<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 Quarterly Period Ended                          Commission File Number
     March 31, 1998                                        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) 277-7000
           ---------------------------------------------------------
              (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, 23,325,222 shares outstanding at May
4, 1998.



<PAGE> 2


               PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES

                               TABLE OF CONTENTS

                                                                       Page
PART I - FINANCIAL INFORMATION                                         ----


Item 1.   Financial Statements 


          Consolidated Statement of Condition--
          March 31, 1998 and 1997 and  December 31, 1997                3

          Consolidated Statement of Income--
          Three Months Ended March 31, 1998 and 1997                    4

          Consolidated Statement of Cash Flows--
          Three Months Ended March 31, 1998 and 1997                    5

          Notes to Consolidated Financial Statements                    6


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

Item 3.   Quantitative and Qualitative Disclosures About
          Market Risk                                                  11

PART II - OTHER INFORMATION                                            12

Item 1.   Legal Proceedings                                            

Item 2.   Changes in Securities and Use of Proceeds                    

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
<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION

CONSOLIDATED STATEMENT OF CONDITION                                                                     
Provident Bankshares Corporation and Subsidiaries                                                                       

                                                                   March 31,    December 31,      March 31,
(dollars in thousands)                                                  1998            1997           1997  
---------------------------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>             <C>
ASSETS                                                                  
Cash and Due From Banks                                          $    67,057     $    68,580     $     73,876
Short-Term Investments                                                   233             350            1,525
Mortgage Loans Held for Sale                                         118,600          66,925           39,397 
Securities Available for Sale                                        989,372         983,241        1,056,449 
Securities Held to Maturity (Market Value    
$87,331 at March 31, 1997)                                                 -               -           87,618
Loans:                                                                  
Consumer                                                           1,786,782       1,667,094        1,266,110 
Commercial Business                                                  300,673         288,289          304,343 
Real Estate -- Construction                                          117,784         125,080          124,922 
Real Estate -- Mortgage                                              583,135         620,605          614,370 
---------------------------------------------------------------------------------------------------------------
Total Loans                                                        2,788,374       2,701,068        2,309,745 
Less:  Allowance for Loan Losses                                      37,769          36,861           30,858 
---------------------------------------------------------------------------------------------------------------  
Net Loans                                                          2,750,605       2,664,207        2,278,887
---------------------------------------------------------------------------------------------------------------
Premises and Equipment, Net                                           37,465          37,402           36,832    
Accrued Interest Receivable                                           32,623          31,032           24,957
Other Assets                                                          28,939          75,002           39,698
---------------------------------------------------------------------------------------------------------------
Total Assets                                                     $ 4,024,894     $ 3,926,739     $  3,639,239   
===============================================================================================================
LIABILITIES                                                                     
Deposits:                                                                       
                 Noninterest-Bearing                             $   215,244     $   196,178     $    188,424  
Interest-Bearing                                                   2,664,617       2,558,337        2,246,134
--------------------------------------------------------------------------------------------------------------
Total Deposits                                                     2,879,861       2,754,515        2,434,558
--------------------------------------------------------------------------------------------------------------
Short-Term Borrowings                                                334,307         347,291          607,056 
Long-Term Debt                                                       488,297         469,077          325,744
Other Liabilities                                                     42,374          85,674           30,763
--------------------------------------------------------------------------------------------------------------
Total Liabilities                                                  3,744,839       3,656,557        3,398,121           
--------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY                                                                    
Common Stock (Par Value $1.00) Authorized 30,000,000 Shares,                                                                    
Issued 23,537,844,  23,284,896 and 21,922,126  Shares;                                                                  
at March 31, 1998, December 31, 1997 and March 31, 1997               23,538          23,285           21,922 
Capital Surplus                                                      135,079         131,191          111,387   
Retained Earnings                                                    119,885         113,463          117,750
Net Accumulated Other Comprehensive Income                             4,043           4,733           (7,451)
Treasury Stock at Cost - 228,066 Shares                               (2,490)         (2,490)          (2,490)
--------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity                                           280,055         270,182          241,118 
--------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                       $ 4,024,894    $  3,926,739     $  3,639,239  
==============================================================================================================

