<PAGE> 1


                                   UNITED STATES

                        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, 1997                                              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, 11,412,054 shares outstanding at
November 4, 1997.



<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, 1997 and 1996 and  December 31, 1996               3

          Consolidated Statement of Income--
          Three and Nine Months Ended September 30, 1997 and 1996          4

          Consolidated Statement of Cash Flows--
          Nine Months Ended September 30, 1997 and 1996                    5

          Notes to Consolidated Financial Statements                       6


Item 2.   Management's Discussion and Analysis
          of Results of Operations and Financial Condition                 9

PART II - OTHER INFORMATION                                               12

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                                                                13


EXHIBIT INDEX                                                             14

================================================================================
Statements contained in this Form 10-Q which are not historical facts are
forward-looking statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995.  Such forward-looking statements are subject to
risk and uncertainties which could cause actual results to differ materially
from those projected.  Such risk and uncertainties include potential changes in
interest rates, competitive factors in the financial services industry,
general economic conditions, the effect of new legislation and other risks
detailed in documents filed by the Company with the SEC from time to time.
================================================================================


                                        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)                                                     1997                   1996                     1996
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                    <C>                      <C>         
ASSETS
Cash and Due From Banks                                            $     60,792           $     70,132             $     61,187
Short-Term Investments                                                    2,526                 11,366                    6,791
Mortgage Loans Held for Sale                                             35,074                 35,356                   56,099
Securities Available for Sale                                           944,124                968,154                  968,972
Securities Held to Maturity (Market Value $91,339
 and $86,464 at December 30, 1996 and September 30, 1996,
 respectively)                                                                -                 86,237                   91,948
Loans:                                                          
  Consumer                                                            1,555,096              1,211,971                1,179,747
  Commercial Business                                                   282,332                294,844                  276,383
  Real Estate -- Construction                                           131,101                121,542                  140,565
  Real Estate -- Mortgage                                               631,693                619,516                  586,342
--------------------------------------------------------------------------------------------------------------------------------
   Total Loans                                                        2,600,222              2,247,873                2,183,037
Less:  Allowance for Loan Losses                                         35,197                 30,361                   29,152
--------------------------------------------------------------------------------------------------------------------------------
   Net Loans                                                          2,565,025              2,217,512                2,153,885
-------------------------------------------------------------------------------------------------------------------------------
Premises and Equipment, Net                                              37,165                 36,481                   35,524
Accrued Interest Receivable                                              28,292                 23,485                   23,608
Other Assets                                                             27,452                 36,895                   43,674
--------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                       $  3,700,450           $  3,485,618             $  3,441,688
--------------------------------------------------------------------------------------------------------------------------------

LIABILITIES                                                             
Deposits:                                                               
 Noninterest-Bearing                                               $    176,390           $    169,000             $    157,325
 Interest-Bearing                                                     2,479,522              2,117,144                2,046,344
--------------------------------------------------------------------------------------------------------------------------------
  TOTAL DEPOSITS                                                      2,655,912              2,286,144                2,203,669
--------------------------------------------------------------------------------------------------------------------------------
Short-Term Borrowings                                                   373,283                602,435                  628,309
Long-Term Debt                                                          374,105                328,517                  346,538
Other Liabilities                                                        37,977                 29,724                   35,187
--------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                     3,441,277              3,246,820                3,213,703
--------------------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY                                                            
Common Stock (Par Value $1.00) Authorized 30,000,000 Shares,                                                            
 Issued  11,568,408,  10,957,265 and 10,928,585 Shares at September 30, 1997,
 December 31, 1996 and September 30, 1996, respectively                  11,568                 10,957                   10,929
Capital Surplus                                                         137,956                120,090                  119,571
Retained Earnings                                                       107,191                111,614                  105,655
Net Unrealized Gain (Loss) on Debt Securities                             4,948                 (1,373)                  (5,680)
Treasury Stock at Cost - 228,066 Shares                                  (2,490)                (2,490)                  (2,490)
--------------------------------------------------------------------------------------------------------------------------------
  TOTAL STOCKHOLDERS' EQUITY                                            259,173                238,798                  227,985
--------------------------------------------------------------------------------------------------------------------------------
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $  3,700,450           $  3,485,618             $  3,441,688
--------------------------------------------------------------------------------------------------------------------------------

