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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







|x | Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended March 31, 2008

Commission File Number
0-16421





PROVIDENT BANKSHARES CORPORATION

(Exact Name of Registrant as Specified in its Charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Maryland                                                       |  | 52-1518642                             
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer 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 by check mark whether the Registrant is a large accelerated filer, an accelerated filed, a non-accelerated filer or a smaller reporting company. See definition of accelerated filer, large
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated
filer  x    Accelerated filer   ̈    Non-accelerated filer   ̈    Smaller reporting company   ̈

Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x

At May 6, 2008, the Registrant had 33,147,422 shares of $1.00 par value common stock outstanding.









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TABLE OF CONTENTS



|                                                                                                              |  |                                                                                       |  |     
|------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                                                                                                              |  |                                                                                       |  | Page
|PART I - FINANCIAL INFORMATION                                                                                |  |                                                                                      
|                                                                                                              |  |                                                                                      
|Item 1.                                                                                                       |  | Financial Statements                                                                  |  |     
|                                                                                                              | 
|Condensed Consolidated Statements of Condition  Unaudited March 31, 2008 and 2007 and December 31, 2007      |  | 4                                                                                    
|                                                                                                              | 
|Condensed Consolidated Statements of Income  Unaudited three month periods ended March 31, 2008 and 2007     |  | 5                                                                                    
|                                                                                                              | 
|Condensed Consolidated Statements of Cash Flows  Unaudited three month periods ended March 31, 2008 and 2007 |  | 6                                                                                    
|                                                                                                              | 
|Notes to Condensed Consolidated Financial Statements  Unaudited                                              |  | 7                                                                                    
|                                                                                                              |  |                                                                                      
|Item 2.                                                                                                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 23  
|                                                                                                              |  |                                                                                      
|Item 3.                                                                                                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 44  
|                                                                                                              |  |                                                                                      
|Item 4.                                                                                                       |  | Controls and Procedures                                                               |  | 44  
|                                                                                                              | 
|PART II - OTHER INFORMATION                                                                                   |  |                                                                                      
|                                                                                                              |  |                                                                                      
|Item 1.                                                                                                       |  | Legal Proceedings                                                                     |  | 44  
|                                                                                                              |  |                                                                                      
|Item 1A.                                                                                                      |  | Risk Factors                                                                          |  | 45  
|                                                                                                              |  |                                                                                      
|Item 2.                                                                                                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 45  
|                                                                                                              |  |                                                                                      
|Item 3.                                                                                                       |  | Defaults upon Senior Securities                                                       |  | 45  
|                                                                                                              |  |                                                                                      
|Item 4.                                                                                                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 45  
|                                                                                                              |  |                                                                                      
|Item 5.                                                                                                       |  | Other Information                                                                     |  | 45  
|                                                                                                              |  |                                                                                      
|Item 6.                                                                                                       |  | Exhibits                                                                              |  | 45  
|                                                                                                              | 
|SIGNATURES                                                                                                    |  | 46                                                                                   



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Forward-looking Statements

This report, as well as other written communications made from time to time by Provident Bankshares Corporation and its subsidiaries (the Corporation) (including, without limitation, the Corporations 2007 Annual Report to
Stockholders) and oral communications made from time to time by authorized officers of the Corporation, may contain statements relating to the future results of the Corporation (including certain projections and business trends) that are considered
forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 (the PSLRA). Such forward-looking statements may be identified by the use of such words as believe, expect,
anticipate, should, planned, estimated, intend and potential. Examples of forward-looking statements include, but are not limited to, possible or assumed estimates with respect
to the financial condition, expected or anticipated revenue, and results of operations and business of the Corporation, including earnings growth determined using U.S. generally accepted accounting principles (GAAP); revenue growth in
retail banking, lending and other areas; origination volume in the Corporations consumer, commercial and other lending businesses; asset quality and levels of non-performing assets; impairment charges with respect to investment securities;
current and future capital management programs; non-interest income levels, including fees from services and product sales; tangible capital generation; market share; expense levels; and other business operations and strategies. For these
statements, the Corporation claims the protection of the safe harbor for forward-looking statements contained in the PSLRA.

The Corporation cautions you
that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: the factors identified in the Corporations Form
10-K for the fiscal year ended December 31, 2007 under the headings Forward-Looking Statements and Item 1A. Risk Factors, prevailing economic conditions, either nationally or locally in some or all areas in which the
Corporation conducts business or conditions in the securities markets or the banking industry; changes in interest rates, deposit flows, loan demand, real estate values and competition, which can materially affect, among other things, consumer
banking revenues, revenues from sales on non-deposit investment products, origination levels in the Corporations lending businesses and the level of defaults, losses and prepayments on loans made by the Corporation, whether held in portfolio
or sold in the secondary markets; changes in the quality or composition of the loan or investment portfolios; the Corporations ability to successfully integrate any assets, liabilities, customers, systems and management personnel the
Corporation may acquire into its operations and its ability to realize related revenue synergies and cost savings within expected time frames; the Corporations timely development of new and competitive products or services in a changing
environment, and the acceptance of such products or services by customers; operational issues and/or capital spending necessitated by the potential need to adapt to industry changes in information technology systems, on which it is highly dependent;
changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; risks and uncertainties related to mergers and related integration and restructuring
activities; conditions in the securities markets or the banking industry; changes in the quality or composition of the investment portfolio; litigation liabilities, including costs, expenses, settlements and judgments; or the outcome of other
matters before regulatory agencies, whether pending or commencing in the future; and other economic, competitive, governmental, regulatory and technological factors affecting the Corporations operations, pricing, products and services.
Additionally, the timing and occurrence or non-occurrence of events may be subject to circumstances beyond the Corporations control. Readers are cautioned not to place undue reliance on these forward-looking statements which are made as of the
date of this report, and, except as may be required by applicable law or regulation, the Corporation assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the
forward-looking statements.



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PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

Provident Bankshares Corporation and Subsidiaries

Condensed Consolidated Statements of Condition



|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | ------------- |  | - | --------- | -
|(dollars in thousands, except per share and share amounts)                                                                                                                              |  | March 31,2008 |           |   | December 31,2007 |   |           | March 31,2007 | 
|                                                                                                                                                                                        |  | (Unaudited)   |           |   |                  |   |           | (Unaudited)   | 
|Assets:                                                                                                                                                                                 |  |               |           |   |                  |   |           |               |  |   |           |  
|Cash and due from banks                                                                                                                                                                 |  | $             | 125,731   |   |                  | $ | 140,348   |               |  | $ | 124,528   |  
|Short-term investments                                                                                                                                                                  |  |               | 2,011     |   |                  |   | 1,970     |               |  |   | 2,603     |  
|Mortgage loans held for sale                                                                                                                                                            |  |               | 15,541    |   |                  |   | 8,859     |               |  |   | 12,356    |  
|Securities available for sale                                                                                                                                                           |  |               | 1,366,779 |   |                  |   | 1,421,299 |               |  |   | 1,569,279 |  
|Securities held to maturity                                                                                                                                                             |  |               | 47,146    |   |                  |   | 47,265    |               |  |   | 68,904    |  
|Loans                                                                                                                                                                                   |  |               | 4,202,677 |   |                  |   | 4,215,326 |               |  |   | 3,890,421 |  
|Less allowance for loan losses                                                                                                                                                          |  |               | 55,249    |   |                  |   | 55,269    |               |  |   | 45,519    |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Net loans                                                                                                                                                                               |  |               | 4,147,428 |   |                  |   | 4,160,057 |               |  |   | 3,844,902 |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Premises and equipment, net                                                                                                                                                             |  |               | 59,523    |   |                  |   | 59,979    |               |  |   | 64,670    |  
|Accrued interest receivable                                                                                                                                                             |  |               | 29,753    |   |                  |   | 33,883    |               |  |   | 34,997    |  
|Goodwill                                                                                                                                                                                |  |               | 253,906   |   |                  |   | 253,906   |               |  |   | 253,906   |  
|Intangible assets                                                                                                                                                                       |  |               | 5,836     |   |                  |   | 6,152     |               |  |   | 8,515     |  
|Other assets                                                                                                                                                                            |  |               | 350,262   |   |                  |   | 331,328   |               |  |   | 250,032   |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Total assets                                                                                                                                                                            |  | $             | 6,403,916 |   |                  | $ | 6,465,046 |               |  | $ | 6,234,692 |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Liabilities:                                                                                                                                                                            |  |               |           |   |                  |   |           |               |  |   |           |  
|Deposits:                                                                                                                                                                               |  |               |           |   |                  |   |           |               |  |   |           |  
|Noninterest-bearing                                                                                                                                                                     |  | $             | 686,289   |   |                  | $ | 676,260   |               |  | $ | 769,081   |  
|Interest-bearing                                                                                                                                                                        |  |               | 3,684,338 |   |                  |   | 3,503,260 |               |  |   | 3,513,319 |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Total deposits                                                                                                                                                                          |  |               | 4,370,627 |   |                  |   | 4,179,520 |               |  |   | 4,282,400 |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Short-term borrowings                                                                                                                                                                   |  |               | 684,946   |   |                  |   | 861,395   |               |  |   | 498,118   |  
|Long-term debt                                                                                                                                                                          |  |               | 771,640   |   |                  |   | 771,683   |               |  |   | 781,776   |  
|Accrued expenses and other liabilities                                                                                                                                                  |  |               | 59,154    |   |                  |   | 96,677    |               |  |   | 36,601    |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Total liabilities                                                                                                                                                                       |  |               | 5,886,367 |   |                  |   | 5,909,275 |               |  |   | 5,598,895 |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Stockholders Equity:                                                                                                                                                                   |  |               |           |   |                  |   |           |               |  |   |           |  
|Common stock (par value $1.00) authorized 100,000,000 shares; issued 31,737,501, 31,621,956 and 32,243,534 shares at March 31,
2008, December 31, 2007 and March 31, 2007, respectively |  |               | 31,738    |   |                  |   | 31,622    |               |  |   | 32,244    |  
|Additional paid-in capital                                                                                                                                                              |  |               | 347,992   |   |                  |   | 347,603   |               |  |   | 362,224   |  
|Retained earnings                                                                                                                                                                       |  |               | 216,700   |   |                  |   | 244,723   |               |  |   | 259,115   |  
|Net accumulated other comprehensive loss                                                                                                                                                |  |               | (78,881   | ) |                  |   | (68,177   | )             |  |   | (17,786   | )
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Total stockholders equity                                                                                                                                                              |  |               | 517,549   |   |                  |   | 555,771   |               |  |   | 635,797   |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  
|Total liabilities and stockholders equity                                                                                                                                              |  | $             | 6,403,916 |   |                  | $ | 6,465,046 |               |  | $ | 6,234,692 |  
|                                                                                                                                                                                        |  |               |           |   |                  |   |           |               |  |   |           |  

The accompanying notes are an integral part of these statements.



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Provident Bankshares Corporation and Subsidiaries

Condensed Consolidated Statements of IncomeUnaudited



|                                                    |  |                             |         |   |      |   |       
|--------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------
|                                                    |  | Three Months EndedMarch 31,
|(dollars in thousands, except per share data)       |  | 2008                        |         |   | 2007
|Interest Income:                                    |  |                             |         |   |      |   |       
|Loans, including fees                               |  | $                           | 66,369  |   |      | $ | 69,254
|Investment securities                               |  |                             | 19,731  |   |      |   | 22,378
|Tax-advantaged loans and securities                 |  |                             | 1,639   |   |      |   | 1,467 
|Short-term investments                              |  |                             | 36      |   |      |   | 97    
|                                                    |  |                             |         |   |      |   |       
|Total interest income                               |  |                             | 87,775  |   |      |   | 93,196
|                                                    |  |                             |         |   |      |   |       
|Interest Expense:                                   |  |                             |         |   |      |   |       
|Deposits                                            |  |                             | 28,210  |   |      |   | 25,554
|Short-term borrowings                               |  |                             | 6,089   |   |      |   | 7,742 
|Long-term debt                                      |  |                             | 8,487   |   |      |   | 10,965
|                                                    |  |                             |         |   |      |   |       
|Total interest expense                              |  |                             | 42,786  |   |      |   | 44,261
|                                                    |  |                             |         |   |      |   |       
|Net interest income                                 |  |                             | 44,989  |   |      |   | 48,935
|Less provision for loan losses                      |  |                             | 3,114   |   |      |   | 1,052 
|                                                    |  |                             |         |   |      |   |       
|Net interest income after provision for loan losses |  |                             | 41,875  |   |      |   | 47,883
|                                                    |  |                             |         |   |      |   |       
|Non-Interest Income:                                |  |                             |         |   |      |   |       
|Service charges on deposit accounts                 |  |                             | 21,031  |   |      |   | 22,179
|Commissions and fees                                |  |                             | 1,562   |   |      |   | 1,662 
|Impairment on investment securities                 |  |                             | (42,655 | ) |      |   |      
|Net gains (losses)                                  |  |                             | (191    | ) |      |   | 1,203 
|Net derivative activities                           |  |                             | 39      |   |      |   | 143   
|Other non-interest income                           |  |                             | 5,090   |   |      |   | 4,682 
|                                                    |  |                             |         |   |      |   |       
|Total non-interest income (loss)                    |  |                             | (15,124 | ) |      |   | 29,869
|                                                    |  |                             |         |   |      |   |       
|Non-Interest Expense:                               |  |                             |         |   |      |   |       
|Salaries and employee benefits                      |  |                             | 26,682  |   |      |   | 27,929
|Occupancy expense, net                              |  |                             | 5,972   |   |      |   | 6,104 
|Furniture and equipment expense                     |  |                             | 3,753   |   |      |   | 3,785 
|External processing fees                            |  |                             | 5,248   |   |      |   | 5,090 
|Restructuring activities                            |  |                             | 74      |   |      |   | 867   
|Other non-interest expense                          |  |                             | 9,702   |   |      |   | 10,993
|                                                    |  |                             |         |   |      |   |       
|Total non-interest expense                          |  |                             | 51,431  |   |      |   | 54,768
|                                                    |  |                             |         |   |      |   |       
|Income (loss) before income taxes                   |  |                             | (24,680 | ) |      |   | 22,984
|Income tax expense (benefit)                        |  |                             | (7,058  | ) |      |   | 6,870 
|                                                    |  |                             |         |   |      |   |       
|Net income (loss)                                   |  | $                           | (17,622 | ) |      | $ | 16,114
|                                                    |  |                             |         |   |      |   |       
|Net Income (Loss) Per Share Amounts:                |  |                             |         |   |      |   |       
|Basic                                               |  | $                           | (0.56   | ) |      | $ | 0.50  
|Diluted                                             |  |                             | (0.56   | ) |      |   | 0.50  

The accompanying notes are an integral part of these statements.



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Provident Bankshares Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows 
Unaudited



|                                                                                  |  |                             |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | --------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                  |  | Three Months EndedMarch 31, |         
|(in thousands)                                                                    |  | 2008                        |          |   | 2007 |  
|Operating Activities:                                                             |  |                             |          |   |      |   |          |  
|Net income (loss)                                                                 |  | $                           | (17,622  | ) |      | $ | 16,114   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |          |   |      |   |          |  
|Depreciation and amortization                                                     |  |                             | 4,167    |   |      |   | 4,938    |  
|Provision for loan losses                                                         |  |                             | 3,114    |   |      |   | 1,052    |  
|Provision for deferred income tax benefit                                         |  |                             | (12,354  | ) |      |   | (1,389   | )
|Impairment on investment securities                                               |  |                             | 42,655   |   |      |   |         |  
|Net (gains) losses                                                                |  |                             | 191      |   |      |   | (1,203   | )
|Net derivative activities                                                         |  |                             | (39      | ) |      |   | (143     | )
|Originated loans held for sale                                                    |  |                             | (28,498  | ) |      |   | (31,052  | )
|Proceeds from sales of loans held for sale                                        |  |                             | 21,928   |   |      |   | 29,491   |  
|Restructuring activities                                                          |  |                             | 74       |   |      |   | 867      |  
|Cash payments for restructuring activities                                        |  |                             | (154     | ) |      |   | (510     | )
|Share based payments                                                              |  |                             | 534      |   |      |   | 421      |  
|Net decrease in accrued interest receivable and other assets                      |  |                             | 9,650    |   |      |   | 14,112   |  
|Net increase (decrease) in accrued expenses and other liabilities                 |  |                             | (716     | ) |      |   | 1,417    |  
|                                                                                  |  |                             |          |   |      |   |          |  
|Total adjustments                                                                 |  |                             | 40,552   |   |      |   | 18,001   |  
|                                                                                  |  |                             |          |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                             | 22,930   |   |      |   | 34,115   |  
|                                                                                  |  |                             |          |   |      |   |          |  
|Investing Activities:                                                             |  |                             |          |   |      |   |          |  
|Principal collections and maturities of securities available for sale             |  |                             | 28,831   |   |      |   | 39,616   |  
|Principal collections and maturities of securities held to maturity               |  |                             |         |   |      |   | 31,815   |  
|Proceeds from sales of securities available for sale                              |  |                             |         |   |      |   | 37,015   |  
|Purchases of securities available for sale                                        |  |                             | (40,589  | ) |      |   | (56,993  | )
|Loan originations and purchases less principal collections                        |  |                             | 10,131   |   |      |   | (25,165  | )
|Purchases of premises and equipment                                               |  |                             | (2,817   | ) |      |   | (1,753   | )
|Sale of branch facility                                                           |  |                             |         |   |      |   | 1,967    |  
|                                                                                  |  |                             |          |   |      |   |          |  
|Net cash provided (used) by investing activities                                  |  |                             | (4,444   | ) |      |   | 26,502   |  
|                                                                                  |  |                             |          |   |      |   |          |  
|Financing Activities:                                                             |  |                             |          |   |      |   |          |  
|Net increase in deposits                                                          |  |                             | 153,960  |   |      |   | 142,288  |  
|Net decrease in short-term borrowings                                             |  |                             | (176,449 | ) |      |   | (160,769 | )
|Proceeds from long-term debt                                                      |  |                             | 25,000   |   |      |   | 25,000   |  
|Payments and maturities of long-term debt                                         |  |                             | (25,266  | ) |      |   | (71,225  | )
|Proceeds from issuance of stock                                                   |  |                             | 127      |   |      |   | 1,206    |  
|Tax (expenses) benefits associated with share based payments                      |  |                             | (156     | ) |      |   | 100      |  
|Purchase of treasury stock                                                        |  |                             |         |   |      |   | (10,119  | )
|Cash dividends paid on common stock                                               |  |                             | (10,278  | ) |      |   | (9,879   | )
|                                                                                  |  |                             |          |   |      |   |          |  
|Net cash used by financing activities                                             |  |                             | (33,062  | ) |      |   | (83,398  | )
|                                                                                  |  |                             |          |   |      |   |          |  
|Decrease in cash and cash equivalents                                             |  |                             | (14,576  | ) |      |   | (22,781  | )
|Cash and cash equivalents at beginning of period                                  |  |                             | 142,318  |   |      |   | 149,912  |  
|                                                                                  |  |                             |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                           | 127,742  |   |      | $ | 127,131  |  
|                                                                                  |  |                             |          |   |      |   |          |  
|Supplemental Disclosures:                                                         |  |                             |          |   |      |   |          |  
|Interest paid, net of amount credited to deposit accounts                         |  | $                           | 26,165   |   |      | $ | 26,781   |  
|Income taxes paid                                                                 |  |                             | 231      |   |      |   | 90       |  
|Impairment of premises and equipment                                              |  |                             |         |   |      |   | 357      |  

The accompanying notes are an integral part of these statements.