These financial statements should be read in conjunction with the accompanying notes.
</TABLE>
                                        3

<PAGE> 4
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF INCOME
Provident Bankshares Corporation and Subsidiaries


                                                             Three Months Ended
                                                                   March 31,
-------------------------------------------------------------------------------------
(in thousands, except per share data)                       1998             1997
-------------------------------------------------------------------------------------
<S>                                                    <C>               <C>
INTEREST INCOME
Interest and Fees on Loans                             $  56,080         $ 46,652
Interest on Securitites                                   16,679           17,778
Tax-Advantaged Interest                                      883            1,948
Interest on Short-Term Investments                            54              110
-------------------------------------------------------------------------------------
   TOTAL INTEREST INCOME                                  73,696           66,488
-------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on Deposits                                      30,047           23,550
Interest on Short-Term Borrowings                          4,610            8,480
Interest on Long-Term Debt                                 7,299            4,903
-------------------------------------------------------------------------------------
   TOTAL INTEREST EXPENSE                                 41,956           36,933
-------------------------------------------------------------------------------------
  NET INTEREST INCOME                                     31,740           29,555
Less: Provisions for Loan Losses                           2,975              834
-------------------------------------------------------------------------------------
  NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     28,765           28,721
-------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service Charges on Deposit Accounts                        6,258            5,517
Mortgage Banking Activities                                1,584            2,178
Commissions and Fees                                       1,184              947
Net Securities Gains                                       1,209               71
Other Non-Interest Income                                  2,533            1,625
-------------------------------------------------------------------------------------
  TOTAL NON-INTEREST INCOME                               12,768           10,338
-------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and Employee Benefits                            14,357           13,747
Occupancy Expense, Net                                     2,482            2,394
Furniture and Equipment Expense                            1,910            1,808
External Processing Fees                                   3,258            2,898
Other Non-Interest Expense                                 5,614            5,955
-------------------------------------------------------------------------------------
  TOTAL NON-INTEREST EXPENSE                              27,621           26,802
-------------------------------------------------------------------------------------
INCOME BEFORE TAXES                                       13,912           12,257
Income Tax Expense                                         4,607            4,328
-------------------------------------------------------------------------------------
Net Income                                             $   9,305         $  7,929
-------------------------------------------------------------------------------------
PER SHARE AMOUNTS:
  Net Income -- Basic                                  $     .40         $    .35
  Net Income -- Diluted                                      .38              .34
-------------------------------------------------------------------------------------

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

                                            4

<PAGE> 5
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF CASH FLOWS

Provident Bankshares Corporation and Subsidiaries

                                                                             Three Months Ended
                                                                                  March 31,
-----------------------------------------------------------------------------------------------------
(in thousands)                                                              1998              1997
-----------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>
OPERATING ACTIVITIES
 Net Income                                                            $   9,305         $   7,929
 Adjustments to Reconcile Net Income to
  Net Cash Provided (Used) by Operating Activities:
    Depreciation and Amortization                                          5,237             2,654
    Provision for Loan Losses                                              2,975               834
    Provision for Deferred Income Tax Benefit                             (1,214)             (613)
    Realized Net Securities Gains                                         (1,209)              (71)
    Loans Originated or Acquired and Held for Sale                      (192,134)          (71,648)
    Proceeds from Sales of Loans                                         141,068            68,724
    Gain on Sales of Loans                                                  (609)             (569)
    Other Operating Activities                                             2,167              (352)
-----------------------------------------------------------------------------------------------------
 Total Adjustments                                                       (43,719)           (1,041)   
-----------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                         (34,414)            6,888
-----------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
 Principal Collections and Maturities of Securities Available for Sale    54,366            36,142
 Principal Collections and Maturities of Securities Held to Maturity          --               878
 Proceeds on Sales of Securities Available for Sale                      139,899            19,328
 Purchases of Securities Held to Maturity                                     --            (2,262)
 Purchases of Securities Available for Sale                             (200,965)         (154,052)
 Loan Originations and Purchases Less Principal Collections              (91,611)          (61,925)
 Purchases of Premises and Equipment                                      (1,755)           (1,823)
-----------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES                                   (100,066)         (163,714)
-----------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES:
 Net Increase in Deposits                                                125,346            148,414
 Net Increase (Decrease) in Short-Term Borrowings                        (12,984)             4,621
 Proceeds from Long-Term Debt                                             50,000             35,000
 Payments and Maturities of Long-Term Debt                               (30,780)           (37,773)
 Issuance of Common Stock                                                  4,141              2,262
 Cash Dividends on Common Stock                                           (2,883)            (1,795)
-----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                132,840            150,729
-----------------------------------------------------------------------------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS                                     (1,640)            (6,097)
 Cash and Cash Equivalents at Beginning of Year                           68,930             81,498
----------------------------------------------------------------------------------------------------- 
CASH AND CASH EQUIVALENTS AT END OF PERIOD                             $  67,290         $   75,401
=====================================================================================================