These financial statements should be read in conjunction with the accompanying notes.
</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)                               1997              1996              1997              1996
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>               <C>               <C>                <C>         
INTEREST INCOME
Interest and Fees on Loans                                    $    53,469       $    44,503       $    149,331       $    124,651
Interest on Securities                                             16,192            18,161             51,892             55,175
Tax-Advantaged Interest                                             1,737               586              5,608              2,087
Interest on Short-Term Investments                                     77               104                238                303
----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME                                              71,475            63,354            207,069            182,216
----------------------------------------------------------------------------------------------------------------------------------

INTEREST EXPENSE            
Interest on Deposits                                               27,612            22,452             76,286             64,614
Interest on Short-Term Borrowings                                   7,156             7,440             24,230             21,202
Interest on Long-Term Debt                                          5,144             5,305             14,952             14,921
----------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE                                             39,912            35,197            115,468            100,737
----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                                31,563            28,157             91,601             81,479
Less: Provision for Loan Losses                                     4,330             1,705              7,217              7,761
----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                27,233            26,452             84,384             73,718  
----------------------------------------------------------------------------------------------------------------------------------

NON-INTEREST INCOME                                                                     
Service Charges on Deposit Accounts                                 6,384             5,196             17,952             13,951
Mortgage Banking Activities                                         1,469             4,962              5,649             12,596
Commissions and Fees                                                  920               802              2,848              2,506
Net Securities Gains                                                  230                42                568              5,078
Other Non-Interest Income                                           1,706             1,403              4,895              4,362
----------------------------------------------------------------------------------------------------------------------------------
TOTAL NON-INTEREST INCOME                                          10,709            12,405             31,912             38,493
----------------------------------------------------------------------------------------------------------------------------------

NON-INTEREST EXPENSE                   
Salaries and Employee Benefits                                     13,663            14,021             41,313             41,948
Occupancy Expense, Net                                              2,541             2,388              7,383              6,971
Furniture and Equipment Expense                                     1,881             1,777              5,498              5,181
External Processing Fees                                            3,299             2,860              9,198              7,983
Federal Deposit Insurance Assessment                                   --             3,029                 --              3,029
Merger Related Expenses                                            10,047                --             10,482                 --
Other Non-Interest Expense                                          5,603             6,141             16,871             17,666
----------------------------------------------------------------------------------------------------------------------------------
  TOTAL NON-INTEREST EXPENSE                                       37,034            30,216             90,745             82,778
----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES                                                   908             8,641             25,551             29,433
Income Tax Expense                                                    882             3,241              9,602             10,896
----------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                    $        26       $     5,400       $     15,949       $     18,537
----------------------------------------------------------------------------------------------------------------------------------

PER SHARE AMOUNTS:                                                                      
 Net Income -- Primary                                        $       0.00      $      0.47       $       1.34       $       1.59
 Net Income -- Fully Diluted                                          0.00             0.47               1.33               1.59
----------------------------------------------------------------------------------------------------------------------------------

These financial statements should be read in conjunction with the accompanying notes.  
</TABLE>


                                                                4            

<PAGE> 5



CONSOLIDATED STATEMENT OF CASH FLOWS

Provident Bankshares Corporation and Subsidiaries
<TABLE>
<CAPTION>

                                            
                                                                                 Nine Months Ended September 30,
----------------------------------------------------------------------------------------------------------------
(in thousands)                                                                          1997               1996
----------------------------------------------------------------------------------------------------------------

<S>                                                                              <C>                <C>   
OPERATING ACTIVITIES:
  Net Income                                                                     $    15,949        $    18,537
  Adjustments to Reconcile Net Income to    
   Net Cash Provided by Operating Activities: 
    Depreciation and Amortization                                                      5,825              4,791
    Provision for Loan Losses                                                          7,217              7,761
    Provision for Deferred Income Tax (Benefit)                                       (3,808)             1,179
    Realized Net Securities Gains                                                       (568)            (5,078)
    Loans Originated or Acquired and Held for Sale                                  (245,172)          (381,138)
    Proceeds from Sales of Loans                                                     247,514            446,256
    Gain on Sales of Loans                                                            (2,060)            (5,097)
    Other Operating Activities                                                        11,024             (6,913)
----------------------------------------------------------------------------------------------------------------
Total Adjustments                                                                     19,972             61,761
----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                             35,921             80,298
----------------------------------------------------------------------------------------------------------------
                                                