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Provident Bankshares Corporation and Subsidiaries

Notes to Condensed Consolidated Financial
StatementsUnaudited

March 31, 2008

NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Provident Bankshares Corporation (the
Corporation), a Maryland corporation, is the bank holding company for Provident Bank (the Bank), a Maryland chartered stock commercial bank. The Bank serves individuals and businesses through a network of banking offices and ATMs
in Maryland, Virginia, and southern York County, Pennsylvania. Related financial services are offered through its wholly owned subsidiaries. Securities brokerage, investment management and related insurance services are available through Provident
Investment Company and leases through Court Square Leasing.

The accounting and reporting policies of the Corporation conform with U.S. generally accepted
accounting principles (GAAP) and prevailing practices within the banking industry for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete
financial statements and prevailing practices within the banking industry. The following summary of significant accounting policies of the Corporation is presented to assist the reader in understanding the financial and other data presented in this
report. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for any future quarters or for the year ending December 31, 2008. 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, 2007 as filed with the Securities and Exchange Commission (SEC) on February 29,
2008.

Principles of Consolidation and Basis of Presentation

The unaudited Condensed Consolidated Financial Statements include the accounts of the Corporation and its wholly owned subsidiary, Provident Bank and its subsidiaries. All significant inter-company accounts and transactions have been
eliminated in consolidation. These unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP and reflect all adjustments which are, in the opinion of management, necessary to a fair statement of our results for the
interim periods presented. All such adjustments are of a normal recurring nature.

Certain prior periods and prior years amounts in the unaudited
Condensed Consolidated Financial Statements have been reclassified to conform to the presentation used for the current period. These reclassifications have no effect on stockholders equity or net income as previously reported.

Use of Estimates

The preparation of these financial statements
requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities for the reporting periods. Management evaluates estimates
on an on-going basis and believes the following represent its more significant judgments and estimates used in preparation of its consolidated financial statements: allowance for loan losses, non-accrual loans, other real estate owned, estimates of
fair value and intangible assets associated with mergers, other-than-temporary impairment of investment securities, pension and post-retirement benefits, asset prepayment rates, goodwill and intangible assets, share-based payment, derivative
financial instruments, litigation and income taxes. Management bases its estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Each estimate and its financial impact, to the extent significant to financial results, is discussed in the audited Consolidated
Financial Statements or in the notes to the audited Consolidated Financial Statements as included in the Corporations Annual Report on Form 10-K for the year ended December 31, 2007. It is at least reasonably possible that each of the
Corporations estimates could change in the near term or that actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could be material to the Corporations unaudited Condensed
Consolidated Financial Statements.

Other Changes in Accounting Principles

Effective January 1, 2008, the Corporation adopted the Emerging Issues Task Force (EITF) issue EITF No. 06-4, Accounting for Deferred Compensation and Postretirement Benefits Aspects of
Endorsement Split-Dollar Life Insurance Arrangements (EITF 06-4). The issue addresses the accounting for the liability and related compensation costs for endorsement split-dollar life insurance arrangements that provide benefits to
employees that extend to postretirement periods. The Corporation has split-dollar arrangements that provide certain postretirement death benefits to certain employees. Under



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the provisions of EITF 06-4, the application of this guidance was recognized through a $122 thousand cumulative adjustment of beginning retained earnings.

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141 (revised 2007), Business Combinations
(SFAS No. 141R), which will be effective for business combinations occurring on or after December 15, 2008. Early adoption is prohibited. The statement provides guidance on the concept of control of another business
and provides further guidance regarding the definition of a business. It further provides an acquisition model which must be used to account for a business combination including the measurement of the fair value of the acquisition, treatment of
transaction costs, contingent consideration, the recognition and measurement of assets, liabilities and noncontrolling interests, treatment of partial acquisitions and determination of goodwill. The Corporation is evaluating the implications of
this guidance.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements (SFAS
No. 160), which will be effective for business combinations occurring on or after December 15, 2008. Early adoption is prohibited. This statement applies to the accounting for noncontrolling interests, previously referred
to as minority interests, and transactions with noncontrolling interest holders in consolidated financial statements. The Corporation is evaluating the implications of this guidance.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS No. 161), which will
be effective for fiscal years and interim periods beginning after November 15, 2008. The statement amends and expands the disclosure requirements of SFAS No. 133 to provide an enhanced understanding of an entitys uses of derivative
instruments, how the derivatives are accounted for and how the derivatives instruments and related hedged items affect an entitys financial position, financial performance and cash flows. The Corporation is currently evaluating the disclosure
requirements of this guidance and any implications it may have on the operations of the Corporation.

NOTE 2FAIR VALUE MEASUREMENTS

Effective January 1, 2008, the Corporation adopted SFAS No. 157  Fair Value Measurements (SFAS No. 157).
This statement defines the concept of fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. Under FASB Staff Position No. 157-2, portions of SFAS No. 157 have been
deferred until years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities recognized or disclosed at fair value in the financial statement on a recurring basis. Therefore, the Corporation effectively
partially adopted the provisions of SFAS No. 157. SFAS No. 157 applies only to fair value measurements required or permitted under current accounting pronouncements, but does not require any new fair value measurements. Fair value is
defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants as of the measurement date. SFAS No.157 establishes a framework for measuring fair value that
considers the attributes specific to particular assets or liabilities and establishes a three-level hierarchy for determining fair value based on the transparency of inputs to each valuation as of the fair value measurement date. The statement also
expands disclosures about financial instruments that are measured at fair value and eliminates the use of large position discounts for financial instruments quoted in active markets. The disclosures emphasis is on the inputs used to measure
fair value and the effect on the measurement on earnings for the period. The adoption of SFAS No. 157 did not have a material effect on the Corporations financial position or results of operations.

The Corporation has an established and documented process for determining fair values. Fair value is based on quoted market prices, when available. If listed prices or
quotes are not available, fair value is based on internally developed fair value models that use market-based or independently sourced market data, which include interest rate yield curves, prepayment speeds, bond ratings and cash flow assumptions.
In addition, valuation adjustments may be made in the determination of fair value. These fair value adjustments include amounts to reflect counterparty credit quality, creditworthiness, liquidity and other unobservable inputs that are applied
consistently over time. These adjustments are estimated and therefore, subject to managements judgment, and at times, may be necessary to mitigate the possibility of error or revision in the model-based estimate of the fair value provided by
the model. The Corporation has various controls in place to ensure that the valuations are appropriate, including a review and approval of the valuation models, benchmarking, comparison to similar products and reviews of actual cash settlements. The
methods described above may produce fair value calculations that may not be indicative of the net realizable value or reflective of future fair values. While the Corporation believes its valuation methods are consistent with other financial
institutions, the use of different methods or assumptions to determine fair values could result in different estimates of fair value.

SFAS No. 157
establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based on the inputs used to value the particular asset or liability at the measurement date. The three levels are defined as follows:



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| |  |  | Level 1  inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2  inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices of identical or similar
assets or liabilities in markets that are not active, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  inputs to the valuation methodology are unobservable and significant to the fair value measurement.
| | - |  | -------------------------------------------------------------------------------------------------------------

Each financial instruments level assignment within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value
measurement for that particular category.

The following is a description of the valuation methodologies used for instruments measured at fair value, as
well as the general classification of each instrument under the valuation hierarchy.

Assets

Loans held for sale

Loans held for sale are classified as
Level 3 because they are valued based on the unobservable contractual terms established with a third party purchaser who processes and purchases the loans at their face amount.

Investment securities

When quoted prices are available in an active market, securities are classified as
Level 1 within the valuation hierarchy. These securities include highly liquid government bonds, mortgage products and, if applicable, exchange traded equities. If quoted market prices are not available, then fair values are estimated by using
pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Such instruments would be generally classified within Level 2 of the valuation hierarchy and include certain collateralized mortgage obligations and
municipal debt obligations. In certain cases where there is limited activity or less transparency to the valuation inputs, securities are classified as Level 3 within the valuation hierarchy. These securities include asset-backed securities and
pooled trust preferred securities.

Derivatives

The Corporations open derivative positions are valued using third party developed models that use as their basis some observable market data or inputs and significant unobservable market data developed by the third party. These
derivatives that are less actively traded are considered within Level 3 of the valuation hierarchy. Examples of these derivatives include interest rate swaps, caps and floors where the indices, correlation and contractual rates may be unobservable.
Exchange-traded derivatives, if applicable, are valued using quoted prices and classified within Level 1 of the valuation hierarchy. At March 31, 2008, the Corporation did not have any exchange-traded derivatives.

Cash surrender value of life insurance contracts

Cash
surrender values are provided by the insurance carrier on a periodic basis. The values approximate the fair value of these policies. The values assigned the individual policies, which are not actively traded on any exchange, are not observable and
are considered within Level 3 of the valuation hierarchy. The fair value determined by each insurance carrier is based on the cash surrender values of each policy where the Corporation is the beneficiary.



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The following table presents the financial instruments measured at fair value on a recurring basis as of March 31,
2008 on the Condensed Consolidated Statements of Condition utilizing the SFAS No. 157 hierarchy discussed on the previous pages:



|                                |  |                   |           |         |   |         |  |         |         |  |   |        
|------------------------------- |  | ----------------- | --------- | ------- | - | ------- |  | ------- | ------- |  | - | -------
|                                |  | At March 31, 2008
|(in thousands)                  |  | Total             |           | Level 1 |   | Level 2 |  | Level 3
|Mortgage loans held for sale    |  | $                 | 15,541    |         | $ |        |  | $       |        |  | $ | 15,541 
|Securities available for sale   |  |                   | 1,366,779 |         |   | 649,145 |  |         | 247,282 |  |   | 470,352
|Derivatives                     |  |                   | 9,851     |         |   |        |  |         | 9,851   |  |   |       
|Bank owned life insurance       |  |                   | 154,790   |         |   |        |  |         |        |  |   | 154,790
|                                |  |                   |           |         |   |         |  |         |         |  |   |        
|Total assets at fair value      |  | $                 | 1,546,961 |         | $ | 649,145 |  | $       | 257,133 |  | $ | 640,683
|                                |  |                   |           |         |   |         |  |         |         |  |   |        
|Other liabilities               |  |                   |           |         |   |         |  |         |         |  |   |        
|Derivatives                     |  |                   | 220       |         |   |        |  |         | 220     |  |   |       
|                                |  |                   |           |         |   |         |  |         |         |  |   |        
|Total liabilities at fair value |  | $                 | 220       |         | $ |        |  | $       | 220     |  | $ |       
|                                |  |                   |           |         |   |         |  |         |         |  |   |        

Changes in Level 3 fair value measurements

The table below includes a roll forward of the Statement of Financial Condition amounts for the three months ending March 31, 2008, including changes in fair value
for financial instruments within Level 3 of the valuation hierarchy. Level 3 financial instruments typically include unobservable components, but may also include some observable components that may be validated to external sources. The gains or
(losses) in the following table may include changes to fair value due in part to observable factors that may be part of the valuation methodology.

Assets and liabilities measured at fair value on a recurring basis



|                                                                                                                               |  |                            |        |                             |   |         |                         |  |   |        
|------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | ------ | --------------------------- | - | ------- | ----------------------- |  | - | -------
|(in thousands)                                                                                                                 |  | Mortgageloans heldfor sale |        | Securitiesavailable forsale |   |         | Bankownedlife insurance
|Balance at December 31, 2007                                                                                                   |  | $                          | 8,859  |                             | $ | 519,278 |                         |  | $ | 153,355
|Total net gains (losses) for the quarter included in :                                                                         |  |                            |        |                             |   |         |                         |  |   |        
|Net gains (losses)                                                                                                             |  |                            | 112    |                             |   | (19,439 | )                       |  |   | 1,435  
|Other comprehensive income (loss), gross                                                                                       |  |                            |       |                             |   | (27,678 | )                       |  |   |       
|Purchases, sales or settlements, net                                                                                           |  |                            | 6,570  |                             |   | (1,809  | )                       |  |   |       
|Net transfer in/out of Level 3                                                                                                 |  |                            |       |                             |   |        |                         |  |   |       
|                                                                                                                               |  |                            |        |                             |   |         |                         |  |   |        
|Balance at March 31, 2008                                                                                                      |  | $                          | 15,541 |                             | $ | 470,352 |                         |  | $ | 154,790
|                                                                                                                               |  |                            |        |                             |   |         |                         |  |   |        
|Net unrealized gains (losses) included in net income for the quarter relating to assets and liabilities held at March 31,
2008 |  | $                          |       |                             | $ | (19,439 | )                       |  | $ | 1,435  
|                                                                                                                               |  |                            |        |                             |   |         |                         |  |   |        



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The following table indicates the changes in fair value recognized in the Condensed Consolidated Statement of Income



|                              |  |                                                                 |         |   |                         |   |                                                              |  |   |         |  
|----------------------------- |  | --------------------------------------------------------------- | ------- | - | ----------------------- | - | ------------------------------------------------------------ |  | - | ------- | -
|                              |  | Changes in fair value for the Three Months Ended March 31, 2008 |        
|(in thousands)                |  | Netgains (losses)                                               |         |   | Othernon-interestincome |   | Total changesin fair valuesincluded incurrent
periodearnings | 
|Mortgage loans held for sale  |  | $                                                               |        |   |                         | $ | 112                                                          |  | $ | 112     |  
|Securities available for sale |  |                                                                 | (19,439 | ) |                         |   |                                                             |  |   | (19,439 | )
|Bank owned life insurance     |  |                                                                 |        |   |                         |   | 1,435                                                        |  |   | 1,435   |  
|                              |  |                                                                 |         |   |                         |   |                                                              |  |   |         |  
|Total assets at fair value    |  | $                                                               | (19,439 | ) |                         | $ | 1,547                                                        |  | $ | (17,892 | )
|                              |  |                                                                 |         |   |                         |   |                                                              |  |   |         |  

Nonrecurring fair value changes

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These instruments are not measured at fair value on an ongoing basis but are subject to fair value in certain circumstances, such as
when there is evidence of impairment or when required for annual reporting in the Corporations Form 10-K.



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NOTE 3INVESTMENT SECURITIES

The following table presents the aggregate amortized cost and fair values of the investment securities portfolio as of the dates indicated:



|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|------------------------------------------------------ |  | ------------- | --------- | -------------------- | - | --------------------- |  | --------- | ------- |  | - | ---------
|(in thousands)                                         |  | AmortizedCost |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue
|March 31, 2008                                         |  |               |           |                      |   |                       |  |           |         |  |   |          
|Securities available for sale:                         |  |               |           |                      |   |                       |  |           |         |  |   |          
|U.S. Treasury and government agencies and corporations |  | $             | 45,592    |                      | $ | 41                    |  | $         |        |  | $ | 45,633   
|Mortgage-backed securities                             |  |               | 712,184   |                      |   | 3,247                 |  |           | 18,584  |  |   | 696,847  
|Municipal securities                                   |  |               | 151,650   |                      |   | 2,505                 |  |           | 209     |  |   | 153,946  
|Other debt securities                                  |  |               | 580,695   |                      |   | 143                   |  |           | 110,485 |  |   | 470,353  
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Total securities available for sale                    |  |               | 1,490,121 |                      |   | 5,936                 |  |           | 129,278 |  |   | 1,366,779
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Securities held to maturity:                           |  |               |           |                      |   |                       |  |           |         |  |   |          
|Other debt securities                                  |  |               | 47,146    |                      |   | 714                   |  |           | 2,538   |  |   | 45,322   
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Total securities held to maturity                      |  |               | 47,146    |                      |   | 714                   |  |           | 2,538   |  |   | 45,322   
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Total investment securities                            |  | $             | 1,537,267 |                      | $ | 6,650                 |  | $         | 131,816 |  | $ | 1,412,101
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|December 31, 2007                                      |  |               |           |                      |   |                       |  |           |         |  |   |          
|Securities available for sale:                         |  |               |           |                      |   |                       |  |           |         |  |   |          
|U.S. Treasury and government agencies and corporations |  | $             | 41,928    |                      | $ | 26                    |  | $         |        |  | $ | 41,954   
|Mortgage-backed securities                             |  |               | 724,744   |                      |   | 1,295                 |  |           | 19,664  |  |   | 706,375  
|Municipal securities                                   |  |               | 152,865   |                      |   | 1,156                 |  |           | 330     |  |   | 153,691  
|Other debt securities                                  |  |               | 601,837   |                      |   | 348                   |  |           | 82,906  |  |   | 519,279  
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Total securities available for sale                    |  |               | 1,521,374 |                      |   | 2,825                 |  |           | 102,900 |  |   | 1,421,299
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Securities held to maturity:                           |  |               |           |                      |   |                       |  |           |         |  |   |          
|Other debt securities                                  |  |               | 47,265    |                      |   | 770                   |  |           | 495     |  |   | 47,540   
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Total securities held to maturity                      |  |               | 47,265    |                      |   | 770                   |  |           | 495     |  |   | 47,540   
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Total investment securities                            |  | $             | 1,568,639 |                      | $ | 3,595                 |  | $         | 103,395 |  | $ | 1,468,839
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|March 31, 2007                                         |  |               |           |                      |   |                       |  |           |         |  |   |          
|Securities available for sale:                         |  |               |           |                      |   |                       |  |           |         |  |   |          
|U.S. Treasury and government agencies and corporations |  | $             | 68,327    |                      | $ | 1                     |  | $         | 1,686   |  | $ | 66,642   
|Mortgage-backed securities                             |  |               | 700,119   |                      |   | 1,272                 |  |           | 15,614  |  |   | 685,777  
|Municipal securities                                   |  |               | 122,513   |                      |   | 706                   |  |           | 314     |  |   | 122,905  
|Other debt securities                                  |  |               | 688,550   |                      |   | 6,941                 |  |           | 1,536   |  |   | 693,955  
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Total securities available for sale                    |  |               | 1,579,509 |                      |   | 8,920                 |  |           | 19,150  |  |   | 1,569,279
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Securities held to maturity:                           |  |               |           |                      |   |                       |  |           |         |  |   |          
|Other debt securities                                  |  |               | 68,904    |                      |   | 1,809                 |  |           | 244     |  |   | 70,469   
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Total securities held to maturity                      |  |               | 68,904    |                      |   | 1,809                 |  |           | 244     |  |   | 70,469   
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          
|Total investment securities                            |  | $             | 1,648,413 |                      | $ | 10,729                |  | $         | 19,394  |  | $ | 1,639,748
|                                                       |  |               |           |                      |   |                       |  |           |         |  |   |          



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At March 31, 2008, a net unrealized after-tax loss of $74.3 million on the investment securities portfolio was
reflected in net accumulated other comprehensive loss, an element of the Corporations capital. This compared to a net unrealized after-tax loss of $5.8 million at March 31, 2007 and a net unrealized after-tax loss of $60.0 million at
December 31, 2007.