SUPPLEMENTAL DISCLOSURES
----------------------------------------------------------------------------------------------------- 
Interest Paid, Net of Amount Capitalized                               $  22,413         $   17,830
Income Taxes Paid                                                             37                 29

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
MARCH 31, 1998

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 three month period ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. For further information, refer to the consolidated financial statements
and notes thereto included in the Provident Bankshares Corporation's (the
"Corporation") Annual Report on Form 10-K for the year ended December 31, 1997
as filed with the Securities and Exchange Commission on March 19, 1998.

NOTE B - PER SHARE INFORMATION

<TABLE>
<CAPTION>

     The Corporation adopted 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. All prior period data presented has
been restated to conform to the provisions of SFAS No. 128. The following table
presents a summary of per share data and amounts for the periods indicated:

                                                                 March 31,
-------------------------------------------------------------------------------------
(dollars in thousands, except per share data)              1998            1997
-------------------------------------------------------------------------------------
<S>                                                      <C>             <C>
Qualifying Net Income                                    $ 9,305         $  7,929
Basic EPS Shares                                          23,176           22,563
Basic EPS                                                    .40              .35
-------------------------------------------------------------------------------------
Dilutive Shares                                            1,183              798
Diluted EPS Shares                                        24,359           23,361
Diluted EPS                                                  .38              .34
-------------------------------------------------------------------------------------
</TABLE>

NOTE C - 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 accumulated other comprehensive income and therefore,
has no effect on the financial results of the Corporation's operations.


                                       6

<PAGE> 7

<TABLE>
<CAPTION>

        The aggregate amortized cost and market values of the investment 
securities portfolio at March 31 were as follows:


                                                                   March 31, 1998
                                    ----------------------------------------------------------------------
                                                              Gross              Gross
                                          Amortized         Unrealized         Unrealized          Market
(in thousands)                              Cost              Gains              Losses            Value
----------------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>                 <C>               <C>       
SECURITIES AVAILABLE FOR SALE
U.S. Treasury and Government
  Agencies and Corporations             $   38,276        $     40            $      9          $   38,307
Mortage-Backed Securities                  903,920           7,796               1,397             910,319
Municipal Securities                        21,039             464                  11              21,492
Other Debt Securities                       19,448              12                 206              19,254
----------------------------------------------------------------------------------------------------------
  Total Securities Available for Sale   $  982,683        $  8,312            $  1,623          $  989,372
----------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                   March 31, 1997
                                    ----------------------------------------------------------------------
                                                              Gross              Gross
                                          Amortized         Unrealized         Unrealized          Market
(in thousands)                              Cost              Gains              Losses            Value
----------------------------------------------------------------------------------------------------------
<S>                                     <C>              <C>                 <C>               <C>       
SECURITIES AVAILABLE FOR SALE
U.S. Treasury and Government
  Agencies and Corporations             $   76,363       $      56            $  1,490         $   74,929
Mortage-Backed Securities                  943,463           3,528              14,231            932,760
Municipal Securities                        18,878             222                 396             18,704
Other Debt Securities                       30,028              61                  33             30,056
----------------------------------------------------------------------------------------------------------
  Total Securities Available for Sale    1,068,732           3,867              16,150          1,056,449
----------------------------------------------------------------------------------------------------------