INVESTING ACTIVITIES:                                           
  Principal Collections and Maturities of Securities Available for Sale              120,037            168,666
  Principal Collections and Maturities of Securities Held to Maturity                 13,130              7,621
  Proceeds on Sales of Securities Available for Sale                                 210,249            240,315
  Purchases of Securities Held to Maturity                                           (15,259)           (26,108)
  Purchases of Securities Available for Sale                                        (208,233)          (299,329)
  Loan Originations and Purchases Less Principal Collections                        (353,013)          (427,141)
  Purchases of Premises and Equipment                                                 (5,321)            (3,832)
----------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES                                               (238,410)          (339,808)
----------------------------------------------------------------------------------------------------------------
    
FINANCING ACTIVITIES: 
  Net Increase in Deposits                                                           369,768            162,060
  Net Change in Short-Term Borrowings                                               (229,152)            52,288
  Proceeds from Long-Term Debt                                                        97,000            176,480
  Payments and Maturities of Long-Term Debt                                          (51,412)          (130,877)
  Issuance of Common Stock                                                             3,871              3,806
  Cash Dividends on Common Stock                                                      (5,766)            (4,581)
----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                            184,309           259,176
----------------------------------------------------------------------------------------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS                                                (18,180)              (334)
  Cash and Cash Equivalents at Beginning of Year                                      81,498             68,312
----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       $    63,318        $    67,978
----------------------------------------------------------------------------------------------------------------
                                                
SUPPLEMENTAL DISCLOSURES
----------------------------------------------------------------------------------------------------------------
Interest Paid, Net of Amount Capitalized                                         $    56,737        $    49,089
Income Taxes Paid                                                                     11,101             13,102
Stock Dividend                                                                        14,606             17,295
Transfer of Securities Held to Maturity to Securities Available for Sale              88,318                 --


These financial statements should be read in conjunction with the accompanying notes.
</TABLE>


                                                          5



<PAGE> 6


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES

SEPTEMBER 30, 1997

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, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997. 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, 1996 as filed with the Securities and Exchange
Commission on March 7, 1997.

NOTE B - ACQUISITION

     On August 22, 1997, Provident Bankshares Corporation completed its
acquisition of First Citizens Financial Corporation, a $694 million savings bank
holding company. This transaction was accounted for as a pooling-of-interest and
all financial information for prior periods has been restated. Each share of
First Citizens was converted into .7665 shares of Provident common stock
resulting in the issuance of 2.3 million shares. As a result of the acquisition,
the Corporation recorded $10.5 million in merger related expenses. These
expenses are comprised of direct merger expenses such as legal and advisory fees
and post merger expenses such as system conversion, severance and various
write-downs of facilities and software. These charges included only identified
direct and incremental costs associated with the merger.

NOTE C - PER SHARE INFORMATION

     Net income per share is based on the number of weighted average common
shares outstanding for the nine month period ended September 30, 1997
(12,020,009 shares) which includes common stock equivalents resulting from
outstanding stock options. For the nine month period ended September 30, 1997
dividends of $.64 per common share were paid. The results for 1996 have been
given retroactive treatment to the beginning of the year for the May 9, 1997
stock dividend and the merger. With the restatement for the stock dividend in
the second quarter 1997 and the merger in the third quarter of 1997, the
restated earnings per share were $.50 for the nine month period ended September
30, 1996.
     The Corporation will adopt Statement of Financial Accounting Standards No.
128 - "Earnings Per Share" ("SFAS No. 128") on December 31, 1997. SFAS No. 128
requires the Corporation to change its method of computing, presenting and
disclosing earnings per share information. Upon adoption, all prior period data
presented will be restated to conform to the provisions of SFAS No. 128.
Adoption of this standard is not expected to have a material impact on the
Corporation's financial statements.

NOTE D - INVESTMENT SECURITIES

     The Corporation's investment portfolio is divided among three categories:
securities held to maturity, 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, net of applicable taxes, directly as a separate component of 
stockholders' equity as an unrealized gain or loss on debt securities and
therefore, has no effect on the reported earnings of the Corporation.