Management reviews the investment securities portfolio on a periodic basis to determine the cause of declines in the fair value of
each security. Thorough evaluations of the causes of the unrealized losses are performed to determine whether the impairment is temporary or other-than-temporary in nature. Considerations such as the Corporations intent and ability to hold
securities, recoverability of invested amount over a reasonable period of time, the length of time the security is in a loss position and receipt of amounts contractually due, for example, are applied in determining whether a security is
other-than-temporarily impaired. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized. Following its credit review for the period ended
March 31, 2008, the Corporation wrote down the values of certain securities by $42.7 million by reducing their carrying values to current market values at that date. The $42.7 million was comprised of $19.5 million in the REIT trust preferred
securities portfolio and $23.2 million in the non-agency mortgage-backed securities portfolio. Originally $105 million, the REIT trust preferred securities portfolio was written down by $47.5 million in December 2007, and was written down an
additional $19.5 million in the first quarter of 2008 due to further credit impairment of certain home builders and mortgage REITs that represent the collateral for these securities. Subsequent to all write-downs, the REIT trust preferred securities
portfolio was $38.1 million at March 31, 2008. Write-downs for the quarter ended March 31, 2008 to the Corporations $130.1 million non-agency mortgage-backed securities portfolio resulted from higher delinquency and foreclosure
levels of the national residential mortgages which collateralize these pooled securities. Management deemed the write-downs necessary in light of these portfolios current performance and market values at March 31, 2008. For further
details regarding investment securities and impairment of investment securities at December 31, 2007, refer to Notes 1 and 3 of the Consolidated Financial Statements in the Corporations Form 10-K for the year ended December 31, 2007.
The Corporation will continue to evaluate the investment ratings in the securities portfolio and the dealer price quotes. Based upon these and other factors, the securities portfolio may experience further impairment. At March 31, 2008,
management currently has the intent and ability to retain investment securities with unrealized losses until the decline in value has been recovered.

NOTE 4LOANS

A summary of loans outstanding as of the dates indicated is shown in the table below.



|                                             |  |               |           |                  |   |               |  |   |          
|-------------------------------------------- |  | ------------- | --------- | ---------------- | - | ------------- |  | - | ---------
|(in thousands)                               |  | March 31,2008 |           | December 31,2007 |   | March 31,2007
|Residential real estate:                     |  |               |           |                  |   |               |  |   |          
|Originated and acquired residential mortgage |  | $             | 280,772   |                  | $ | 296,783       |  | $ | 319,437  
|Home equity                                  |  |               | 1,081,953 |                  |   | 1,082,819     |  |   | 1,003,666
|Other consumer:                              |  |               |           |                  |   |               |  |   |          
|Marine                                       |  |               | 360,343   |                  |   | 352,604       |  |   | 374,206  
|Other                                        |  |               | 26,287    |                  |   | 26,101        |  |   | 25,065   
|                                             |  |               |           |                  |   |               |  |   |          
|Total consumer                               |  |               | 1,749,355 |                  |   | 1,758,307     |  |   | 1,722,374
|                                             |  |               |           |                  |   |               |  |   |          
|Commercial real estate:                      |  |               |           |                  |   |               |  |   |          
|Commercial mortgage                          |  |               | 488,309   |                  |   | 439,229       |  |   | 454,096  
|Residential construction                     |  |               | 596,698   |                  |   | 631,063       |  |   | 586,127  
|Commercial construction                      |  |               | 445,475   |                  |   | 447,394       |  |   | 369,657  
|Commercial business                          |  |               | 922,840   |                  |   | 939,333       |  |   | 758,167  
|                                             |  |               |           |                  |   |               |  |   |          
|Total commercial                             |  |               | 2,453,322 |                  |   | 2,457,019     |  |   | 2,168,047
|                                             |  |               |           |                  |   |               |  |   |          
|Total loans                                  |  | $             | 4,202,677 |                  | $ | 4,215,326     |  | $ | 3,890,421
|                                             |  |               |           |                  |   |               |  |   |          



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NOTE 5ALLOWANCE FOR LOAN LOSSES

The following table reflects the activity in the allowance for loan losses for the periods indicated:



|                                             |  |                             |        |      |   |       
|-------------------------------------------- |  | --------------------------- | ------ | ---- | - | ------
|                                             |  | Three Months EndedMarch 31,
|(in thousands)                               |  | 2008                        |        | 2007
|Balance at beginning of period               |  | $                           | 55,269 |      | $ | 45,203
|Provision for loan losses                    |  |                             | 3,114  |      |   | 1,052 
|Less loans charged-off, net of recoveries:   |  |                             |        |      |   |       
|Originated and acquired residential mortgage |  |                             | 225    |      |   | 138   
|Home equity                                  |  |                             | 237    |      |   | 26    
|Marine and other consumer                    |  |                             | 438    |      |   | 465   
|Residential construction                     |  |                             | 320    |      |   |      
|Commercial business                          |  |                             | 1,914  |      |   | 107   
|                                             |  |                             |        |      |   |       
|Net charge-offs                              |  |                             | 3,134  |      |   | 736   
|                                             |  |                             |        |      |   |       
|Balance at end of period                     |  | $                           | 55,249 |      | $ | 45,519
|                                             |  |                             |        |      |   |       

NOTE 6INTANGIBLE ASSETS

The table below presents an analysis of the goodwill and deposit-based intangible activity for the three months ended March 31, 2008.



|                             |  |                         |         |                         |   |        |                            |  |   |         |  
|---------------------------- |  | ----------------------- | ------- | ----------------------- | - | ------ | -------------------------- |  | - | ------- | -
|(in thousands)               |  | Goodwill                |         | AccumulatedAmortization |   |        | NetGoodwill                | 
|Balance at December 31, 2007 |  | $                       | 254,528 |                         | $ | (622   | )                          |  | $ | 253,906 |  
|                             |  |                         |         |                         |   |        |                            |  |   |         |  
|Balance at March 31, 2008    |  | $                       | 254,528 |                         | $ | (622   | )                          |  | $ | 253,906 |  
|                             |  |                         |         |                         |   |        |                            |  |   |         |  
|                             |  |                         |        
|(in thousands)               |  | Deposit-basedIntangible |         | AccumulatedAmortization |   |        | NetDeposit-basedIntangible | 
|Balance at December 31, 2007 |  | $                       | 13,473  |                         | $ | (7,321 | )                          |  | $ | 6,152   |  
|Amortization expense         |  |                         |         |                         |   | (316   | )                          |  |   | (316    | )
|                             |  |                         |         |                         |   |        |                            |  |   |         |  
|Balance at March 31, 2008    |  | $                       | 13,473  |                         | $ | (7,637 | )                          |  | $ | 5,836   |  
|                             |  |                         |         |                         |   |        |                            |  |   |         |  

NOTE 7DEPOSITS

The table below presents a summary of deposits as of the dates indicated:



|                                    |  |               |           |                  |   |               |  |   |          
|----------------------------------- |  | ------------- | --------- | ---------------- | - | ------------- |  | - | ---------
|(in thousands)                      |  | March 31,2008 |           | December 31,2007 |   | March 31,2007
|Interest-bearing deposits:          |  |               |           |                  |   |               |  |   |          
|Interest-bearing demand             |  | $             | 488,010   |                  | $ | 479,436       |  | $ | 580,557  
|Money market                        |  |               | 652,379   |                  |   | 675,077       |  |   | 560,085  
|Savings                             |  |               | 549,243   |                  |   | 512,684       |  |   | 605,602  
|Direct time certificates of deposit |  |               | 1,090,271 |                  |   | 1,094,622     |  |   | 1,227,188
|Brokered certificates of deposit    |  |               | 904,435   |                  |   | 741,441       |  |   | 539,887  
|                                    |  |               |           |                  |   |               |  |   |          
|Total interest-bearing deposits     |  |               | 3,684,338 |                  |   | 3,503,260     |  |   | 3,513,319
|Noninterest-bearing deposits        |  |               | 686,289   |                  |   | 676,260       |  |   | 769,081  
|                                    |  |               |           |                  |   |               |  |   |          
|Total deposits                      |  | $             | 4,370,627 |                  | $ | 4,179,520     |  | $ | 4,282,400
|                                    |  |               |           |                  |   |               |  |   |          



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NOTE 8SHORT-TERM BORROWINGS

The table below presents a summary of short-term borrowings as of the dates indicated:



|                                             |  |               |         |                  |   |               |  |   |        
|-------------------------------------------- |  | ------------- | ------- | ---------------- | - | ------------- |  | - | -------
|(in thousands)                               |  | March 31,2008 |         | December 31,2007 |   | March 31,2007
|Securities sold under repurchase agreements  |  | $             | 241,921 |                  | $ | 309,712       |  | $ | 335,637
|Federal funds purchased                      |  |               | 355,000 |                  |   | 549,000       |  |   | 160,000
|Federal Home Loan Bank advances - fixed rate |  |               | 75,000  |                  |   |              |  |   |       
|Other short-term borrowings                  |  |               | 13,025  |                  |   | 2,683         |  |   | 2,481  
|                                             |  |               |         |                  |   |               |  |   |        
|Total short-term borrowings                  |  | $             | 684,946 |                  | $ | 861,395       |  | $ | 498,118
|                                             |  |               |         |                  |   |               |  |   |        

NOTE 9LONG-TERM DEBT

The table below presents a summary of long-term debt as of the dates indicated:



|                                                |  |               |         |                  |   |               |  |   |        
|----------------------------------------------- |  | ------------- | ------- | ---------------- | - | ------------- |  | - | -------
|(in thousands)                                  |  | March 31,2008 |         | December 31,2007 |   | March 31,2007
|Federal Home Loan Bank advances - fixed rate    |  | $             | 90,000  |                  | $ | 90,000        |  | $ | 24,963 
|Federal Home Loan Bank advances - variable rate |  |               | 545,000 |                  |   | 545,000       |  |   | 620,000
|Junior Subordinated Debentures                  |  |               | 136,640 |                  |   | 136,683       |  |   | 136,813
|                                                |  |               |         |                  |   |               |  |   |        
|Total long-term debt                            |  | $             | 771,640 |                  | $ | 771,683       |  | $ | 781,776
|                                                |  |               |         |                  |   |               |  |   |        

NOTE 10STOCKHOLDERS EQUITY

Share-Based Payment Plan Description

The Corporation issues nonqualified stock options and restricted stock grants
to certain of its employees and directors pursuant to the 2004 Equity Compensation Plan (the Plan), which has been approved by the Corporations shareholders. The Plan allows for a maximum of 12.5 million shares of common stock
to be issued. At March 31, 2008, 3.3 million shares were available to be granted by the Corporation pursuant to the plan.

Stock Option Awards

Stock options (options) are granted with an exercise price equal to the market price of the Corporations shares at the date of the
grant. Options granted subsequent to January 1, 2005 vest based on four years of continuous service and have eight-year contractual terms. All options issued prior to January 1, 2005 have contractual terms of ten years and are vested.

All options provide for accelerated vesting upon a change in control (as defined in the Plan). Stock options exercised result in the issuance of new
shares.

On the date of each grant, the fair value of each award is estimated using the Black-Scholes option pricing model based on assumptions made by the
Corporation as follows:



| |  | Dividend yield is based on the dividend rate of the Corporations stock at the date of the grant;
|- |  | -------------------------------------------------------------------------------------------------



| |  | Risk-free interest rate is based on the U.S. Treasury zero-coupon bond rate with a term equaling the expected life of the granted options.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  | Expected volatility is based on the historical volatility of the Corporations stock price and
|- |  | ----------------------------------------------------------------------------------------------



| |  | Expected life represents the period of time that granted options are expected to be outstanding based on historical trends.
|- |  | ---------------------------------------------------------------------------------------------------------------------------



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Below is a tabular presentation of the option pricing assumptions and the estimated fair value of the options granted
during the periods indicated using these assumptions.



|                                               |  |                             |            |   |      |   |            |  
|---------------------------------------------- |  | --------------------------- | ---------- | - | ---- | - | ---------- | -
|                                               |  | Three Months EndedMarch 31, |           
|                                               |  | 2008                        |            |   | 2007 |  
|Weighted average dividend yield                |  |                             | 7.39       | % |      |   | 3.41       | %
|Weighted average risk-free interest rate       |  |                             | 2.98       | % |      |   | 4.72       | %
|Weighted average expected volatility           |  |                             | 20.73      | % |      |   | 16.69      | %
|Weighted average expected life                 |  |                             | 5.25 years |   |      |   | 5.25 years |  
|Weighted average fair value of options granted |  | $                           | 1.26       |   |      | $ | 5.44       |  

The Corporation recognized compensation expense related to options of $221 thousand and $246 thousand for the
three months ended March 31, 2008 and 2007, respectively. The intrinsic value of options exercised for the three months ended March 31, 2008 and 2007 was $49 thousand and $323 thousand, respectively. Unrecognized compensation cost related
to non-vested options was $3.5 million and $3.0 million at March 31, 2008 and 2007, respectively, and is expected to be recognized over a weighted average period of 3.4 years and 3.5 years, respectively.

The following table presents a summary of the activity related to options for the period indicated:



|                                         |  |              |   |  |                                |       |                                                     |      |                                       |   |   
|---------------------------------------- |  | ------------ | - |  | ------------------------------ | ----- | --------------------------------------------------- | ---- | ------------------------------------- | - | --
|                                         |  | CommonShares |   |  | Weighted AverageExercise Price |       | Weighted AverageContractualRemaining Life(in years) |      | AggregateIntrinsicValue(in thousands)
|Options outstanding at December 31, 2007 |  | 2,323,946    |   |  | $                              | 29.18 |                                                     |      |                                       |   |   
|Granted                                  |  | 1,120,024    |   |  | $                              | 17.36 |                                                     |      |                                       |   |   
|Exercised                                |  | (9,450       | ) |  | $                              | 13.48 |                                                     |      |                                       |   |   
|Cancelled or expired                     |  | (177,008     | ) |  | $                              | 29.22 |                                                     |      |                                       |   |   
|                                         |  |              |   |  |                                |       |                                                     |      |                                       |   |   
|Options outstanding at March 31, 2008    |  | 3,257,512    |   |  | $                              | 25.16 |                                                     | 6.00 |                                       | $ | 27
|                                         |  |              |   |  |                                |       |                                                     |      |                                       |   |   
|                                         |  |              |   | 
|Options exercisable at March 31, 2008    |  | 1,710,556    |   |  | $                              | 27.94 |                                                     | 4.70 |                                       | $ | 27

Restricted Stock Awards

The Corporation issues restricted stock grants, in the form of new shares, to its directors and certain key employees. The restricted stock grants are issued at the fair market value of the common shares on the date
of each grant. The Corporation grants shares of restricted stock to directors of the Corporation as part of director compensation, and as such, those restricted stock grants vest immediately. The restricted stock grants to the directors may not be
sold or otherwise divested until six months subsequent to their departure from the board of directors. The restricted stock grants to employees vest ratably over four years.

Expense recorded relating to restricted stock grants to directors and employees is presented in the following table:



|                            |  |                             |       |      |   |    
|--------------------------- |  | --------------------------- | ----- | ---- | - | ---
|                            |  | Three Months EndedMarch 31,
|(in thousands)              |  | 2008                        |       | 2007
|Grants to directors         |  | $                           |      |      | $ |   
|Grants to employees         |  | $                           | 300   |      | $ | 232
|Fair value of grants vested |  | $                           | 1,131 |      | $ | 740



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The following table presents a summary of the activity related to restricted stock grants for the period indicated:



|                              |  |              |   |  |                                  |      
|----------------------------- |  | ------------ | - |  | -------------------------------- | -----
|                              |  | CommonShares |   |  | Weighted AverageGrant Fair Value
|Unvested at December 31, 2007 |  | 107,152      |   |  | $                                | 35.48
|Granted                       |  | 111,188      |   |  | $                                | 17.37
|Vested                        |  | (31,999      | ) |  | $                                | 35.35
|Cancelled                     |  | (3,722       | ) |  | $                                | 35.52
|                              |  |              |   |  |                                  |      
|Unvested at March 31, 2008    |  | 182,619      |   |  | $                                | 24.47
|                              |  |              |   |  |                                  |      

At March 31, 2008, unrecognized compensation cost related to non-vested restricted stock grants was $4.3
million and is expected to be recognized over a weighted average period of 3.3 years.