SECURITIES HELD TO MATURITY
U.S. Treasury and Government
  Agencies and Corporations                 53,119             433                 127             53,425
Mortage-Backed Securities                   34,499              21                 614             33,906
----------------------------------------------------------------------------------------------------------
  Total Securities Held to Maturity         87,618             454                 741             87,331
----------------------------------------------------------------------------------------------------------
Total Investment Securities Portfolio   $1,156,350       $   4,321           $  16,891         $1,143,780
----------------------------------------------------------------------------------------------------------
</TABLE>

      At March 31, 1998 a net unrealized gain of $4.0 million was reflected as
Accumulated Other Comprehensive Income which is reflected separately as a
component of Stockholders' Equity in the Consolidated Statement of Condition as
compared to a net unrealized gain of $4.7 million at December 31, 1997. For
details regarding investment securities at December 31, 1997, refer to Note 3 of
the Consolidated Financial Statements incorporated in the Corporation's 10-K
filed March 19, 1998.


                                       7

<PAGE> 8


NOTE D - SERVICING ASSETS

      Effective January 1, 1997, the Corporation adopted the provisions of
Statement of Financial Accounting Standards No. 125 - "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No.
125"). 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 March 31, 1998 no valuation allowance was required.

<TABLE>
<CAPTION>

     The following is an analysis of servicing asset balance, net of accumulated
amortization, during the period ended March 31, 1998:

                                                              March 31,
(in thousands)                                                    1998
-----------------------------------------------------------------------
<S>                                                             <C>   
Balance at January 1, 1998                                      $1,984
Additions                                                        2,011
Amortization                                                       179
Sales of Servicing Assets                                            8
-----------------------------------------------------------------------
Balance at March 31, 1998                                       $3,808
-----------------------------------------------------------------------
</TABLE>

NOTE E - CONTINGENT LIABILITIES

      In April 1997, a judgment stemming from a lawsuit alleging that Provident
Bank of Maryland ("Provident" or the "Bank") 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 F - COMPREHENSIVE INCOME

      In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS No. 130"). SFAS No. 130 establishes requirements for the
disclosure of comprehensive income in interim financial statements.
Comprehensive income is defined as net income plus transactions and other
occurrences which are the result of nonowner changes in equity. For the
Corporation, nonowner equity changes are comprised of unrealized gains or losses
on debt securities that will be accumulated with net income in determining
comprehensive income. This statement does not impact the historical financial
results of the Corporation's operations and is effective for years beginning
after December 15, 1997. Reclassification of financial statements for earlier
periods provided for comparative purposes is required. Adoption of this standard
did not have an impact on the Corporation's results of operations. Presented
below is a reconcilement of net income to comprehensive income indicating the
components of other comprehensive income.

<TABLE>
<CAPTION>
                                                                        Three Months Ended March 31,
-----------------------------------------------------------------------------------------------------
(in thousands)                                                              1998            1997
-----------------------------------------------------------------------------------------------------
<S>                                                                      <C>             <C>
Net Income                                                               $  9,305        $   7,929
Other Comprehensive Income:  
  Unrealized Holding Gains (Losses) During the Period                          66           (9,967)
  Less:  Reclassification Adjustment for Gains Included in Net Income      (1,209)             (71)
-----------------------------------------------------------------------------------------------------
Other Comprehensive Income, Before Tax                                     (1,143)         (10,038)
Income Tax Benefit Related to Items of Other Comprehensive Income             453            3,960
-----------------------------------------------------------------------------------------------------
Other Comprehensive Income, After Tax                                        (690)          (6,078)
-----------------------------------------------------------------------------------------------------
Comprehensive Income                                                     $  8,615        $   1,851
-----------------------------------------------------------------------------------------------------
</TABLE>