                                       6


<PAGE> 7



     The aggregate amortized cost and market values of the investment securities
portfolio at September 30 were as follows:
<TABLE>
<CAPTION>
                                                                 September  30, 1997                                   
                                        -----------------------------------------------------------------------------------------
                                                                       Gross                  Gross 
                                            Amortized                Unrealized             Unrealized                Market
(in thousands)                                Cost                     Gains                  Losses                  Value
---------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                        <C>                    <C>                     <C>     
SECURITITES AVAILABLE FOR SALE                                                                                  

U.S. Treasury and Government                                                                                    

   Agencies and Corporations            $       54,291             $       35             $       165             $       54,161

Mortgage-Backed Securities                     836,364                  9,976                   1,961                    844,379

Municipal Securities                            18,872                    430                       9                     19,293

Other Debt Securities                           26,414                     --                     123                     26,291
---------------------------------------------------------------------------------------------------------------------------------
Total Securities Available for Sale     $      935,941             $   10,441             $     2,258             $      944,124
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                                                 September  30, 1996                                   
                                        -----------------------------------------------------------------------------------------
                                                                       Gross                  Gross 
                                            Amortized                Unrealized             Unrealized                Market
(in thousands)                                Cost                     Gains                  Losses                  Value
---------------------------------------------------------------------------------------------------------------------------------

<S>                                     <C>                        <C>                    <C>    <C>              <C>           
SECURITITES AVAILABLE FOR SALE                                                                                   

U.S. Treasury and Government

   Agencies and Corporations            $       72,062             $       82             $    1 ,308             $       70,836

Mortgage-Backed Securities                     859,026                  3,948                  12,376                    850,598

Municipal Securities                            11,550                    255                     138                     11,667

Other Debt Securiites                           30,678                    117                      49                     30,746

Equity Securities                                5,010                    115                      --                      5,125
---------------------------------------------------------------------------------------------------------------------------------
Total Securities Available for Sale     $      978,326             $    4,517             $    13,871             $      968,972
---------------------------------------------------------------------------------------------------------------------------------
                                                                                         
SECURITITES HELD TO MATURITY                                                                                    

U.S. Treasury and Government                                                                                    

   Agencies and Corporations                    37,011                    114                       4                     37,121

Mortgage-Backed Securities                      54,937                    196                     915                     54,218
---------------------------------------------------------------------------------------------------------------------------------
Total Securities Held to Maturity               91,948                    310                     919                     91,339
---------------------------------------------------------------------------------------------------------------------------------
Total Investment Securities Portfolio   $    1,070,274             $    4,827             $    14,790             $    1,060,311
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                       

     At September 30, 1997 a net unrealized gain of $4.9 million was reflected
as a separate component of Stockholders' Equity in the Consolidated Statement of
Condition as compared to a net unrealized loss of $5.7 million on Securities
Available for Sale at December 31, 1996. For details regarding investment
securities at December 31, 1996, refer to Note 3 of the Consolidated Financial
Statements incorporated in the Corporation's 10-K filed March 7, 1997.
     During the third quarter of 1997, the Corporation transferred $88.3 million
in Securities Held to Maturity to Securities Available for Sale. At the time of
the transfer, these securities had a net unrealized gain of $467 thousand which
was included as a separate component of Stockholders' Equity. These securities
were transferred to provide additional liquidity and financial flexibility. The
Corporation will classify all subsequent security acquisitions as Securities
Available for Sale in the foreseeable future.


                                                                7


<PAGE> 8


NOTE E - SERVICING ASSETS

     Effective January 1, 1997, the Corporation adopted the provisions of
Statement of Accounting Standards No. 125 - "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No.
125"). This new statement supersedes SFAS No. 122 - "Accounting for Mortgage
Servicing Rights", which was adopted on January 1 of the prior year. The
adoption of SFAS No. 125 has had no significant impact on the earnings or
financial condition of the Corporation. SFAS No. 125 requires the Corporation to
carry any retained interest in a transferred asset on the Statement of Condition
as a servicing asset. In the case of the Corporation, the servicing assets
represent the fair value of the servicing contracts associated with the purchase
or origination and subsequent securitization of the mortgage loans. Servicing
assets are amortized in proportion to and over the period of estimated net
servicing income. Servicing assets are evaluated periodically for impairment
based on their fair value and impairment, if any, is recognized through a
valuation allowance and a charge to operations. At September 30, 1997 no
valuation allowance was required.
     The following is an analysis of servicing asset balance, net of accumulated
amortization, during the period September 30, 1997:
<TABLE>
<CAPTION>