NOTE 11DERIVATIVE FINANCIAL INSTRUMENTS

Fair value hedges that meet the criteria for effectiveness have changes in the fair value of the derivative and the designated hedged item recognized in earnings. During
all periods presented, the derivatives designated as fair value hedges were determined to be effective. Accordingly, the designated hedges and the associated hedged items were marked to fair value by equal and offsetting amounts. At March 31,
2008, there were no derivatives designated as fair value hedges. Cash flow hedges have the effective portion of changes in the fair value of the derivative, net of taxes, recorded in net accumulated other comprehensive loss. For the three months
ended March 31, 2008, the Corporation recorded an increase in the value of derivatives of $3.6 million compared to an increase of $1.0 million for the same period in 2007, net of taxes, in net accumulated other comprehensive loss to reflect the
effective portion of cash flow hedges. Amounts recorded in net accumulated other comprehensive loss are recognized into earnings concurrent with the impact of the hedged item on earnings. The ineffectiveness portion of cash flow hedges resulted in a
credit to earnings of $9 thousand for the three months ended March 31, 2008. For the three months ended March 31, 2007 there was no ineffectiveness with respect to cash flow hedges.

During the first quarter of 2008, the Corporation closed out a $40.0 million non-designated derivative and added two non-designated derivatives for $4.0 million each.
Typically, interest rate swaps that are classified as non-designated derivatives are marked-to-market and the gains or losses are recorded in non-interest income at the end of each reporting period. Non-designated derivatives may represent interest
rate protection on the Corporations net interest income or derivative products provided to customers but do not meet the requirements to receive hedge accounting treatment. For the three months ended March 31, 2008 and 2007, the
Corporation recorded net losses of $266 thousand and $63 thousand, respectively, to reflect the change in value of the non-designated interest rate swaps. The net cash settlements on these interest rate swaps are recorded in non-interest income. The
net cash benefit from these interest rate swaps was $296 thousand and $206 thousand for the three months ended March 31, 2008 and 2007, respectively. These transactions are recorded in net derivative activities on the Condensed Consolidated
Statements of Income.

Where appropriate, the Corporation obtains collateral to reduce counterparty risk associated with interest rate swaps. To the extent
the master netting arrangements meet the requirements of FSP FIN 39-1 Amendment of FASB Interpretation No. 39, amounts are reflected on the Condensed Consolidated Statement of Condition at a net amount. At March 31, 2008, cash
collateral of $10.3 million was included in the Condensed Consolidated Statement of Condition and netted against the fair value of the derivative positions.



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The table below presents the Corporations open derivative positions as of the dates indicated:



|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|-------------------------------- |  | -------------------------- |  | -------------- | ------- | ----------------- | - | ---------- |  | - | ------ | -
|(in thousands) Derivative Type   |  | Objective                  |  | NotionalAmount |         | Credit RiskAmount |   | MarketRisk | 
|March 31, 2008                   |  |                            |  |                |         |                   |   |            |  |   |        |  
|Designated Derivatives           |  |                            |  |                |         |                   |   |            |  |   |        |  
|Interest rate swaps:             |  |                            |  |                |         |                   |   |            |  |   |        |  
|Receive fixed/pay variable       |  | Hedge investment rate risk |  | $              | 255,450 |                   | $ | 10,151     |  | $ | 10,151 |  
|Interest rate caps/corridors     |  | Hedge borrowing cost       |  |                | 25,000  |                   |   | 7          |  |   | 7      |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|Total designated derivatives     |  |                            |  |                | 280,450 |                   |   | 10,158     |  |   | 10,158 |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|                                 |  |                            |  |               
|Non-designated Derivatives       |  |                            |  |                |         |                   |   |            |  |   |        |  
|Interest rate swaps:             |  |                            |  |                |         |                   |   |            |  |   |        |  
|Receive variable/pay fixed       |  |                            |  |                | 4,000   |                   |   |           |  |   | (11    | )
|Receive fixed/pay variable       |  |                            |  |                | 4,000   |                   |   | 27         |  |   | 27     |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|Total non-designated derivatives |  |                            |  |                | 8,000   |                   |   | 27         |  |   | 16     |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|Total derivatives                |  |                            |  | $              | 288,450 |                   | $ | 10,185     |  | $ | 10,174 |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|                                 |  |                            |  |               
|December 31, 2007                |  |                            |  |                |         |                   |   |            |  |   |        |  
|Designated Derivatives           |  |                            |  |                |         |                   |   |            |  |   |        |  
|Interest rate swaps:             |  |                            |  |                |         |                   |   |            |  |   |        |  
|Receive fixed/pay variable       |  | Hedge investment rate risk |  | $              | 272,450 |                   | $ | 5,002      |  | $ | 4,968  |  
|Interest rate caps/corridors     |  | Hedge borrowing cost       |  |                | 25,000  |                   |   | 71         |  |   | 71     |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|Total designated derivatives     |  |                            |  |                | 297,450 |                   |   | 5,073      |  |   | 5,039  |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|                                 |  |                            |  |               
|Non-designated Derivatives       |  |                            |  |                |         |                   |   |            |  |   |        |  
|Interest rate swaps:             |  |                            |  |                |         |                   |   |            |  |   |        |  
|Receive fixed/pay variable       |  |                            |  |                | 40,000  |                   |   | 2,095      |  |   | 2,095  |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|Total non-designated derivatives |  |                            |  |                | 40,000  |                   |   | 2,095      |  |   | 2,095  |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|Total derivatives                |  |                            |  | $              | 337,450 |                   | $ | 7,168      |  | $ | 7,134  |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|                                 |  |                            |  |               
|March 31, 2007                   |  |                            |  |                |         |                   |   |            |  |   |        |  
|Designated Derivatives           |  |                            |  |                |         |                   |   |            |  |   |        |  
|Interest rate swaps:             |  |                            |  |                |         |                   |   |            |  |   |        |  
|Receive fixed/pay variable       |  | Hedge investment rate risk |  | $              | 293,450 |                   | $ | 716        |  | $ | (282   | )
|Receive fixed/pay variable       |  | Hedge borrowing cost       |  |                | 25,000  |                   |   |           |  |   | (83    | )
|Interest rate caps/corridors     |  | Hedge borrowing cost       |  |                | 100,000 |                   |   | 422        |  |   | 422    |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|Total designated derivatives     |  |                            |  |                | 418,450 |                   |   | 1,138      |  |   | 57     |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|                                 |  |                            |  |               
|Non-designated Derivatives       |  |                            |  |                |         |                   |   |            |  |   |        |  
|Interest rate swaps:             |  |                            |  |                |         |                   |   |            |  |   |        |  
|Receive fixed/pay variable       |  |                            |  |                | 40,000  |                   |   | 3,245      |  |   | 3,245  |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|Total non-designated derivatives |  |                            |  |                | 40,000  |                   |   | 3,245      |  |   | 3,245  |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  
|Total derivatives                |  |                            |  | $              | 458,450 |                   | $ | 4,383      |  | $ | 3,302  |  
|                                 |  |                            |  |                |         |                   |   |            |  |   |        |  



18



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##### Table of Contents

NOTE 12CONTINGENCIES AND OFF-BALANCE SHEET RISK

Commitments

Commitments to extend credit in the form of consumer,
commercial real estate and business loans at the date indicated were as follows:



|                                      |  |               |          
|------------------------------------- |  | ------------- | ---------
|(in thousands)                        |  | March 31,2008
|Commercial business and real estate   |  | $             | 841,631  
|Consumer revolving credit             |  |               | 828,141  
|Residential mortgage credit           |  |               | 15,242   
|Performance standby letters of credit |  |               | 129,001  
|Commercial letters of credit          |  |               | 3,152    
|                                      |  |               |          
|Total loan commitments                |  | $             | 1,817,167
|                                      |  |               |          

Historically, many of the commitments expire without being fully drawn; therefore, the total commitment amounts do
not necessarily represent realizable future cash requirements.

Litigation

The Corporation is involved in various legal actions that arise in the ordinary course of its business. All active lawsuits entail amounts which management believes to be, individually and in the aggregate, immaterial
to the financial condition and the results of operations of the Corporation.

In 2005, a lawsuit captioned Bednar v. Provident Bank of Maryland was
initiated by a former Bank customer against the Bank in the Circuit Court for Baltimore City (Maryland) asserting that, upon early payoff, the Banks recapture of home equity loan closing costs initially paid by the Bank on the borrowers
behalf constituted a prepayment charge prohibited by state law. The Baltimore City Circuit Court ruled in the Banks favor, finding that the recapture of loan closing costs was not an unlawful charge, a position consistent with that taken by
the State of Maryland Commissioner of Financial Regulation. However, on appeal, the Maryland Court of Appeals reversed this ruling and found in favor of the borrower. The case was remanded to the trial court for further
proceedings. The potential damages for this individual matter are not material to the Corporations results of operations. However, the complaint is styled as a class action complaint. To date, no class has been certified. Management
believes that the Bank has meritorious defense against this action and intends to vigorously defend the litigation. On April 8, 2008, the Governor of Maryland signed legislation that limits the potential recovery of Bank customers in the Bednar
litigation to the amount of closing costs recovered by the Bank upon early payoff. As a result, the Bank believes that, even if a class is certified, the potential damages in the Bednar litigation would not be material to the Banks results of
operations.

NOTE 13NET GAINS (LOSSES)

Net gains
(losses) include the following components for the periods indicated:



|                                                            |  |                             |      |   |      |   |      
|----------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | -----
|                                                            |  | Three Months EndedMarch 31,
|(in thousands)                                              |  | 2008                        |      |   | 2007
|Net gains (losses):                                         |  |                             |      |   |      |   |      
|Securities sales                                            |  | $                           |     |   |      | $ | 212  
|Asset sales                                                 |  |                             | 26   |   |      |   | 838  
|Extinguishment of debt and early redemption of brokered CDs |  |                             | (217 | ) |      |   | 153  
|                                                            |  |                             |      |   |      |   |      
|Net gains (losses)                                          |  | $                           | (191 | ) |      | $ | 1,203
|                                                            |  |                             |      |   |      |   |      



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NOTE 14RESTRUCTURING ACTIVITIES

Costs associated with restructuring activities are recorded in the Condensed Consolidated Statements of Income as they are incurred. The costs include incremental expenses associated with corporate-wide efficiency and
infrastructure initiatives focused on the rationalization of the branch network, the composition and execution of fee generation activities and the creation of efficiencies in the Corporations business model.

All amounts accrued with respect to the initiatives discussed above have been recognized in the Condensed Consolidated Statements of Income for the three months ended
March 31, 2008 and 2007.

The incurred costs for all restructuring activities are reflected in the following tables:



|                                                                                                                   |  |                                           |     |   |                       |   |     |       |  |   |      |  
|------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------- | --- | - | --------------------- | - | --- | ----- |  | - | ---- | -
|                                                                                                                   |  | For the Three Months Ended March 31, 2008 |    
|(in thousands)                                                                                                     |  | BranchClosures                            |     |   | EfficiencyInitiatives |   |     | Total | 
|Severance and employee-related charges                                                                             |  | $                                         |    |   |                       | $ | 19  |       |  | $ | 19   |  
|Other related costs                                                                                                |  |                                           | 55  |   |                       |   |    |       |  |   | 55   |  
|                                                                                                                   |  |                                           |     |   |                       |   |     |       |  |   |      |  
|Total restructuring activities                                                                                     |  | $                                         | 55  |   |                       | $ | 19  |       |  | $ | 74   |  
|                                                                                                                   |  |                                           |     |   |                       |   |     |       |  |   |      |  
|                                                                                                                   | 
|                                                                                                                   |  | For the Three Months Ended March 31, 2007 |    
|(in thousands)                                                                                                     |  | BranchClosures                            |     |   | EfficiencyInitiatives |   |     | Total | 
|Contract terminations                                                                                              |  | $                                         | 473 |   |                       |   |    |       |  | $ | 473  |  
|Impairment of fixed assets                                                                                         |  |                                           | 357 |   |                       |   |    |       |  |   | 357  |  
|Other related costs                                                                                                |  |                                           | 37  |   |                       |   |    |       |  |   | 37   |  
|                                                                                                                   |  |                                           |     |   |                       |   |     |       |  |   |      |  
|Total restructuring activities                                                                                     |  | $                                         | 867 |   |                       | $ |    |       |  | $ | 867  |  
|                                                                                                                   |  |                                           |     |   |                       |   |     |       |  |   |      |  
|                                                                                                                  
|The following table reflects a roll-forward of the accrued liability associated with the restructuring activities: | 
|                                                                                                                   | 
|                                                                                                                   |  | At March 31, 2008                         |    
|(in thousands)                                                                                                     |  | BranchClosures                            |     |   | EfficiencyInitiatives |   |     | Total | 
|Balance December 31, 2007                                                                                          |  | $                                         |    |   |                       | $ | 147 |       |  | $ | 147  |  
|Branch closure costs                                                                                               |  |                                           | 55  |   |                       |   |    |       |  |   | 55   |  
|Efficiency initiatives costs                                                                                       |  |                                           |    |   |                       |   | 19  |       |  |   | 19   |  
|Cash payments                                                                                                      |  |                                           | (55 | ) |                       |   | (99 | )     |  |   | (154 | )
|                                                                                                                   |  |                                           |     |   |                       |   |     |       |  |   |      |  
|Balance at March 31, 2008                                                                                          |  | $                                         |    |   |                       | $ | 67  |       |  | $ | 67   |  
|                                                                                                                   |  |                                           |     |   |                       |   |     |       |  |   |      |  

Future costs associated with efficiency initiatives have not been incurred or estimated at this time and have not
been recognized as liabilities at March 31, 2008. The expected completion date of the restructuring activities is mid 2008.

NOTE 15INCOME
TAXES

Effective January 1, 2007, the Corporation adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (FIN No. 48), which prescribes the recognition and measurement of tax positions taken or expected to be taken in a tax return. FIN No. 48 provides guidance for de-recognition and classification of previously
recognized tax positions that did not meet the certain recognition criteria in addition to recognition of interest and penalties, if necessary. The Corporation did not have any material unrecognized tax benefits as of the date of adoption. The
Corporations policy is to recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense on the Condensed Consolidated Statements of Income. At January 1, 2007, no interest and penalties were required
to be recognized. At March 31, 2008, the Corporation did not have any material unrecognized tax benefits and no interest and penalties were required to be recognized. The tax years that remain subject to examination are 2004 through 2007 for
both the Federal and State of Maryland tax authorities.



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NOTE 16EARNINGS PER SHARE

The following table presents a summary of per share data and amounts for the periods indicated.



|                                      |  |                             |         |   |      |   |       
|------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------
|                                      |  | Three Months EndedMarch 31,
|(in thousands, except per share data) |  | 2008                        |         |   | 2007
|Net income (loss)                     |  | $                           | (17,622 | ) |      | $ | 16,114
|Basic EPS shares                      |  |                             | 31,537  |   |      |   | 32,196
|Basic EPS                             |  | $                           | (0.56   | ) |      | $ | 0.50  
|Dilutive shares                       |  |                             |        |   |      |   | 300   
|Diluted EPS shares                    |  |                             | 31,537  |   |      |   | 32,496
|Diluted EPS                           |  | $                           | (0.56   | ) |      | $ | 0.50  
|Antidilutive shares                   |  |                             | 2,628   |   |      |   | 627   

NOTE 17COMPREHENSIVE INCOME (LOSS)

Presented below is a reconciliation of net income to comprehensive income (loss) including the components of other comprehensive income (loss) for the periods indicated.



|                                                                        |                 |                              |         |                     |  |   |          |   |  |                 |         |   |                     |   |       |          |  |   |       |   |  |   |        |  
|----------------------------------------------------------------------- | --------------- | ---------------------------- | ------- | ------------------- |  | - | -------- | - |  | --------------- | ------- | - | ------------------- | - | ----- | -------- |  | - | ----- | - |  | - | ------ | -
|(in thousands)                                                          |                 | Three Months Ended March 31, |        
|                                                                        | 2008            |                              |         | 2007                | 
|                                                                        | BeforeIncomeTax |                              |         | TaxExpense(Benefit) |  |   | NetofTax |   |  | BeforeIncomeTax |         |   | TaxExpense(Benefit) |   |       | NetofTax | 
|Securities available for sale:                                          |                 |                              |         |                     |  |   |          |   |  |                 |         |   |                     |   |       |          |  |   |       |   |  |   |        |  
|Net unrealized gains (losses) arising during the year                   |                 | $                            | (66,025 | )                   |  | $ | (25,691  | ) |  | $               | (40,334 | ) |                     | $ | 5,690 |          |  | $ | 2,251 |   |  | $ | 3,439  |  
|Reclassification of net (gains) losses realized in net income           |                 |                              | 42,655  |                     |  |   | 16,596   |   |  |                 | 26,059  |   |                     |   | (212  | )        |  |   | (84   | ) |  |   | (128   | )
|                                                                        |                 |                              |         |                     |  |   |          |   |  |                 |         |   |                     |   |       |          |  |   |       |   |  |   |        |  
|Net unrealized gains (losses) on securities arising during the year     |                 |                              | (23,370 | )                   |  |   | (9,095   | ) |  |                 | (14,275 | ) |                     |   | 5,478 |          |  |   | 2,167 |   |  |   | 3,311  |  
|Net unrealized gains from derivative activities arising during the year |                 |                              | 5,897   |                     |  |   | 2,326    |   |  |                 | 3,571   |   |                     |   | 1,370 |          |  |   | 360   |   |  |   | 1,010  |  
|                                                                        |                 |                              |         |                     |  |   |          |   |  |                 |         |   |                     |   |       |          |  |   |       |   |  |   |        |  
|Other comprehensive income (loss)                                       |                 | $                            | (17,473 | )                   |  | $ | (6,769   | ) |  |                 | (10,704 | ) |                     | $ | 6,848 |          |  | $ | 2,527 |   |  |   | 4,321  |  
|                                                                        |                 |                              |         |                     |  |   |          |   |  |                 |         |   |                     |   |       |          |  |   |       |   |  |   |        |  
|Net income (loss)                                                       |                 |                              |         |                     |  |   |          |   |  |                 | (17,622 | ) |                     |   |       |          |  |   |       |   |  |   | 16,114 |  
|                                                                        |                 |                              |         |                     |  |   |          |   |  |                 |         |   |                     |   |       |          |  |   |       |   |  |   |        |  
|Comprehensive income (loss)                                             |                 |                              |         |                     |  |   |          |   |  | $               | (28,326 | ) |                     |   |       |          |  |   |       |   |  | $ | 20,435 |  
|                                                                        |                 |                              |         |                     |  |   |          |   |  |                 |         |   |                     |   |       |          |  |   |       |   |  |   |        |  

NOTE 18EMPLOYEE BENEFIT PLANS

The actuarially estimated net benefit cost includes the following components for the periods indicated:



|                                                       |  |                             |        |   |                           |   |                            |      |  |      |     |      |   |     |      |   |    |   |  |   |    |  
|------------------------------------------------------ |  | --------------------------- | ------ | - | ------------------------- | - | -------------------------- | ---- |  | ---- | --- | ---- | - | --- | ---- | - | -- | - |  | - | -- | -
|                                                       |  | Three Months EndedMarch 31, |       
|                                                       |  | QualifiedPension Plan       |        |   | Non-qualifiedPension Plan |   | PostretirementBenefit Plan |     
|(in thousands)                                         |  | 2008                        |        |   | 2007                      |   |                            | 2008 |  | 2007 |     | 2008 |   |     | 2007 |  
|Service cost - benefits earned during the period       |  | $                           | 636    |   |                           | $ | 632                        |      |  | $    | 188 |      | $ | 257 |      | $ | 1  |   |  | $ | 1  |  
|Interest cost on projected benefit obligation          |  |                             | 817    |   |                           |   | 724                        |      |  |      | 95  |      |   | 215 |      |   | 5  |   |  |   | 6  |  
|Expected return on plan assets                         |  |                             | (1,217 | ) |                           |   | (1,107                     | )    |  |      |    |      |   |    |      |   |   |   |  |   |   |  
|Net amortization and deferral of loss (gain)           |  |                             | 238    |   |                           |   | 211                        |      |  |      | 106 |      |   | 68  |      |   | (1 | ) |  |   | (2 | )
|                                                       |  |                             |        |   |                           |   |                            |      |  |      |     |      |   |     |      |   |    |   |  |   |    |  
|Net pension cost included in employee benefits expense |  | $                           | 474    |   |                           | $ | 460                        |      |  | $    | 389 |      | $ | 540 |      | $ | 5  |   |  | $ | 5  |  
|                                                       |  |                             |        |   |                           |   |                            |      |  |      |     |      |   |     |      |   |    |   |  |   |    |  

The minimum required contribution in 2008 for the qualified plan is estimated to be zero. The decision to
contribute further amounts is dependent on other factors, including the actual investment performance of the plan assets and the requirements of the Internal Revenue Code. Given these uncertainties and the lack of available data at this time, the
Corporation is not able to reliably estimate the maximum deductible contribution or the future amounts that may be contributed in 2008 to the qualified plan. No contributions were made to the qualified pension plan during the three months ended
March 31, 2008.