                                        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
March 31, 1998 of $9.3 million or $.40 per share basic and $.38 diluted. This
represented a 17.4% increase in net income over the same period a year ago. Net
income for the quarter ended March 31, 1997 was $7.9 million or $.35 per share
basic or $.34 diluted. The higher earnings in 1998 were mainly due to loan
growth, increased fee income and controlled operating expenses. Average consumer
loans outstanding grew $486 million as total average loans increased 21% to
$2.72 billion. Increase in non-interest income was driven by a 15% increase in
fee based services on higher account volume. Even with higher account volume and
continued investment in business initiatives, operating expenses were controlled
to a 3.1% growth rate. There was a $2.1 million increase in the provision for
loan losses during the quarter with net charge-offs of $2.1 million. The
increase in provision is mainly related to the growth in loans.

NET INTEREST INCOME

      Growth in average earning assets offset in part by a higher cost of
liabilities raised tax-equivalent net interest income to $32.0 million for the
first quarter of 1998, a $2.3 million increase over the prior year.
      Provident's interest income on earning assets rose $7.3 million from the
first quarter of 1997, the result of a $378 million expansion in average earning
asset balances. Growth in total average earning assets was provided by increases
of $486 million in consumer loans and $12.4 million in commercial construction
loans as well as a $35.6 million increase in mortgage loans held for sale.
Investments decreased $123 million, residential construction $13.4 million, real
estate mortgage loans $11.6 million and commercial business loans $8.2 million.
The yield remained relatively flat at 7.90% versus 7.91%.
      Total interest expense for the first quarter of 1998 was $5.0 million
above a year ago, the combined result of an increase of 16 basis points in the
average rate paid and a $308 million increase in the average outstanding balance
of interest-bearing liabilities. Included in this increase were $319 million in
matched maturity brokered deposits, $83 million in money market certificates of
deposit, $36 million in interest-bearing demand/money market deposits and $64
million in individual retirement account deposits. Savings and direct
certificates of deposit declined $8 million and $73 million, respectively.
Borrowed money declined $113 million.
      As a result of off-balance sheet transactions undertaken to insulate the
Bank from interest rate risks, interest income increased by $90 thousand and
interest expense increased by $310 thousand, for a total decrease of $220
thousand in net interest income for the quarter ended March 31, 1998. Included
in this net interest income decrease was the amortization of closed positions
which reduced interest income by $54 thousand and increased interest expense by
$611 thousand (a net decrease of $665 thousand) for the current quarter. Without
the amortization of closed positions, off-balance sheet positions increased net
interest income $445 thousand for the current quarter.
      The forward yield curve indicates that short-term rates will increase 10
basis points and long-term rates will increase 5 basis points over the next
twelve months. The Corporation's analysis indicates that if management does not
adjust its March 31, 1998 off-balance sheet positions and the forward yield
curve assumptions occur, off-balance sheet positions, including amortization of
closed positions, would increase net interest income by $912 thousand over the
next twelve months. This compares to an increase in net interest income of $645
thousand should interest rates remain unchanged. Amortization of closed
positions will reduce



                                       9

<PAGE> 10


net interest income $1.55 million over the next twelve months. Thus, without
amortization of closed positions, net interest income would increase $2.5
million over the next twelve months if the forward yield curve assumptions occur
and $2.2 million if rates remain unchanged.

PROVISION FOR LOAN LOSSES

      The Corporation recorded a $3.0 million provision for loan losses for the
quarter, with net charge-offs of $2.1 million for the first quarter of 1998
compared to $337 thousand for the same period of 1997. 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
March 31, 1998 was $37.8 million, up from $30.9 million a year ago. At March 31,
1998, the allowance represented 1.35% of total loans and 264% of non-performing
loans. Total non-performing loans were $14.3 million at March 31, 1998. 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 March 31,
1998 were .51%.

      In April 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 $12.8 million in the first quarter of 1998
compared to $10.3 million in 1997. This increase was driven by a $1.2 million
net securities gain and $441 thousand gain from the sale of real estate. Deposit
service fees continued their upward trend, increasing 13% over the prior year.
Loan fees increased 98% and other commissions and fees increased 25% all from
increased account volume. Income from Provident Investment Center increased 8%
generating $608 thousand in fee income. Fees from mortgage banking activities
declined $600 thousand as a result of closing several retail sales offices and a
shift in strategy to a more indirect origination business.

