30%,  reflecting an increase in
loan originations and an intensified focus on commercial business development.

NON-INTEREST EXPENSE

        Third  quarter  non-interest  expense of $23.5 million was 14.7% or $3.0
million  higher than a year ago.  Salaries and benefits  rose 10.9%,  largely to
staff additional supermarket branch locations,  check cashing facilities,  and a
loan production office.

        Occupancy  costs  increased  $48  thousand  or 2.4%  over  last year and
furniture  and equipment  expense  increased  $286  thousand  required by branch
network expansion and upgrades of technology. 

                                        12

<PAGE>13


        External  processing  fees  increased  $840  thousand  due to  increased
account volume.  All other expenses  increased a total of $646 thousand after an
FDIC  insurance  premium refund in the third quarter of 1995 and a one-time SAIF
premium of $90 thousand in the third quarter of 1996.

INCOME TAXES

        Provident  recorded  income tax expense of $3.6 million on income before
taxes of $9.6 million,  an effective tax rate of 38.2%. During the third quarter
of 1995,  Provident's  tax  expense was $2.8  million on pre-tax  income of $7.6
million,  an effective tax rate of 37.0%. The increase in the effective tax rate
is primarily due to a federal tax benefit  received  during the third quarter of
1995.

FINANCIAL CONDITION

        Total assets of the Corporation increased $210 million from December 31,
1995 to September 30, 1996 as loan  balances  increased  $375 million.  Consumer
loans were up $297  million,  commercial  business  loans $30  million  and real
estate  construction loans $41 million.  Securities  available for sale declined
$147  million  to help fund the loan  growth  and  mortgage  loans held for sale
decreased $32 million.  Total deposits  ended the quarter at $1.71  billion,  an
increase of $140 million over the December 31, 1995 level.  Non-interest bearing
deposits  increased $9 million from  December  31, 1995 while  interest  bearing
deposits increased $131 million.  Borrowings increased $63 million from December
31, 1995 ending the quarter at $848 million.

        At September 30, 1996,  loans held for sale,  investments  available for
sale and investment  securities maturing within one year totaled $925 million or
36% of total  liabilities,  compared to $1.10  billion or 46% as of December 31,
1995.

        At  quarter-end,  the leverage  ratio was 7.10% and total  stockholders'
equity  represented  10.28% of risk  adjusted  assets.  These ratios  exceed the
minimum  requirements  of the current  leverage  capital and risk-based  capital
standards established by regulatory agencies.


                                         13
<PAGE>14


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings - None

Item 2.  Changes in Securities - None

Item 3.  Defaults Upon Senior Securities - None

Item 4.  Submission of Matters to a Vote of Security Holders - None

Item 5.  Other Information - None

Item 6.  Exhibits and Reports on Form 8-K

         (a) The exhibits filed as part of this report are listed below:

             (3.1)    Articles of Incorporation of Provident Bankshares
                      Corporation.*

             (3.2)    By-laws of Provident Bankshares Corporation, as amended.**

             (11)     Statement re: Computation of Per Share Earnings.

             (27)     Financial Data Schedule.

         (b) Reports on Form 8-K
         
             There  were no current reports on Form 8-K filed during the quarter
             ended September 30, 1996.

*  Incorporated  by  reference from  Registrant's Registration Statement on Form
S-3 (File No. 33-73162) filed with the Commission on August 18, 1994.

** Incorporated  by  reference from Registrant's 1994 Annual Report on Form 10-K
(File No. 0-16421) filed with the Commission on February 17, 1995.



                                         14



<PAGE>15



                                     SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                           PROVIDENT BANKSHARES CORPORATION
                                           --------------------------------
                                                       Registrant



November 12, 1996                                  /s/ Peter M. Martin
                                                   -------------------
                                                       Peter M. Martin     
                                           President and Chief Operating Officer



November 12, 1996                                  /s/ R. Wayne Hall
                                                   -----------------
                                                       R. Wayne Hall
                                                         Treasurer


                                       15



<PAGE>16




                                 EXHIBIT INDEX


Exhibit    Description                                Sequentially Numbered Page
-------    -----------                                --------------------------

 (11)    Statement re: Computation of Per Share Earnings          17

 (27)    Financial Data Schedule                                  18



                                        16