For the unfunded non-qualified pension and postretirement benefit plans, the Corporation will contribute the minimum required amount
in 2008, which is equal to the benefits paid under the plans.



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NOTE 19BUSINESS SEGMENT INFORMATION

The Corporations lines of business are structured according to the channels through which its products and services are delivered to its customers. For management purposes the lines are divided into the
following segments: Consumer Banking, Commercial Banking, and Treasury and Administration.

The Corporation offers consumer and commercial banking products
and services through its wholly owned subsidiary, Provident Bank. The Bank offers its services to customers in the key metropolitan areas of Baltimore, Washington D.C. and Richmond, Virginia, through 80 traditional and 62 in-store banking offices in
Maryland, Virginia and southern York County, Pennsylvania. Additionally, the Bank offers its customers 24-hour banking services through 195 Bank owned ATMs, telephone banking and the Internet. The Bank is also a member of the MoneyPass network which
provides customers with free access to more than 11,000 ATMs nationwide. Consumer banking services include a broad array of small business and consumer loan, deposit and investment products offered to retail and commercial customers through the
retail branch network and direct channel sales center. Commercial Banking provides an array of commercial financial services including asset-based lending, equipment leasing, real estate financing, cash management and structured financing to middle
market commercial customers. Treasury and Administration is comprised of balance sheet management activities that include managing the investment portfolio, discretionary funding, utilization of derivative financial instruments and optimizing the
Corporations equity position.

The financial performance of each business segment is monitored using an internal profitability measurement system.
This system utilizes policies that ensure the results reflect the economics for each segment compiled on a consistent basis. Line of business information is based on management accounting practices that support the current management structure and
is not necessarily comparable with similar information for other financial institutions. This profitability measurement system uses internal management accounting policies that generally follow the policies described in Note 1. The
Corporations funds transfer pricing system utilizes a matched maturity methodology that assigns a cost of funds to earning assets and a value to the liabilities of each business segment with an offset in the Treasury and Administration
business segment. The provision for loan losses is charged to the consumer and commercial segments based on actual charge-offs with the balance to the Treasury and Administration segment. Operating expense is charged on a fully absorbed basis.
Income tax expense is calculated based on the segments fully taxable equivalent income and the Corporations effective tax rate. Revenues from no individual customer exceeded 10% of consolidated total revenues.

The table below summarizes results by each business segment for the periods indicated.



|                                                    |  |                   |           |                 |   |                            |  |      |         |   |  |                   |           |                 |  |                            |           |       |   |           |  |   |         |  |   |          
|--------------------------------------------------- |  | ----------------- | --------- | --------------- | - | -------------------------- |  | ---- | ------- | - |  | ----------------- | --------- | --------------- |  | -------------------------- | --------- | ----- | - | --------- |  | - | ------- |  | - | ---------
|Three Months Ended March 31,                        |  | 2008              |           |                 |   |                            |  | 2007 |         |  
|(in thousands)                                      |  | CommercialBanking |           | ConsumerBanking |   | Treasury andAdministration |  |      | Total   |   |  | CommercialBanking |           | ConsumerBanking |  | Treasury andAdministration |           | Total
|Net interest income                                 |  | $                 | 17,478    |                 | $ | 22,498                     |  | $    | 5,013   |   |  | $                 | 44,989    |                 |  | $                          | 15,737    |       | $ | 25,008    |  | $ | 8,190   |  | $ | 48,935   
|Provision for loan losses                           |  |                   | 2,060     |                 |   | 879                        |  |      | 175     |   |  |                   | 3,114     |                 |  |                            | 17        |       |   | 582       |  |   | 453     |  |   | 1,052    
|                                                    |  |                   |           |                 |   |                            |  |      |         |   |  |                   |           |                 |  |                            |           |       |   |           |  |   |         |  |   |          
|Net interest income after provision for loan losses |  |                   | 15,418    |                 |   | 21,619                     |  |      | 4,838   |   |  |                   | 41,875    |                 |  |                            | 15,720    |       |   | 24,426    |  |   | 7,737   |  |   | 47,883   
|Non-interest income (loss)                          |  |                   | 5,021     |                 |   | 22,851                     |  |      | (42,996 | ) |  |                   | (15,124   | )               |  |                            | 4,853     |       |   | 24,952    |  |   | 64      |  |   | 29,869   
|Non-interest expense                                |  |                   | 6,314     |                 |   | 37,226                     |  |      | 7,891   |   |  |                   | 51,431    |                 |  |                            | 6,116     |       |   | 40,939    |  |   | 7,713   |  |   | 54,768   
|                                                    |  |                   |           |                 |   |                            |  |      |         |   |  |                   |           |                 |  |                            |           |       |   |           |  |   |         |  |   |          
|Income (loss) before income taxes                   |  |                   | 14,125    |                 |   | 7,244                      |  |      | (46,049 | ) |  |                   | (24,680   | )               |  |                            | 14,457    |       |   | 8,439     |  |   | 88      |  |   | 22,984   
|Income tax expense (benefit)                        |  |                   | 4,040     |                 |   | 2,072                      |  |      | (13,170 | ) |  |                   | (7,058    | )               |  |                            | 4,321     |       |   | 2,523     |  |   | 26      |  |   | 6,870    
|                                                    |  |                   |           |                 |   |                            |  |      |         |   |  |                   |           |                 |  |                            |           |       |   |           |  |   |         |  |   |          
|Net income (loss)                                   |  | $                 | 10,085    |                 | $ | 5,172                      |  | $    | (32,879 | ) |  | $                 | (17,622   | )               |  | $                          | 10,136    |       | $ | 5,916     |  | $ | 62      |  | $ | 16,114   
|                                                    |  |                   |           |                 |   |                            |  |      |         |   |  |                   |           |                 |  |                            |           |       |   |           |  |   |         |  |   |          
|Total assets                                        |  | $                 | 2,426,244 |                 | $ | 3,027,399                  |  | $    | 950,273 |   |  | $                 | 6,403,916 |                 |  | $                          | 2,182,262 |       | $ | 3,156,421 |  | $ | 896,009 |  | $ | 6,234,692
|                                                    |  |                   |           |                 |   |                            |  |      |         |   |  |                   |           |                 |  |                            |           |       |   |           |  |   |         |  |   |          

NOTE 20SUBSEQUENT EVENT

On April 9, 2008, the Corporation entered into a Stock Purchase Agreement (the Agreement) with certain institutional and individual accredited investors and certain officers of the Company and members
of Companys board of directors in connection with the private placement of approximately $64.8 million of its capital stock. The Agreement provides for the sale of 1,422,110 shares of the Corporations common stock at a price of $9.50 per
share ($10.80 for officers and directors of the Corporation, which was the closing bid price on April 8, 2008, the date prior to the execution of the Agreement), and 51,215 shares of a newly created class of Series A Mandatory Convertible
Non-Cumulative Preferred Stock (the Series A Preferred) at a purchase price and liquidation preference of $1,000 per share. The transaction closed on April 14, 2008. Net proceeds from the equity offering totaled approximately
$63 million.



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Each share of Series A Preferred will automatically convert into 95.238 shares of common stock on April 1, 2011.
Holders may elect to convert at any time prior to that date. The conversion rate will be subject to customary anti-dilution adjustments. The aggregate number of common and preferred shares to be issued represents approximately 17% of the
Corporations common stock outstanding after the offering (assuming conversion of the Series A Preferred).

The Series A Preferred will pay dividends
in cash, when declared by the Board of Directors, at a rate of 10.0% per annum on the liquidation preference of $1,000 per share, payable quarterly in arrears. In the event that the Corporation increases its quarterly dividend on its common
stock above $0.165, the holders of the Series A Preferred will be entitled to an additional dividend at rate per annum equal to the percentage increase above $0.165 multiplied by 10.0%. No dividends may be paid on the Corporations common stock
unless dividends have been paid in full on the Series A Preferred.

On April 24, 2008, the Corporations wholly owned subsidiary, Provident Bank,
completed a private placement of $50.0 million of subordinated unsecured notes that are rated BBB to qualified institutional buyers and accredited investors. The purchase price of the subordinated notes was 97.651% of the principal amount. The
subordinated notes bear interest at a fixed rate of 9.5% and mature on May 1, 2018, with semi-annual interest payments payable on May 1 and November 1 of each year beginning on November 1, 2008. The subordinated notes are not
convertible. Beginning on May 1, 2013, Provident Bank may redeem some or all of the subordinated notes, at any time, at a price equal to 100% of the principal amount of such notes redeemed plus accrued and unpaid interest to the redemption
date. Sandler ONeill & Partners, L.P. was the initial purchaser of the subordinated notes. Net proceeds from the debt offering totaled approximately $48.2 million.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

GENERAL

Provident Bankshares Corporation (the Corporation), a Maryland corporation, is the holding
company for Provident Bank (Provident or the Bank), a Maryland chartered stock commercial bank. At March 31, 2008, the Bank is the largest independent commercial bank, in asset size, headquartered in Maryland, with $6.4
billion in assets. Provident is a regional bank serving Maryland, Virginia and Southern York County, PA, with emphasis on the key urban centers within these states  the Baltimore, Washington, D.C. and Richmond metropolitan areas.

Providents principal business is to acquire deposits from individuals and businesses and to use these deposits to fund loans to individuals and businesses.
Provident focuses on providing its products and services to three segments of customers  individuals, small businesses and middle market businesses. The Corporation offers consumer and commercial lending products and services through the
Consumer Banking group and the Commercial Banking group. Provident also offers related financial services through wholly-owned subsidiaries. Securities brokerage, investment management and related insurance services are available through Provident
Investment Company and leases through Court Square Leasing.

Providents mission is to exceed customer expectations by delivering superior service,
products and banking convenience. Every employees commitment to serve the Banks customers in this fashion will assist in establishing Provident as the primary bank of choice of individuals, families, small businesses and middle market
businesses throughout its chosen markets. To achieve this mission and to improve financial fundamentals, the strategic priorities of the organization are to:

Maximize Providents position as the right size bank in the marketplace. Providents position as the largest bank headquartered in Maryland provides a unique opportunity as the right size
bank in its market areas, or footprint. The Bank provides the service of a community bank combined with the convenience and wide array of products and services that a major regional bank offers. In addition, the 62 in-store banking offices
throughout its footprint reinforce its right size strategy through convenient locations, hours and a full line of products and services. Provident currently has 142 banking offices concentrated in the Baltimore-Washington, D.C. corridor and beyond
to Richmond, Virginia. Of the 142 banking offices, 49% are located in the Greater Baltimore region and 51% are located in the Greater Washington, D.C. and Central Virginia regions, reflecting the successful development of the Bank into a highly
competitive regional commercial bank. Provident also offers its customers 24-hour banking services through ATMs, telephone banking and the Internet. The Banks network of 195 ATMs enhances the banking office network by providing customers
increased opportunities to access their funds. In addition, the Bank is a member of the MoneyPass network, which provides free access to more than 11,000 ATMs nationwide for its customers.

Profitably grow and deepen customer relationships in all four key market segments: Commercial, Commercial Real Estate, Consumer and Business
Banking. Consumer banking continues to be an important component of the Banks strategic priorities. Consumer banking services include a broad array of consumer loan, deposit and investment products offered to consumer and commercial
customers through Providents banking office network and ProvidentDirect, the Banks direct channel sales center. The business banking segment is further supported by relationship managers who provide comprehensive business product and
sales support to expand existing customer



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relationships and acquire new clients. Commercial banking is the other key component to the Corporations regional presence in its market area.
Commercial Banking provides lending services through its commercial business division and its commercial real estate division. Commercial business division provides customized banking solutions to middle market commercial customers while the
commercial real estate division provides the lending expertise and financing options to real estate customers. The Bank has an experienced team of relationship managers with expertise in business and real estate lending to companies in various
industries in the region. It also has a suite of cash management products managed by responsive account teams that deepen customer relationships through competitively priced deposit based services, responsive service and frequent personal contact
with each customer. During 2007, management has introduced a remote deposit product, which allows a customer to electronically post their deposits directly from the workplace. This product was designed to attract and retain commercial deposits.
Business clients have embraced this convenience-based product. In addition, the Bank has significantly expanded its online deposit account capabilities, including the introduction of mobile banking services in March 2008.

Consistently execute a higher-performance, customer relationship-focused sales culture.The Corporations transition to a customer
relationship driven sales culture requires deepening relationships through cross-selling and the continuing emphasis on retention of valued customers. The Bank has segmented its customers to better understand and anticipate their financial needs and
provide Providents sales force with a targeted approach to customers and prospects. The successful execution of this strategic priority will be centered on the right size bank commitmentproviding the service of a community bank combined
with the convenience and wide array of products and services that a major regional bank offers. This strategy is measured and monitored by a number of actions such as the utilization of individual performance and incentive plans.

Sustain a culture that attracts and retains employees who provide the differentiating Provident Way customer experience.Provident has
always placed a high priority on its employees and has approached employee development and training with renewed emphasis. Employee development is viewed as a critical part of executing Providents strategic priority as the right size bank and
transforming the Corporations sales culture with a focus on the employees development and approach with Providents customers. This strategy is measured and monitored by a number of actions, such as utilization of individual
development plans for every employee and tracking individual employee learning activities through our learning management system.

Expand
delivery (branch and non-branch) within the market Provident serves; supplement with acquisitions within pricing discipline. Provident supplements organic growth opportunities with acquisitions if they are a strategic fit and are within the
Corporations pricing model. Over the past five years, Provident has expanded its branch network by a net 29 in-store or traditional branches.

FINANCIAL REVIEW

The principal objective of this Financial Review is to provide an overview of the financial condition and results of
operations of Provident Bankshares Corporation and its subsidiaries year over year, unless otherwise indicated. This discussion and tabular presentations should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial
Statements and Notes as well as the other information herein.

Overview of Income and Expenses

Income

The Corporation has two primary sources of pre-tax
income. The first is net interest income. Net interest income is the difference between interest incomewhich is the income that the Corporation earns on its loans and investmentsand interest expensewhich is the interest that the
Corporation pays on its deposits and borrowings.

The second principal source of pre-tax income is non-interest incomethe compensation received from
providing products and services. The majority of the non-interest income comes from service charges on deposit accounts. The Corporation also earns income from insurance commissions, mortgage banking fees and other fees and charges.

The Corporation recognizes gains or losses as a result of sales of investment securities or the disposition of loans, foreclosed property. fixed assets or early
extinguishment of debt. In addition, the Corporation also recognizes gains or losses on its outstanding derivative financial instruments or impairment on investment securities that are considered other-than-temporarily impaired. Gains and losses are
not a regular part of the Corporations primary source of income.



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Expenses

The
expenses the Corporation incurs in operating its business consist of salaries and employee benefits expense, occupancy expense, furniture and equipment expense, external processing fees, deposit insurance premiums, advertising expenses, and other
miscellaneous expenses.

Salaries and employee benefits expense consists primarily of the salaries and wages paid to employees, payroll taxes, and expenses
for health care, retirement and other employee benefits.

Occupancy expenses, which are fixed or variable costs associated with premises and equipment,
consist primarily of lease payments, real estate taxes, depreciation charges, maintenance and cost of utilities.

Furniture and equipment include expenses
and depreciation charges related to office and banking equipment. Depreciation of furniture and equipment is computed using the straight-line method based on the useful lives of related assets. Estimated lives are 2 to 15 years for building and
leasehold improvements, and 3 to 10 years for furniture and equipment.

External processing fees are fees paid to third parties mainly for data processing
services.

Restructuring activities are incremental expenses associated with corporate-wide efficiency and infrastructure initiatives implemented to
simplify the Corporations business model as is discussed further in the Notes to the Condensed Consolidated Financial Statements.