                                                                  September 30,
(in thousands)                                                         1997
---------------------------------------------------------------------------
<S>                                                                   <C>   
Balance at January 1, 1997                                            $2,155
Additions                                                                699
Amortization                                                             212
Sales of Servicing Assets                                              1,532
----------------------------------------------------------------------------
Balance at September 30, 1997                                         $1,110
----------------------------------------------------------------------------

</TABLE>

NOTE F - CONTINGENT LIABILITIES

     In April of 1997, a judgment stemming from a lawsuit alleging that
Provident Bank of Maryland had failed to fully honor a letter of credit was
entered against Provident in the amount of $5.2 million. This decision reversed
an earlier court holding in favor of Provident. The Bank has appealed the
decision. Management, in consultation with legal counsel, is of the opinion that
there exists a significant possibility that the award will be reversed or
substantially altered at the appellate level. The ultimate outcome of the case
will not have a material adverse effect on the Corporation's financial
statements.

NOTE G - FUTURE ACCOUNTING DISCLOSURE REQUIREMENTS

     In June, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting
Comprehensive Income." The statement establishes requirements for the disclosure
and presentation of comprehensive income and its components in full sets of
financial statements. Comprehensive income is defined as transactions and other
occurrences which are the result of nonowner changes in equity. Nonowner equity
changes, such as unrealized gain or losses on debt securities for example, will
be accumulated with net income in determining comprehensive income. This
statement will not impact the historical financial results of the Corporation's
operations. This statement is effective for years beginning after December 15,
1997 and reclassification of financial statements for earlier periods provided
for comparative purposes is required.
     The FASB also issued Statement of Financial Accounting Standards No. 131
("SFAS No. 131"), "Disclosures about Segments of an Enterprise and Related
Information" during June 1997. This statement provides standards for reporting
information on the operating segments of public businesses in their annual and
interim reports to shareholders. SFAS No. 131 requires that selected financial
information be provided for segments meeting specific criteria. The statement
will not have an impact on the results of operations of the Corporation but will
expand present disclosures. This statement becomes effective for all periods
beginning after December 15, 1997. Currently, management has not yet determined
the core segments for SFAS No. 131 reporting purposes.


                                       8

<PAGE> 9


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

PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES

FINANCIAL REVIEW            

EARNINGS SUMMARY

     Provident Bankshares Corporation recorded net income for the quarter ended
September 30, 1997, before merger related costs of the acquisition of First
Citizens Financial Corporation, of $8.7 million or $.73 per share. The
acquisition was completed on August 22, 1997 and was accounted for as a
pooling-of-interest. During the quarter, the Corporation recorded one-time
merger costs before tax benefits in connection with the acquisition of $12.6
million. Actual net income for the third quarter of 1997 was $26 thousand. Net
income for the third quarter of 1996 was $5.4 million, or $.47 per share which
included a special FDIC deposit assessment of $3.0 million. Adjusting for this
assessment, net income would have been $7.3 million or $.63 per share.
     Continued loan growth contributed to the 12% rise in net interest income
for the third quarter. Consumer loans have grown 28% from December 31, 1996 and
total loans amounted to $2.6 billion at September 30, 1997, a 15.7% growth.
Non-interest income decreased $1.7 million from the third quarter of 1996,
driven mainly by a $3.5 million decrease in mortgage banking income. This
decline was partially offset by a $1.2 million increase in fee based services on
higher account volume.
     Operating expenses for the third quarter of 1997, net of merger related
costs, declined $3.2 million mainly due to the FDIC special deposit assessment
of $3.0 million paid in the third quarter of 1996. The loan loss provision for
the third quarter of 1997 was $4.3 million and net charge-offs were $1.2 million
or .19% of average loans.