NON-INTEREST EXPENSE

      First quarter non-interest expense was $27.6 million, compared to $26.8
million for the same period last year. Salaries and benefits increased $610
thousand mainly related to merit increases. Occupancy costs increased $88
thousand over last year and furniture and equipment expense increased $102
thousand. These increases were required by branch network expansion and upgrades
of technology. External processing fees increased $360 thousand due to increased
account volume. All other expenses decreased a total of $341 thousand mainly
associated with a $292 thousand decrease in legal and consulting fees.

INCOME TAXES

      Provident recorded income tax expense of $4.6 million on income before
taxes of $13.9 million, an effective tax rate of 33.1%. During the first quarter
of 1997, Provident's tax expense was $4.3 million on pre-tax income of $12.3
million, an effective tax rate of 35.3%. The decrease in the effective tax rate
is primarily due to lower state income tax expense.



                                       10

<PAGE> 11


FINANCIAL CONDITION

      Total assets of the Corporation increased $98 million from December 31,
1997 to March 31, 1998 as loan balances increased $87 million. Consumer loans
were up $120 million and commercial business loans were up $12.4 million from
December 31, 1997. Real estate construction loans declined $7.3 million and real
estate mortgage loans $37.5 million. Total deposits ended the quarter at $2.88
billion, an increase of $125 million over the December 31, 1997 level.
Non-interest bearing deposits increased $19.1 million from December 31, 1997
while interest bearing deposits increased $106 million. Borrowings increased
$6.2 million from December 31, 1997 ending the quarter at $823 million.
      The primary sources of liquidity at March 31, 1998 were loans held for
sale and investments available for sale, which totaled $1.1 billion. This
represents 30% of total liabilities compared to 29% at December 31, 1997.
      At quarter-end, the leverage ratio was 7.05% and total stockholders'
equity represented 10.24% of risk adjusted assets. These ratios exceed the
minimum requirements of the current leverage capital and risk-based capital
standards established by regulatory agencies. In the second quarter of 1998 the
Corporation issued $40 million of 8.29% corporation obligated mandatory
redeemable capital securities which mature in 2028. These securities qualify as
capital for regulatory purposes and will be used for general corporate purposes.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      For information regarding market risk at December 31, 1997, see "Interest
Sensitivity Management" and Note 13 to the Consolidated Financial Statements in
the Corporation's Form 10-K filed with the Commission on March 19, 1998.
Additionally, refer to "Net Interest Income" in Item 2 - Management's Discussion
and Analysis of Results of Operations and Financial Condition for additional
quantitative and qualitative discussions about market risk at March 31, 1998.



                                       11

<PAGE> 12


PART II - OTHER INFORMATION


Item 1.  Legal Proceedings - See Part I, Note E - 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 - 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) Bylaws of Provident Bankshares Corporation, as amended.**
            (4)   Stockholder Protection Rights Agreement.**
            (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 March 31, 1998.

*   Incorporated by reference from Registrant's Registration Statement on Form
    S-3 (File No. 33-73162) filed with the Commission on August 18, 1997.
**  Incorporated by reference from Registrant's Form 10-K (File No. 0-16421)
    filed with the Commission on February 17, 1995.




                                       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

May 14, 1998                               /s/ Peter M. Martin
                                           ------------------------------------
                                           Peter M. Martin
                                           President, Chairman and Chief 
                                           Executive Officer



May 14, 1998                               /s/ R. Wayne Hall
                                           ------------------------------------
                                           R. Wayne Hall
                                           Treasurer




                                       13


<PAGE>  14
<TABLE>
<CAPTION>

                                  EXHIBIT INDEX


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

  <S>                    <C>                                                              <C> 
  (11)                   Statement re: Computation of Per Share Earnings                  15

  (27)                   Financial Data Schedule                                          16


</TABLE>



                                       14