Other expenses
include expenses for attorneys, accountants and consultants, fees paid to directors, franchise taxes, charitable contributions, insurance, office supplies, postage, telephone and other miscellaneous operating expenses.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The unaudited Condensed
Consolidated Financial Statements of the Corporation are prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities for the reporting periods. Management evaluates estimates on an on-going basis, and believes the following
represent its more significant judgments and estimates used in preparation of its consolidated financial statements: allowance for loan losses, non-accrual loans, other real estate owned, estimates of fair value and intangible assets associated with
mergers, other-than-temporary impairment of investment securities, pension and post-retirement benefits, asset prepayment rates, goodwill and intangible assets, share-based payment, derivative financial instruments, litigation and income taxes.
Management bases its estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Management believes the following critical accounting policies affect its more significant judgments and estimates used in preparation of its unaudited Condensed Consolidated
Financial Statements: allowance for loan losses, other-than-temporary-impairment of investment securities, derivative financial instruments, goodwill and intangible assets, asset prepayment rates, and income taxes. Each estimate and its financial
impact, to the extent significant to financial results, are discussed in the Notes to the Condensed Consolidated Financial Statements. It is at least reasonably possible that each of the Corporations estimates could change in the near term or
that actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could be material to the Condensed Consolidated Financial Statements.

FINANCIAL CONDITION

The financial condition of the Corporation
reflects the strengthening of the Corporations franchise in the key major markets of Greater Baltimore, Greater Washington, D.C. and Central Virginia, through expanded business development and the execution of the Corporations strategic
priorities and the strengthening of the balance sheet by growing loans and deposits along with maintaining loan credit quality in an uncertain economic environment. Strong growth in relationship-based loan portfolios (loans other than the
Corporations originated and acquired residential mortgage loans) was a reflection of the Corporations ability to grow the loan portfolio in these key markets through its lending expertise and focus on its premier loan programs 
home equity, commercial real estate, and commercial business. The Corporation was also successful in growing deposits, mainly from the use of brokered certificates of deposit, which offset the decline in deposits resulting from the sale of six
branches and associated deposits to Union Bankshares in September 2007, increased competition for deposits and the significant decline in real estate title activity. The success in the core banking performance has led to growth in average
relationship-based loans of $394.1 million, or 11.1% and average deposits of $137.2 million, compared to the first quarter of 2007. At March 31, 2008, total assets were $6.4 billion, while total loans and deposits were $4.2 billion and $4.4
billion, respectively.



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Consistent with the Corporations strategy, growth in internally generated loan portfolios has replaced the decline
in wholesale assets (originated and acquired residential mortgages and investment securities) as the Corporation strengthens the balance sheet by growing relationship-based portfolios and de-emphasizing wholesale assets. Loan credit quality
continues to be a focus for the Corporation during these uncertain economic times. Loan credit quality has remained stable from December 31, 2007 and has not revealed any significant deterioration. In addition, long-term capital growth is a
specific focus for the Corporation. At March 31, 2008, tangible common equity as a percentage of tangible assets was 5.48%, a decline from 5.86% at December 31, 2007. The decline in tangible common equity at March 31, 2008 is mainly
attributable to a $42.7 million pre-tax write-down of certain investment securities. To provide capital growth; and as detailed in Note 20 above, the Corporation completed a multi-tiered capital plan in April 2008 to strengthen the
Corporations capital base, including the issuance of $64.8 million in equity securities and $50 million in subordinated debt. In addition, beginning with the dividend to be paid in May 2008, the quarterly dividend payment was reduced by 66%,
which is expected to result in an annual savings of approximately $29 million and will bring the Corporations dividend yield in-line with that of its peer banks and provides the least costly source to re-build tangible common equity. The
equity raised from the capital plan and the equity preserved from the dividend reduction is expected to improve the Corporations tangible common equity ratios in 2008.

The tangible common equity ratio is a non-GAAP measure used by management to evaluate capital adequacy. Tangible common equity is total equity less net accumulated other comprehensive income (OCI),
goodwill and deposit-based intangibles. Tangible assets are total assets less goodwill and deposit-based intangibles. The tangible common equity ratio is calculated by removing the impact of OCI and certain intangible assets from total equity and
total assets. Management and many stock analysts use the tangible common equity ratio in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other
intangible assets, typically stemming from the use of the purchase accounting method accounting for mergers and acquisitions. Management believes this is an important benchmark for the Corporation and for investors. Neither tangible common equity,
tangible assets nor the related measures should be considered in isolation or as a substitute for stockholders equity, total assets or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Corporation
calculates its tangible common equity, tangible assets and the related measures may differ from that of other companies reporting measures with similar names. The following table is a reconciliation of the Corporations tangible common equity
and tangible assets for the periods ended March 31, 2008, December 31, 2007 and March 31, 2007, respectively.



|                                                           |  |               |           |   |                  |   |           |               |  |   |           |  
|---------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | ------------- |  | - | --------- | -
|(dollars in thousands)                                     |  | March 31,2008 |           |   | December 31,2007 |   |           | March 31,2007 | 
|                                                           |  |              
|Total equity capital per consolidated financial statements |  | $             | 517,549   |   |                  | $ | 555,771   |               |  | $ | 635,797   |  
|Accumulated other comprehensive loss                       |  |               | 78,881    |   |                  |   | 68,177    |               |  |   | 17,786    |  
|Goodwill                                                   |  |               | (253,906  | ) |                  |   | (253,906  | )             |  |   | (253,906  | )
|Deposit-based intangible                                   |  |               | (5,836    | ) |                  |   | (6,152    | )             |  |   | (8,515    | )
|                                                           |  |               |           |   |                  |   |           |               |  |   |           |  
|Tangible common equity                                     |  | $             | 336,688   |   |                  | $ | 363,890   |               |  | $ | 391,162   |  
|                                                           |  |               |           |   |                  |   |           |               |  |   |           |  
|                                                           |  |               |          
|Total assets per consolidated financial statements         |  | $             | 6,403,916 |   |                  | $ | 6,465,046 |               |  | $ | 6,234,692 |  
|Goodwill                                                   |  |               | (253,906  | ) |                  |   | (253,906  | )             |  |   | (253,906  | )
|Deposit-based intangible                                   |  |               | (5,836    | ) |                  |   | (6,152    | )             |  |   | (8,515    | )
|                                                           |  |               |           |   |                  |   |           |               |  |   |           |  
|Tangible assets                                            |  | $             | 6,144,174 |   |                  | $ | 6,204,988 |               |  | $ | 5,972,271 |  
|                                                           |  |               |           |   |                  |   |           |               |  |   |           |  
|Tangible common equity ratio                               |  |               | 5.48      | % |                  |   | 5.86      | %             |  |   | 6.55      | %



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##### Table of Contents

Lending

Total
average loan balances increased to $4.2 billion in the first quarter of 2008, an increase of $358.8 million, or 9.3%, over the first quarter of 2007. The following table summarizes the composition of the Corporations average loans for the
periods indicated.



|                                             |  |                             |           |           |   |           |           |   |         |   |  |       |   
|-------------------------------------------- |  | --------------------------- | --------- | --------- | - | --------- | --------- | - | ------- | - |  | ----- | --
|                                             |  | Three Months EndedMarch 31, |           | $Variance |   |           | %Variance |  
|                                             |  |                            
|(dollars in thousands)                       |  | 2008                        |           | 2007      |   |          
|Residential real estate:                     |  |                             |           |           |   |           |           |   |         |   |  |       |   
|Originated and acquired residential mortgage |  | $                           | 290,093   |           | $ | 325,377   |           | $ | (35,284 | ) |  | (10.8 | )%
|Home equity                                  |  |                             | 1,085,752 |           |   | 996,519   |           |   | 89,233  |   |  | 9.0   |   
|Other consumer:                              |  |                             |           |           |   |           |           |   |         |   |  |       |   
|Marine                                       |  |                             | 357,963   |           |   | 373,271   |           |   | (15,308 | ) |  | (4.1  | ) 
|Other                                        |  |                             | 24,962    |           |   | 27,678    |           |   | (2,716  | ) |  | (9.8  | ) 
|                                             |  |                             |           |           |   |           |           |   |         |   |  |       |   
|Total consumer                               |  |                             | 1,758,770 |           |   | 1,722,845 |           |   | 35,925  |   |  | 2.1   |   
|                                             |  |                             |           |           |   |           |           |   |         |   |  |       |   
|Commercial real estate:                      |  |                             |           |           |   |           |           |   |         |   |  |       |   
|Commercial mortgage                          |  |                             | 445,465   |           |   | 450,402   |           |   | (4,937  | ) |  | (1.1  | ) 
|Residential construction                     |  |                             | 613,126   |           |   | 585,987   |           |   | 27,139  |   |  | 4.6   |   
|Commercial construction                      |  |                             | 475,882   |           |   | 371,302   |           |   | 104,580 |   |  | 28.2  |   
|Commercial business                          |  |                             | 936,933   |           |   | 740,810   |           |   | 196,123 |   |  | 26.5  |   
|                                             |  |                             |           |           |   |           |           |   |         |   |  |       |   
|Total commercial                             |  |                             | 2,471,406 |           |   | 2,148,501 |           |   | 322,905 |   |  | 15.0  |   
|                                             |  |                             |           |           |   |           |           |   |         |   |  |       |   
|Total loans                                  |  | $                           | 4,230,176 |           | $ | 3,871,346 |           | $ | 358,830 |   |  | 9.3   |   
|                                             |  |                             |           |           |   |           |           |   |         |   |  |       |   

The Corporation continues to produce strong loan growth in its internally generated loan portfolios.
Relationship-based loans increased in the aggregate $394.1 million, or 11.1%, over the same quarter in 2007. The Corporations focus on business development and developing lending relationships that are provided by the market opportunity,
combined with the experience of lending officers in the market, has been demonstrated by the strong growth in the commercial real estate and commercial business loan portfolios.

Total average loans increased by 9.3%, primarily due to an increase of $89.3 million, or 9.0%, in average home equity loans, $27.1 million, or 4.6%, in average residential construction loans, $104.6 million, or 28.2%,
in average commercial construction loans and $196.1 million, or 26.5%, in average commercial business loans. These increases more than offset the planned reductions in marine lending of $15.3 million and $35.3 million in the originated and acquired
residential portfolios. These positive results reflect the effectiveness of the Corporations strategy to grow and deepen customer relationships in all four key market segments: commercial, commercial real estate, consumer and small business.
The overall result is a strategically balanced mix of lending revenue sources between consumer and commercial loan products with $1.8 billion, or 41.6%, in consumer loans, and $2.5 billion, or 58.4%, in commercial loans. The diversity of lending
products should provide the Corporation with opportunities to emphasize certain product lines as market conditions change.

Commercial loans are a key
component to the Corporations regional presence in its market area. Average total commercial loans increased $322.9 million, or 15.0%, compared to the first quarter of 2007. Residential and commercial construction loans posted increases
compared to the same quarter of 2007 of $27.1 million and $104.6 million, respectively, reflecting positive growth in the regional real estate construction markets. During this same period, commercial business loans increased by $196.1 million, or
26.5%. This growth has occurred within the Corporations market footprint and is a reflection of the strength in the Corporations markets and the groups ability to deepen historical lending relationships with seasoned borrowers in
familiar markets and the creation of new lending relationships. These expanded relationships and associated risks are managed through disciplined loan administration and credit monitoring by an experienced credit management staff.

The variety of home equity loan products, along with the Corporations relationship sales approach and competitive pricing have proven to be successful in the
markets of Maryland, Washington, D.C. and Virginia. Home equity loans are mainly located in these markets and 85% of this portfolio has been originated through the Corporations internal production network. This marketing strategy resulted in
the $89.3 million, or 9.0%, increase in average home equity loan balances. The production of direct consumer loans, primarily home equity loans and lines, is generated through the Banks retail banking offices, phone center and internet
channels. The solid growth in home equity lending was partially offset by a decline in marine and other consumer loans. Currently, management has chosen to limit marine lending loan growth due to low margins in the industry.



27



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##### Table of Contents

Asset Quality

The
following table presents information with respect to non-performing assets and 90-day delinquencies as of the dates indicated.



|                                                  |  |               |        |   |                  |   |        |  
|------------------------------------------------- |  | ------------- | ------ | - | ---------------- | - | ------ | -
|(dollars in thousands)                            |  | March 31,2008 |        |   | December 31,2007 |  
|                                                  | 
|Non-Performing Assets:                            |  |               |        |   |                  |   |        |  
|Originated and acquired residential mortgage      |  | $             | 7,719  |   |                  | $ | 7,511  |  
|Home equity                                       |  |               | 1,319  |   |                  |   | 1,737  |  
|Commercial mortgage                               |  |               | 1,335  |   |                  |   | 1,335  |  
|Residential real estate construction              |  |               | 9,478  |   |                  |   | 7,923  |  
|Commercial business                               |  |               | 10,770 |   |                  |   | 12,742 |  
|                                                  |  |               |        |   |                  |   |        |  
|Total non-accrual loans                           |  |               | 30,621 |   |                  |   | 31,248 |  
|Total renegotiated loans                          |  |               |       |   |                  |   |       |  
|                                                  |  |               |        |   |                  |   |        |  
|Total non-performing loans                        |  |               | 30,621 |   |                  |   | 31,248 |  
|Non-performing investments                        |  |               | 2,580  |   |                  |   |       |  
|Total other assets and real estate owned          |  |               | 3,785  |   |                  |   | 2,664  |  
|                                                  |  |               |        |   |                  |   |        |  
|Total non-performing assets                       |  | $             | 36,986 |   |                  | $ | 33,912 |  
|                                                  |  |               |        |   |                  |   |        |  
|90-Day Delinquencies:                             |  |               |        |   |                  |   |        |  
|Originated and acquired residential mortgage      |  | $             | 1,722  |   |                  | $ | 2,149  |  
|Home equity                                       |  |               | 1,995  |   |                  |   | 1,281  |  
|Other consumer                                    |  |               | 2,297  |   |                  |   | 321    |  
|Commercial mortgage                               |  |               | 410    |   |                  |   |       |  
|Residential real estate construction              |  |               | 1,350  |   |                  |   |       |  
|Commercial business                               |  |               | 561    |   |                  |   | 79     |  
|                                                  |  |               |        |   |                  |   |        |  
|Total 90-day delinquencies                        |  | $             | 8,335  |   |                  | $ | 3,830  |  
|                                                  |  |               |        |   |                  |   |        |  
|Asset Quality Ratios:                             |  |               |        |   |                  |   |        |  
|Non-performing loans to loans                     |  |               | 0.73   | % |                  |   | 0.74   | %
|Non-performing investments to investments         |  |               | 0.18   | % |                  |   |       |  
|Non-performing assets to assets                   |  |               | 0.58   | % |                  |   | 0.52   | %
|Allowance for loan losses to loans                |  |               | 1.31   | % |                  |   | 1.31   | %
|Net charge-offs in quarter to average loans       |  |               | 0.30   | % |                  |   | 0.58   | %
|Allowance for loan losses to non-performing loans |  |               | 180.43 | % |                  |   | 176.87 | %

Recent economic data has shown that the Mid-Atlantic region, while sluggish, remains one of the better performing
markets in the nation in terms of preserving real estate values and lower delinquency levels. New housing inventories are down in both Maryland and Virginia while unemployment levels in the region continue to be below the national average. With the
majority of the home equity and commercial real estate portfolios concentrated with in the Washington D.C., Virginia and Maryland region, the overall credit quality for the first quarter of 2008 did not reveal any significant deterioration and is
evidenced by non-performing loans to loans of 0.73% at March 31, 2008 compared to 0.74% at December 31, 2007. Net charge-offs to average loans ratio were 0.30%, a decline from 0.58% for the quarter ending December 31, 2007. At
March 31, 2008, the allowance for loan losses to total loans was 1.31%, while the allowance for loan losses to non-performing loans was 180.4%, compared to 1.31% and 176.9%, respectively at December 31, 2007. The level of 90-day delinquent
loans increased during the same period, increasing $4.5 million to $8.3 million over the $3.8 million level at December 31, 2007. The increase in 90-day delinquent loans was spread through all the internally generated portfolios and was not
concentrated in any one portfolio. Non-performing commercial business loans include $1.1 million of loans that have U.S. government guarantees.

During the
current quarter, the Corporation did not experience any broad-based deterioration within its loan portfolios. The diversification of the commercial real estate portfolio between commercial mortgages, commercial construction and residential
construction along with the geographically different markets of Baltimore, suburban Washington, D.C. and Richmond, Virginia supports these results. In addition, the home equity portfolio has performed fairly well under the current market conditions.
The success in maintaining loan asset quality above the national average is a reflection of managements high credit standards, in-house administration and strong oversight procedures along with the majority of the portfolio



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focused within the Washington D.C, Virginia and Maryland region which remains one of the better performing markets in the nation. Because events affecting
borrowers and collateral are constantly changing and cannot be reliably predicted, present portfolio quality may not be an indication of future performance.

Non-performing loans as a percentage of each portfolios outstanding balance were as follows:



|                                           |  |               |   |  |                  |  
|------------------------------------------ |  | ------------- | - |  | ---------------- | -
|                                           |  | March 31,2008 |   |  | December 31,2007 |  
|                                           | 
|Originated & acquired residential mortgage |  | 2.75          | % |  | 2.53             | %
|Home equity                                |  | 0.12          |   |  | 0.16             |  
|Other consumer                             |  |              |   |  |                 |  
|Total consumer                             |  | 0.52          |   |  | 0.53             |  
|Commercial mortgage                        |  | 0.27          |   |  | 0.30             |  
|Residential real estate construction       |  | 1.59          |   |  | 1.26             |  
|Commercial real estate construction        |  |              |   |  |                 |  
|Commercial business                        |  | 1.17          |   |  | 1.36             |  
|Total commercial                           |  | 0.88          |   |  | 0.90             |  
|Total loans                                |  | 0.73          |   |  | 0.74             |  

The level of non-performing assets to total assets was 0.58% at March 31, 2008, a slight increase compared to
0.52% at December 31, 2007. Non- performing investments were $2.6 million at March 31, 2008 and relate to certain investment securities that were other-than-temporarily impaired. Overall, the asset quality ratios of the Corporation are
considered stable when compared to December 31, 2007. Non-performing assets were $37.0 million at March 31, 2008, a 9.1% increase over the level at December 31, 2007. The increase in non-performing assets was mainly a result of the
additional $2.6 million in investment securities that was added during the quarter.