NET INTEREST INCOME

     Growth in average earning assets and a 7 basis point increase in net
interest margin raised tax-equivalent net interest income to $31.9 million for
the third quarter of 1997, a $3.5 million increase over the prior year.
     Provident's interest income on earning assets rose $8.2 million from the
third quarter of 1996, the result of a $309 million expansion in average earning
asset balances and a 22 basis point rise in yield. Growth in total average
earning assets was provided by increases of $372 million in consumer loans, $19
million in commercial business loans, and $69 million in real estate mortgage
loans. Investments decreased $99 million, real estate construction $9 million
and mortgage loans held for sale $44 million. The yield increase was mainly
attributable to a greater mix of higher yielding loans versus investments.
      Total interest expense for the third quarter of 1997 was $4.7 million
above a year ago, the combined result of an increase of 18 basis points in the
average rate paid and a $260 million increase in the average outstanding balance
of interest-bearing liabilities. Included in this increase were $193 million in
matched maturity brokered deposits, $81 million in money market certificates of
deposits, $17 million in interest bearing demand/money market deposits and $27
million in other time deposits. Savings and borrowings declined $8 and $49
million, respectively.
     As a result of off-balance sheet transactions undertaken to insulate the
bank from interest rate risks, interest income increased by $89 thousand and
interest expense increased by $472 thousand, for a total decrease of $383
thousand in net interest income for the quarter ending September 30, 1997. For
the nine months ending September 30, 1997, these transactions decreased interest
income by $194 thousand and increased interest expense by $1.96 million
combining to decrease net interest income $2.15 million. Included in this net
interest income decrease was the amortization of closed positions which reduced
interest income by $64 thousand and 



                                        9

<PAGE> 10


increased interest expense by $846 thousand (a net decrease of $910 thousand)
for the current quarter and reduced interest income by $342 thousand and
increased interest expense $2.19 million (a net decrease of $2.53 million) for
the nine months ending September 30, 1997. Without the amoritization of closed
positions, off-balance sheet positions increased net interest income $527
thousand for the current quarter and increased net interest income $379 thousand
for the nine months ending September 30, 1997.
     The forward yield curve indicates that short-term rates will increase by 40
basis points and long term rates will increase 10 basis points over the next
twelve months. The Corporation's analysis indicates that if management does not
adjust its September 30, 1997 off-balance sheet positions and the forward yield
curve assumptions occur, off-balance sheet positions, including amortization of
closed positions, would decrease net interest income by $814 thousand over the
next twelve months. This compares to a decrease in net interest income of $449
thousand should interest rates remain unchanged. Amortization of closed
positions will reduce net interest income $3.0 million over the next twelve
months. Thus, without amortization of closed positions, net interest income
would increase $2.2 million over the next twelve months if the forward yield
curve assumptions occur and $2.6 million if rates remain unchanged.

PROVISION FOR LOAN LOSSES

      The Corporation recorded a $4.3 million provision for loan losses for the
quarter, of which $2.6 million was associated with the merger of First Citizens
Financial Corporation. The $2.6 million principally reflects Provident's
estimates of the effect of its intent to accelerate the resolution of certain of
First Citizens' problem assets and its intent to discontinue certain business
relationships. Management believes that this strategy of accelerating the
resolution of certain problem assets is more cost effective than protracted
workout proceedings. Net charge-offs were $1.2 million compared to net
charge-offs of $201 thousand for the third quarter of 1996. The Corporation
continues to emphasize loan quality and closely monitors potential problem
credits. 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, 1997 was $35.2 million, up from the $29.2 million a year ago. At
September 30, 1997, the allowance represented 1.35% of total loans and 461% of
non-performing loans. Total non-performing loans were $7.6 million at September
30, 1997. Beginning in 1997, the Corporation no longer places consumer loans in
non-accrual status to better conform to standard industry practice. Consumer
loans and any uncollected accrued interest are generally charged-off at 120 days
past due. Non-performing loans as a percent of loans outstanding as of September
30, 1997 were .29%.

      In April of 1997, a judgment stemming from a lawsuit alleging that
Provident Bank of Maryland had failed to fully honor a letter of credit was
entered against Provident in the amount of $5.2 million. This decision reversed
an earlier court holding in favor of Provident. The Bank has appealed the
decision. Management, in consultation with legal counsel, is of the opinion that
there exists a significant possibility that the award will be reversed or
substantially altered at the appellate level. The ultimate outcome of the case
will not have a material adverse effect on the Corporation's financial
statements.