Allowance for Loan Losses

The Corporation maintains an allowance for loan losses (the allowance), which is intended to be managements best estimate of probable inherent losses in
the outstanding loan portfolio. The allowance is reduced by actual credit losses and is increased by the provision for loan losses and recoveries of previous losses. The provisions for loan losses are charges to earnings to bring the total allowance
to a level considered necessary by management.

The allowance is based on managements continuing review and credit risk evaluation of the loan
portfolio. This process provides an allowance consisting of two components, allocated and unallocated. To arrive at the allocated component of the allowance, the Corporation combines estimates of the allowances needed for loans analyzed individually
and on a pooled basis. The allocated component of the allowance is supplemented by an unallocated component.

The portion of the allowance that is
allocated to individual internally criticized and non-accrual loans is determined by estimating the inherent loss on each problem credit after giving consideration to the value of underlying collateral. Management emphasizes loan quality and close
monitoring of potential problem credits. Credit risk identification and review processes are utilized in order to assess and monitor the degree of risk in the loan portfolio. The Corporations lending and credit administration staff are charged
with reviewing the loan portfolio and identifying changes in the economy or in a borrowers circumstances which may affect the ability to repay debt or the value of pledged collateral. A loan classification and review system exists that
identifies those loans with a higher than normal risk of uncollectibility. Each commercial loan is assigned a grade based upon an assessment of the borrowers financial capacity to service the debt and the presence and value of collateral for
the loan.

In addition to being used to categorize risk, the Banks internal ten-point risk rating system is used to determine the allocated allowance
for the commercial portfolio. Reserve factors, based on the actual loss history for a 5-year period for criticized loans, are assigned. If the factor, based on loss history for classified credits is lower than the minimum established factor, the
higher factor is applied. For loans with satisfactory risk profiles, the factors are based on the rating profile of the portfolio and the consequent historic losses of bonds with equivalent ratings.

For the consumer portfolios, the determination of the allocated allowance is conducted at an aggregate, or pooled, level. Each quarter, historical rolling loss rates for
homogenous pools of loans in these portfolios provide the basis for the allocated reserve. For any portfolio where the Bank lacks sufficient historic experience, industry loss rates are used. If recent history is not deemed to reflect the inherent
losses existing within a portfolio, older historic loss rates during a period of similar economic or market conditions are used.

The Banks credit
administration group adjusts the indicated loss rates based on qualitative factors. Factors that are considered in adjusting loss rates include risk characteristics, credit concentration trends and general economic conditions,



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including job growth and unemployment rates. For commercial and real estate portfolios, additional factors include the level and trend of watched and
criticized credits within those portfolios; commercial real estate vacancy, absorption and rental rates; and the number and volume of syndicated credits, construction loans, or other portfolio segments deemed to carry higher levels of risk. Upon
completion of the qualitative adjustments, the overall allowance is allocated to the components of the portfolio based on the adjusted loss factors.

The
unallocated component of the allowance exists to mitigate the imprecision inherent in managements estimates of expected credit losses and includes its judgmental determination of the amounts necessary for concentrations, economic uncertainties
and other subjective factors that may not have been fully considered in the allocated allowance. The relationship of the unallocated component to the total allowance may fluctuate from period to period. Although management has allocated the majority
of the allowance to specific loan categories, the evaluation of the allowance is considered in its entirety.

Lending management meets at least quarterly
with executive management to review the credit quality of the loan portfolios and to evaluate the allowance. The Corporation has an internal risk analysis and review staff that continuously reviews loan quality and reports the results of its reviews
to executive management and the Board of Directors. Such reviews also assist management in establishing the level of the allowance.

Management believes
that it uses relevant information available to make determinations about the allowance and that it has established its existing allowance in accordance with GAAP. If circumstances differ substantially from the assumptions used in making
determinations, adjustments to the allowance may be necessary and results of operations could be affected. Because events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that increases to the
allowance will not be necessary should the quality of any loans deteriorate.

The FDIC examines the Bank periodically and, accordingly, as part of this
examination, the allowance is reviewed for adequacy utilizing specific guidelines. Based upon their review, the regulators may from time to time require reserves in addition to those previously provided.

At March 31, 2008, the allowance for loan losses was $55.2 million, or 1.31% of total loans outstanding, compared to an allowance for loan losses at
December 31, 2007 of $55.3 million, or 1.31% of total loans outstanding. The allowance coverage was 180.4% of non-performing loans at March 31, 2008 compared to 176.87% at December 31, 2007. Portfolio-wide, net charge-offs represented
0.30% of average loans in first quarter of 2008, compared to 0.08% in first quarter of 2007 and 0.58% in the fourth quarter of 2007.



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##### Table of Contents

Deposits

The
following table summarizes the composition of the Corporations average deposit balances for the periods indicated.



|                         |      |                             |           |           |   |           |           |   |          |   |  |       |   
|------------------------ | ---- | --------------------------- | --------- | --------- | - | --------- | --------- | - | -------- | - |  | ----- | --
|(dollars in thousands)   |      | Three Months EndedMarch 31, |           | $Variance |   |           | %Variance |  
|                         |      |                            
|                         | 2008 |                             | 2007      |           |  
|Transaction accounts:    |      |                             |           |           |   |           |           |   |          |   |  |       |   
|Noninterest-bearing      |      | $                           | 643,161   |           | $ | 724,805   |           | $ | (81,644  | ) |  | (11.3 | )%
|Interest-bearing         |      |                             | 458,059   |           |   | 518,115   |           |   | (60,056  | ) |  | (11.6 | ) 
|Savings/money market:    |      |                             |           |           |   |           |           |   |          |   |  |       |   
|Savings                  |      |                             | 518,370   |           |   | 598,591   |           |   | (80,221  | ) |  | (13.4 | ) 
|Money market             |      |                             | 653,693   |           |   | 542,751   |           |   | 110,942  |   |  | 20.4  |   
|Certificates of deposit: |      |                             |           |           |   |           |           |   |          |   |  |       |   
|Direct                   |      |                             | 1,085,109 |           |   | 1,184,343 |           |   | (99,234  | ) |  | (8.4  | ) 
|Brokered                 |      |                             | 874,356   |           |   | 526,907   |           |   | 347,449  |   |  | 65.9  |   
|                         |      |                             |           |           |   |           |           |   |          |   |  |       |   
|Total deposits           |      | $                           | 4,232,748 |           | $ | 4,095,512 |           | $ | 137,236  |   |  | 3.4   |   
|                         |      |                             |           |           |   |           |           |   |          |   |  |       |   
|Deposits by source:      |      |                             |           |           |   |           |           |   |          |   |  |       |   
|Consumer                 |      | $                           | 2,666,964 |           | $ | 2,779,804 |           | $ | (112,840 | ) |  | (4.1  | ) 
|Commercial               |      |                             | 691,428   |           |   | 788,801   |           |   | (97,373  | ) |  | (12.3 | ) 
|Brokered                 |      |                             | 874,356   |           |   | 526,907   |           |   | 347,449  |   |  | 65.9  |   
|                         |      |                             |           |           |   |           |           |   |          |   |  |       |   
|Total deposits           |      | $                           | 4,232,748 |           | $ | 4,095,512 |           | $ | 137,236  |   |  | 3.4   |   
|                         |      |                             |           |           |   |           |           |   |          |   |  |       |   

Average total deposits increased $137.2 million, or 3.4%, in the first quarter of 2008 compared to the same period
a year ago. Brokered deposits increased $347.4 million during this period, as these deposits provided funding for loan growth as a result of the decline in consumer and commercial deposits. Consumer deposits declined by 4.1%, or $112.8 million to
$2.7 billion and commercial deposits declined $97.4 million, or 12.3%.

The decline in consumer deposits of $112.8 million includes $46.5 million of
consumer deposits that were sold in September 2007. Market conditions and the intense competition for deposits also contributed to the decline in consumer deposits. During the first quarter of 2008, consumer money market accounts increased by $105.4
million from the same period a year ago and were offset by a $218.2 million net decline in all other sources of consumer deposits. Commercial deposits declined $97.4 million in the quarter ending March 31, 2008 when compared to the same period
a year ago. The decline in commercial deposits is mainly attributed to lower title company activity, repo sweeps and the increase in customer utilization of their deposits versus obtaining financing.

Treasury Activities

The Treasury Division manages the wholesale
segments of the balance sheet, including investments, purchased funds, long-term debt and derivatives. Managements objective is to achieve the maximum level of stable earnings over the long term, while controlling the level of interest rate,
credit risk and liquidity risk, and optimizing capital utilization. In managing the investment portfolio to achieve its stated objective, the Corporation invests predominately in U.S. Treasury and Agency securities, mortgage-backed securities
(MBS), asset-backed securities (ABS), including trust preferred securities, corporate bonds and municipal bonds. Treasury strategies and activities are overseen by the Banks Asset / Liability Committee (the
ALCO), which also reviews all investment and funding transactions. ALCO activities are summarized and reviewed monthly with the Corporations Board of Directors.

On February 27, 2008, the Corporation announced a write-down projected to be as high as $47.7 million for the first quarter of 2008 due to other-than-temporary impairment in its investment portfolio.
Following its credit review for the period ended March 31, 2008, the Corporation wrote down the values of certain securities by $42.7 million, reducing their carrying values to current market values at that date. The $42.7 million was comprised
of $19.5 million in the REIT trust preferred securities portfolio and $23.2 million in the non-agency mortgage-backed securities portfolio. Originally $105 million, the REIT trust preferred securities portfolio was written down by $47.5 million in
December 2007, and has been written down an additional $19.5 million due to further credit impairment of certain home builders and mortgage REITs that represent the collateral for these securities. Subsequent to all write-downs, the REIT trust
preferred securities portfolio stands at $38.1 million. The first quarter 2008 write-downs to the Corporations $130.1 million non-agency mortgage-backed securities



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portfolio resulted from elevated delinquency and foreclosure levels of the national residential mortgages which collateralize these pooled securities.

At March 31, 2008, the investment securities portfolio totaled $1.4 billion, or 22.1% of total assets, compared to 22.7% of total assets at year-end
2007. The portfolio declined $54.6 million from the level at year-end 2007, primarily due to the decline in market values in the available for sale portfolios, and the $42.7 million other-than-temporary impairment write down taken in the quarter
ending March 31, 2008. In the first quarter of 2008, management invested $34.7 million in fixed rate, U.S. agency backed mortgage-backed securities and $5.9 million in Federal Home Loan Bank (FHLB) Stock offsetting investment prepayments and
maturities totaling $29.0 million.

Investment Portfolio Credit Quality

Investment allocations at March 31, 2008 include MBS (49.3%), ABS (29.8%), municipal (10.9%), corporate (6.8%), and U.S. Government securities (3.2%). The chart below summarizes the credit quality of the
Corporations investment portfolio, using the lowest of the ratings of Moodys, Standard and Poors, or Fitch Ratings.

$ in thousands



|                                   |  |        |           |                |       |  
|---------------------------------- |  | ------ | --------- | -------------- | ----- | -
|                                   |  | Amount |           | % of Portfolio |      
|U.S. Treasury                      |  | $      | 2,539     |                | 0.2   | %
|U.S. Govt Agency (Incl Agency MBS) |  |        | 646,760   |                | 45.7  |  
|AAA                                |  |        | 256,353   |                | 18.1  |  
|AA                                 |  |        | 116,196   |                | 8.2   |  
|A                                  |  |        | 350,946   |                | 24.8  |  
|BBB                                |  |        | 33,319    |                | 2.4   |  
|BB                                 |  |        | 5,452     |                | 0.4   |  
|B                                  |  |        | 1,619     |                | 0.1   |  
|Not Rated                          |  |        | 741       |                | 0.1   |  
|                                   |  |        |           |                |       |  
|Total portfolio                    |  | $      | 1,413,925 |                | 100.0 | %
|                                   |  |        |           |                |       |  

The MBS portfolio includes $603.7 million of agency-backed securities, $65.3 million of AAA rated non-agency
MBS, and $27.9 million of AA rated non-agency MBS. No non-agency MBS are rated below AA and there are no investments in sub-prime MBS or ABS in the Corporations portfolio. Securities rated AA with a face value of $30.2 million were
written down to their market value of $7.2 million at March 31, 2008. These securities were deemed to be other-than-temporarily impaired due to high delinquency levels in the underlying loans collateralizing the securities and an increase in
the Corporations loss severity assumption. On average, these securities experienced 60 day+ delinquencies of 7.36% at March 31, 2008. In contrast, the remaining $33.7 million of AA rated non-agency MBS are experiencing 60 day+
delinquencies of 1.96% at March 31, 2008. The AAA rated non-agency MBS are experiencing 60 day+ delinquencies of 1.53% at March 31, 2008.

The
market value of the ABS portfolio includes $335.8 million of securities backed primarily by banking institutions, $70.7 million of securities backed by insurance companies, and $15.0 million of securities backed by real estate investment trusts
(REITs). The chart below illustrates the credit ratings of the portfolio, using the lowest rating among Moodys, S&P, and Fitch Ratings.



|                       |  |     |        |    |   |        |  |     |         |    |   |       |  |           |       |       |   |       |  |   |   |  |   |        
|---------------------- |  | --- | ------ | -- | - | ------ |  | --- | ------- | -- | - | ----- |  | --------- | ----- | ----- | - | ----- |  | - | - |  | - | -------
|(dollars in thousands) |  | AAA |        | AA |   | A      |  | BBB |         | BB |   | B     |  | Not Rated |       | Total
|Bank*                  |  | $   | 28,682 |    | $ | 24,525 |  | $   | 279,163 |    | $ | 3,410 |  | $         |      |       | $ |      |  | $ |  |  | $ | 335,780
|Insurance              |  |     | 43,657 |    |   | 9,353  |  |     | 17,666  |    |   |      |  |           |      |       |   |      |  |   |  |  |   | 70,676 
|REIT                   |  |     |       |    |   |       |  |     | 5,661   |    |   | 2,761 |  |           | 4,931 |       |   | 1,619 |  |   |  |  |   | 14,972 
|                       |  |     |        |    |   |        |  |     |         |    |   |       |  |           |       |       |   |       |  |   |   |  |   |        
|Total                  |  | $   | 72,339 |    | $ | 33,878 |  | $   | 302,490 |    | $ | 6,171 |  | $         | 4,931 |       | $ | 1,619 |  | $ |  |  | $ | 421,428
|                       |  |     |        |    |   |        |  |     |         |    |   |       |  |           |       |       |   |       |  |   |   |  |   |        



|* | Some bank-issued securities may contain up to 33% insurance or REIT issuers in addition to depository institutions. Provident currently owns $10 million of bank-issued securities
that contains 32% REIT issuers.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On March 31, 2008, REIT pooled trust preferred securities with a carrying value of $28.5 million were
written down to their market value of $9.1 million. These securities were deemed to be other-than-temporarily impaired due to significantly rising levels of defaults and technical defaults among the underlying REIT issuers. Four REIT securities with
a face value of $35.0 million and a market value of $2.6 million did not make their first quarter 2008 interest payment, and are classified as non-performing investments. The securities backed by bank and insurance institutions continue make their
contractual payments.

The Corporations $153.9 million (market value) municipal bond portfolio consists of geographically diversified, federal
tax-exempt general obligation securities. The portfolio includes $136.0 million of securities insured by one of the major bond



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##### Table of Contents

insurers; additionally, all of the municipalities have underlying ratings of A, AA, or AAA. Other debt securities primarily include investments in single
issuer corporate bonds rated investment-grade by Moodys or S&P, and U.S. Treasury and Agency securities.

In addition to credit risk, the other
significant risk in the investment portfolio is duration risk. Duration measures the expected change in the market value of an investment for a 100 basis point (or 1%) change in interest rates. The higher an investments duration, the longer
the time until its rate is reset to current market rates. The Banks risk tolerance, as measured by the duration of the investment portfolio, is typically between 2.5% and 3.5%. The portfolio duration is currently 3.4%.

Investment securities are evaluated periodically to determine whether a decline in their value is other-than-temporary. Management utilizes criteria such as the
magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other-than-temporary. As of March 31, 2008, the Corporations investment portfolio had unrealized losses of
$125.2 million, or 8.1%, up from $99.8 million, or 6.4% at December 31, 2007. The increased loss position stemmed primarily from deterioration in the market valuations of pooled trust preferred securities and non-agency MBS. The pricing for
these securities has been distressed by the sub-prime mortgage crisis, which has caused a liquidity contagion in both the mortgage and asset-backed securities markets. For securities whose price declines were due to changes in market interest rates
or market illiquidity, not in expected cash flows, no other-than-temporary impairment was recorded at March 31, 2008. The Corporation will continue to evaluate the investment ratings in the securities portfolio and the dealer price quotes.
Based upon these and other factors, the securities portfolio may experience further impairment. At March 31, 2008, management has the intent and ability to retain investment securities with unrealized losses until the decline in value has been
recovered.

On March 31, 2008, the Corporation deemed certain securities to be other-than-temporarily impaired, and accordingly, recognized a $42.7
million write-down of the securities portfolio. The write-down was determined based on the individual securities credit performance and the market values of those securities at March 31, 2008. These values are not based on the
expectations of future market values or changes in current market conditions. Should market values and credit quality of certain securities continue to deteriorate, it is possible that additional write-downs may be required. If economic conditions
continue to deteriorate, it is possible that the securities that are currently performing satisfactorily could suffer impairment and could potentially require write-downs. The entire securities portfolio is evaluated each quarter to determine if
additional write-downs are warranted.

Borrowings

Treasury funding, representing brokered certificates of deposit, short-term borrowings excluding repurchase agreements (repo), long-term debt and junior subordinated debentures, averaged $2.2 billion in March 2008, up $158.4
million from the average in December 2007. The increase offset core deposit outflow of $29.8 million and funded loan growth of $80.2 million over that time period.

Providents funds management objectives are two-fold: to minimize the cost of borrowings while assuring sufficient funding availability to meet current and future customer requirements, and to contribute to interest rate risk
management goals through match-funding loan and investment activity. Management utilizes a variety of sources to raise borrowed funds at competitive rates, including federal funds purchased (fed funds), Federal Home Loan Bank
(FHLB) borrowings, Federal Reserve Term Auction Facility (TAF) borrowings, securities sold under repo agreements, and brokered and jumbo certificates of deposit (CDs). FHLB borrowings, TAF borrowings, and repos typically are
borrowed at rates approximating the LIBOR rate for the equivalent term because they are secured with investments or high quality loans. Fed funds, which are generally overnight borrowings, are typically purchased at the Federal Reserve target rate.