NON-INTEREST INCOME

     Non-interest income totaled $10.7 million in the third quarter of 1997
compared to $12.4 million in 1996. This decrease was driven by a $3.5 million
decline in mortgage banking income due to lower originations associated with the
decision to reorganize and restructure the Corporation's approach to the
mortgage banking business. Deposit service fees continued their upward trend,
increasing 23% over the prior year. Commercial deposit fees increased 20% and
commercial loan fees increased 84%. Income from Provident Investment Center
increased 16% generating $517 thousand in fee income.


                                       10

<PAGE> 11


NON-INTEREST EXPENSE

     Third quarter non-interest expense, net of merger related expenses and the
FDIC special assessment, was $27.0 million, compared to $27.2 million for
the same period last year. Salaries and benefits declined $358 thousand  mainly
related to the downsized mortgage banking business. 
     Occupancy costs increased $153 thousand over last year and furniture and 
equipment expense increased $104 thousand.  These increases were required by 
branch network expansion and upgrades of technology.
     External processing fees increased $439 thousand due to increased
account volume. All other expenses decreased a total of $538 thousand mainly
associated with a $473 thousand decrease in legal and consulting fees. 

INCOME TAXES

     Provident recorded income tax expense of $882 thousand on income before
taxes of $908 thousand. As mentioned, during the quarter, the Corporation
recorded one-time merger costs, some of which were not deducted for tax 
purposes, thus causing the effective tax rate to appear unusually high. Net of
merger related expenses, income before taxes would have been $13.6 million and
$8.7 million after taxes, an effective tax rate of 36%. During the third quarter
of 1996, Provident's tax expense was $3.2 million on pre-tax income of $8.6
million, an effective tax rate of 37.5%. The decrease in the effective tax rate
is primarily due to lower state income tax expense.

FINANCIAL CONDITION

     Total assets of the Corporation increased $215 million from December 31,
1996 to September 30, 1997 as loan balances increased $352 million. Consumer
loans were up $343 million, real estate construction loans $9.6 million and real
estate mortgage loans $12.1 million. Commercial business loans declined $12.5
million. Total deposits ended the quarter at $2.66 billion, an increase of $370
million over the December 31, 1996 level. Non-interest bearing deposits
increased $7.4 million from December 31, 1996 while interest bearing deposits
increased $362 million. Borrowings decreased $184 million from December 31, 1996
ending the quarter at $747 million.
     The primary source of liquidity at September 30, 1997 were loans held for
sale and investments available for sale, which totaled $979 million.  This
represents 28% of total liabilities compared to 35% at December 31, 1996.
      At quarter-end, the leverage ratio was 6.9% and total stockholders' equity
represented 10.51% of risk adjusted assets. These ratios exceed the well
capitalized requirements of the current leverage capital and risk-based capital
standards established by regulatory agencies.



                                       11



<PAGE> 12


PART II - OTHER INFORMATION

   Item 1.  Legal Proceedings - See Part I, Note F - Contingent Liabilities

   Item 2.  Changes in Securities - None

   Item 3.  Defaults Upon Senior Securities - None

   Item 4.  Submission of Matters to a Vote of Security Holders
            A Special Meeting of Stockholders of Provident Bankshares 
            Corporation was held on August 20, 1997.

            The Stockholders approved the acquisition of First Citizens 
            Financial Corporation, Gaithersburg, Maryland, with 6,169,434 
            (99.1%) shares cast in favor, 40,522 (0.7%) shares cast against and
            13,535 (0.2%) shares abstaining.

   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:

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

              (27)   Financial Data Schedule.

            (b) Reports on Form 8-K

                There was a current report on Form 8-K filed August 25, 1997
                regarding the consummation of the acquisition of First Citizens
                Financial Corporation, Gaithersburg, Maryland.







                                       12





<PAGE> 13





                                     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 13, 1997                       /s/ Peter M. Martin
                                          -------------------
                                          Peter M. Martin
                                          President and Chief Operating Officer



  November 13, 1997                       /s/ R. Wayne Hall
                                          -----------------
                                          R. Wayne Hall
                                          Treasurer















                                        13
                         

<PAGE> 14



                                     EXHIBIT INDEX


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

 (11)           Statement re: Computation of Per Share Earnings      15

 (27)           Financial Data Schedule                              16





















                                       14