The Corporation formed wholly owned statutory business trusts in 1998, 2000 and 2003. In 2004, the Corporation also acquired three wholly owned statutory
business trusts from Southern Financial as part of the merger. In all cases, the trusts issued trust preferred securities that were sold to outside third parties. The junior subordinated debentures issued by the Corporation to the trusts are
presented net of unamortized issuance costs as long-term debt in the Condensed Consolidated Statements of Condition and are includable in Tier 1 capital for regulatory capital purposes, subject to certain limitations. Any of the junior subordinated
debentures are redeemable at any time in whole, but not in part, from the date of issuance on the occurrence of certain events. There are $121.0 million of issuances callable within the next twelve months.



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##### Table of Contents

Liquidity

An
important component of the Corporations asset/liability structure is the level of liquidity available to meet the needs of customers and creditors. Traditional sources of bank liquidity include deposit growth, loan repayments, investment
maturities, asset sales, borrowings and interest received. Management believes the Corporation has sufficient liquidity to meet future funding needs.

The
Corporations chief source of liquidity is the assets it possesses, which can either be pledged as collateral for secured borrowings or sold outright. At March 31, 2008, over $300 million of the Corporations investment portfolio was
immediately saleable at a market value equaling or exceeding its amortized cost basis. Additionally, over a 90-day time frame, a majority of the Corporations $1.7 billion consumer and residential loan portfolios is saleable under normal
conditions.

As an alternative to asset sales, the Corporation has the ability to pledge assets to raise secured borrowings. At March 31, 2008, $1.1
billion of secured borrowings were employed, with sufficient collateral available to raise an additional $442.6 million from the FHLB - Atlanta, the Federal Reserves term auction facility and securities sold under repurchase agreements.
Additionally, over $300 million of borrowing capacity exists at the Federal Reserve discount window as a contingent funding source. The Corporation also employs unsecured funding sources such as fed funds and brokered certificates of deposit. At
March 31, 2008, $205.0 million fed funds were employed, with sufficient funding lines in place to purchase an additional $1.1 billion. At March 31, 2008 the Corporation had $923.4 million of brokered certificates of deposit outstanding.

A significant use of the Corporations liquidity is the dividends it pays to shareholders. The Corporation is a one-bank holding company that relies
upon the Banks performance to generate capital growth through Bank earnings. A portion of the Banks earnings is passed to the Corporation in the form of cash dividends. As a commercial bank under the Maryland Financial Institution Law,
the Bank may declare cash dividends from undivided profits or, with the prior approval of the Commissioner of Financial Regulation, out of paid-in capital in excess of 100% of its required capital stock, and after providing for due or accrued
expenses, losses, interest and taxes. These dividends paid to the Corporation are utilized to pay dividends to stockholders, repurchase shares and pay interest on junior subordinated debentures. The Corporation and the Bank, in declaring and paying
dividends, are also limited insofar as minimum capital requirements of regulatory authorities must be maintained. The Corporation and the Bank comply with such capital requirements. If the Corporation or the Bank were unable to comply with the
minimum capital requirements, it could result in regulatory actions that could have a material impact on the Corporation.

In April 2008, the Corporation
announced a multi-tiered plan to strengthen its capital base. Please refer to Note 20 for further details of the capital plan.

Contractual Obligations,
Commitments and Off Balance Sheet Arrangements

The Corporation has various contractual obligations, such as long-term borrowings, that are recorded as
liabilities in the Condensed Consolidated Financial Statements. Other items, such as certain minimum lease payments for the use of banking and operations offices under operating lease agreements, are not recognized as liabilities in the Condensed
Consolidated Financial Statements, but are required to be disclosed. Each of these arrangements affects the Corporations determination of sufficient liquidity.

The following table summarizes significant contractual obligations at March 31, 2008 and the future periods in which such obligations are expected to be settled in cash. In addition, the table reflects the timing
of principal payments on outstanding borrowings.



|                                      |                |                                    |           |       |          |         |              |   |         |  |   |         |  |   |          
|------------------------------------- | -------------- | ---------------------------------- | --------- | ----- | -------- | ------- | ------------ | - | ------- |  | - | ------- |  | - | ---------
|(in thousands)                        |                | Contractual Payments Due by Period |           | Total
|                                      | Lessthan 1Year |                                    | 1-3Years  |       | 4-5Years |         | After 5Years |  
|                                      |                |                                    |           |      
|                                      |                |                                    |           |      
|Lease commitments                     |                | $                                  | 12,965    |       | $        | 23,089  |              | $ | 17,810  |  | $ | 22,826  |  | $ | 76,690   
|Certificates of deposit               |                |                                    | 1,372,180 |       |          | 499,217 |              |   | 79,167  |  |   | 44,142  |  |   | 1,994,706
|Long-term debt                        |                |                                    | 270,000   |       |          | 300,000 |              |   | 65,000  |  |   | 136,640 |  |   | 771,640  
|                                      |                |                                    |           |       |          |         |              |   |         |  |   |         |  |   |          
|Total contractual payment obligations |                | $                                  | 1,655,145 |       | $        | 822,306 |              | $ | 161,977 |  | $ | 203,608 |  | $ | 2,843,036
|                                      |                |                                    |           |       |          |         |              |   |         |  |   |         |  |   |          



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Arrangements to fund credit products or guarantee financing take the form of loan commitments (including lines of credit
on revolving credit structures) and letters of credit. Approvals for these arrangements are obtained in the same manner as loans. Generally, cash flows, collateral value and a risk assessment are considered when determining the amount and structure
of credit arrangements. Commitments to extend credit in the form of consumer, commercial real estate and business loans at March 31, 2008 were as follows:



|                                      |  |               |          
|------------------------------------- |  | ------------- | ---------
|(in thousands)                        |  | March 31,2008
|                                     
|Commercial business and real estate   |  | $             | 841,631  
|Consumer revolving credit             |  |               | 828,141  
|Residential mortgage credit           |  |               | 15,242   
|Performance standby letters of credit |  |               | 129,001  
|Commercial letters of credit          |  |               | 3,152    
|                                      |  |               |          
|Total loan commitments                |  | $             | 1,817,167
|                                      |  |               |          

Historically, many of the commitments expire without being fully drawn; therefore, the total commitment amounts do
not necessarily represent future cash requirements. Obligations also take the form of commitments to purchase loans. At March 31, 2008, the Corporation did not have any firm commitments to purchase loans.

Risk Management

Interest Rate Risk

The nature of the banking business, which involves paying interest on deposits at varying rates and terms and charging interest on loans at other rates and terms, creates
interest rate risk. As a result, earnings and the market value of assets and liabilities are subject to fluctuations, which arise due to changes in the level and directions of interest rates. Managements objective is to minimize the
fluctuation in the net interest margin caused by changes in interest rates using cost-effective strategies and tools. The Bank manages several forms of interest rate risk, including asset/liability mismatch, basis risk and prepayment risk.

Management continually monitors Prime/LIBOR basis risk and asset/liability mismatch. Basis risk exists as a result of having much of the Banks
earning assets priced using either the prime rate or the U.S. Treasury yield curve, while much of the liability portfolio, which finances earning assets, is priced using the certificates of deposit yield curve or LIBOR yield curve. These different
yield curves are highly correlated but do not move in lock-step with one another. Additionally, management routinely monitors and limits the mismatch between assets and liabilities subject to repricing on a monthly, quarterly, semiannual and annual
basis.

The Corporation both purchases and originates amortizing loan pools and investment securities in which the underlying assets are residential
mortgage loans subject to prepayments. The actual principal reduction on these assets varies from the expected contractual principal reduction due to principal prepayments resulting from borrowers elections to refinance the underlying
mortgages based on market and other conditions. Prepayment rate projections utilize actual prepayment speed experience and available market information on like-kind instruments. The prepayment rates form the basis for income recognition of premiums
or discounts on the related assets. Changes in prepayment estimates may cause the earnings recognized on these assets to vary over the term that the assets are held, creating volatility in the net interest margin. Prepayment rate assumptions are
monitored and updated monthly to reflect actual activity and the most recent market projections.

Measuring and managing interest rate risk is a dynamic
process that management performs continually to meet the objective of maintaining a stable net interest margin. This process relies chiefly on simulation modeling of shocks to the balance sheet under a variety of interest rate scenarios, including
parallel and non-parallel rate shifts, such as the forward yield curves for both short and long term interest rates. The results of these shocks are measured in two forms: first, the impact on the net interest margin and earnings over one and two
year time frames; and second, the impact on the market value of equity. In addition to measuring the basis risks and prepayment risks noted above, simulations also quantify the earnings impact of rate changes and the cost / benefit of hedging
strategies.



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The following table shows the anticipated effect on net interest income in parallel shift (up or down) interest rate
scenarios. These shifts are assumed to begin on April 1, 2008 for the March 31, 2008 data and on January 1, 2008 for the December 31, 2007 data and evenly increase or decrease over a 6-month period. The effect on net interest
income would be for the next twelve months.



|                       |  |                                                                   |   |  |                                                                      |  
|---------------------- |  | ----------------------------------------------------------------- | - |  | -------------------------------------------------------------------- | -
|Interest Rate Scenario |  | At March 31, 2008ProjectedPercentage Change inNet Interest Income |   |  | At December 31, 2007ProjectedPercentage Change inNet Interest Income |  
|                       | 
|                       | 
|                       | 
|-200 basis points      |  | -3.50                                                             | % |  | -4.80                                                                | %
|-100 basis points      |  | -1.40                                                             | % |  | -2.60                                                                | %
|No change              |  |                                                                  |   |  |                                                                     |  
|+100 basis points      |  | -0.90                                                             | % |  | -0.50                                                                | %
|+200 basis points      |  | -2.20                                                             | % |  | -0.70                                                                | %

The percentage changes displayed in the table above relate to the Corporations projected net interest
income. Managements intent is for derivative interest income to mitigate risk to the Corporations net interest income stemming from changes in interest rates. For comparison purposes, these projections include all interest earned on
derivatives in net interest income. The analysis includes the interest income and expense relating to non-designated interest rate swaps that is classified in non-interest income as net cash settlement on swaps.

The isolated modeling environment, assuming no action by management, shows that the Corporations net interest income volatility is less than 3.6% under the assumed
single direction scenarios. Management routinely models several yield curve flattening and steepening scenarios as part of its interest rate risk management function, and this modeling discloses little risk under most yield curve twisting scenarios.
The current economic environment includes concerns about elevated inflation on one hand and a slowing housing market on the other. At this point in time there is no clear direction for the path of future interest rate changes, or changes in the
shape of the yield curve. Management is currently employing strategies to reduce the exposure to net interest margin from rising or falling interest rates.

Management employs the investment, borrowings, and derivatives portfolios in implementing the Banks interest rate strategies. To protect the Bank from rising short-term interest rates, over $500 million of the investment portfolio
reprices annually or more frequently. In the borrowings portfolio, $235 million of funds reset their rates quarterly with long-term interest rates, and $90 million are fixed rate and callable at Providents option, to mitigate the impact on the
net interest margin from falling long-term interest rates. The interest expense associated with these borrowings declines when long-term interest rates decline, either through the rate reset or the exercise of the call option. Additionally, $295.5
million of interest rate swaps were in force to reduce interest rate risk, and $25.0 million of interest rate caps were employed specifically to protect against rising interest rates in the future.

Credit Risk

In addition to managing interest rate risk, which
applies to both assets and liabilities, the Corporation must understand and manage risks specific to lending. Much of the fundamental lending business of Provident is based upon understanding, measuring and controlling credit risk. Credit risk
entails both general risks, which are inherent in the process of lending, and risk specific to individual borrowers. Each consumer and residential lending product has a generally predictable level of credit loss based on historical loss experience.
Home mortgage and home equity loans and lines generally have the lowest credit loss experience. Loans with medium credit loss experience are primarily secured products such as auto and marine loans. Unsecured loan products such as personal revolving
credit have the highest credit loss experience; therefore the Bank has chosen not to engage in a significant amount of this type of lending. Credit risk in commercial lending varies significantly, as losses as a percentage of outstanding loans can
shift widely from period to period and are particularly sensitive to changing economic conditions. Generally improving economic conditions result in improved operating results on the part of commercial customers, enhancing their ability to meet debt
service requirements. However, this improvement in operating cash flow is often at least partially offset by rising interest rates often seen in an improving economic environment. In addition, changing economic conditions often impact various
business segments differently, giving rise to the need to manage industry concentrations within the loan portfolio.



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To control and manage credit risk, management has set high credit standards along with an in-house administration and
strong oversight procedures along with a cautious approach to adopting products before they have been sufficiently tested in the market place. In addition, the Corporation maintains a fairly balanced portfolio concentration between home equity,
commercial and residential real estate and commercial business loans. The Corporations assessment of the loan portfolios credit risk and asset quality is measured by its levels of delinquencies, non-performing asset levels and
net-charge-offs. For the quarter ending March 31, 2008, the 90-day delinquency level was $8.3 million, or 0.20% of loans, up by $4.5 million from December 31, 2007. Non-performing loans were $30.6 million, or 0.73% of total assets compared
to 0.74% as of December 31, 2007. Net charge-offs as a percentage of average loans for the quarter ending March 31, 2008 were 0.30% compared to 0.58% for the fourth quarter of 2007. Overall, the asset quality of the Corporations loan
portfolio remains stable while the market conditions appear to be sluggish, but the Mid-Atlantic region remains one of the better performing markets in the nation in terms of preserving real estate values and lower delinquency levels.

Managing credit risk is an integral part of the investment portfolio management process for the Corporation. The investment portfolio contains three distinct types of
credit risks: risk to residential mortgage borrowers, risk to corporate entities, and risk to municipalities. Each risk is monitored and controlled separately.

Risk to residential mortgage borrowers is inherent in the non-agency MBS portfolio. This risk is controlled by purchasing securities in which the underlying loans have favorable risk characteristics, such as low loan-to-value ratios and
high borrower credit scores. The risk is further controlled through purchasing only the top two (AAA and AA) classes of securities, which contain greater levels of credit support than the lower rated classes. Management monitors the risk through
tracking the delinquencies and foreclosures of the underlying loans monthly and monitoring primary and secondary market activity for similar securities.

Risk to corporate entities is inherent in the REIT, Bank, and Insurance pooled trust preferred securities portfolios, and the individual bank trust preferred stock investments. Risk is controlled in the pooled securities through identifying
the issuer exposures for each pool, and limiting purchases to securities in the top three rating classes (AAA, AA, and A), which have significant levels of credit support. Risk is monitored through tracking the financial performance of large issuers
and issuers considered to be at risk to deferral or default of payment. Additionally, issuers actual default and deferral experience and expected future outlook are measured against the credit support levels to evaluate the extent of risk to
the securities. Market activity is monitored on an ongoing basis. Risk to individual bank debt is controlled by purchasing securities of high quality issuers as assessed internally and corroborated by external ratings. Management monitors risk
through tracking the issuers financial performance quarterly or more frequently as needed, and monitoring market activity on an ongoing basis.

Risk
to municipalities is controlled through limiting purchases to general obligation bonds of municipalities rated AAA, AA, or A, limiting exposure to individual municipalities, and limiting state concentrations. Risk is further controlled by limits
placed on the exposure to individual bond insurers that credit-enhance most of the issues. Management monitors risk through tracking the credit ratings of each municipality monthly and tracking the financial conditions of bond insurers. Market
activity is also tracked on an ongoing basis.

Credit criteria and purchase limits for all investments containing credit risk are defined in documented and
frequently reviewed investment policies, and subject to approval by the Asset / Liability Committee (ALCO). The ALCO also monitors the portfolio credit risk monthly.

Other Lending Risks

Other lending risks include liquidity risk and specific risk. The liquidity risk of the
Corporation arises from its obligation to make payment in the event of a customers contractual default. The evaluation of specific risk is a basic function of underwriting and loan administration, involving analysis of the borrowers
ability to service debt as well as the value of pledged collateral. In addition to impacting individual lending decisions, this analysis may also determine the aggregate level of commitments the Corporation is willing to extend to an individual
customer or a group of related customers.



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Capital Resources

Total stockholders equity was $517.5 million at March 31, 2008, a decrease of $38.2 million from December 31, 2007. The overall change in stockholders equity for the period was attributable to a $17.6 million net loss
for the current quarter and dividends declared or paid of $10.3 million. Net accumulated other comprehensive loss increased $10.7 million during the period primarily due to the impact on the market value of the debt securities portfolio from the
current illiquid market. Capital was increased by $505 thousand due to share based payment activity.

The Corporation is required to maintain minimum
amounts and ratios of core capital to adjusted quarterly average assets (leverage ratio) and of tier 1 and total regulatory capital to risk-weighted assets. The actual regulatory capital ratios and required ratios for capital adequacy
purposes under FIRREA and the ratios to be categorized as well capitalized under prompt corrective action regulations are summarized in the following table.



|                                                                  |  |               |           |   |                               |   |           |                         |  |      |   |  |       |  
|----------------------------------------------------------------- |  | ------------- | --------- | - | ----------------------------- | - | --------- | ----------------------- |  | ---- | - |  | ----- | -
|(dollars in thousands)                                            |  | March 31,2008 |           |   | December 31,2007              |   |           |                         |  |      |   | 
|                                                                  |  |               |           |   |                               |   |          
|Total equity capital per consolidated financial statements        |  | $             | 517,549   |   |                               | $ | 555,771   |                         |  |      |   |  |       |  
|Qualifying trust preferred securities                             |  |               | 129,000   |   |                               |   | 129,000   |                         |  |      |   |  |       |  
|Accumulated other comprehensive loss                              |  |               | 78,881    |   |                               |   | 68,177    |                         |  |      |   |  |       |  
|                                                                  |  |               |           |   |                               |   |           |                         |  |      |   |  |       |  
|Adjusted capital                                                  |  |               | 725,430   |   |                               |   | 752,948   |                         |  |      |   |  |       |  
|Adjustments for tier 1 capital:                                   |  |               |           |   |                               |   |           |                         |  |      |   |  |       |  
|Goodwill and disallowed intangible assets                         |  |               | (259,861  | ) |                               |   | (260,186  | )                       |  |      |   |  |       |  
|                                                                  |  |               |           |   |                               |   |           |                         |  |      |   |  |       |  
|Total tier 1 capital                                              |  |               | 465,569   |   |                               |   | 492,762   |                         |  |      |   |  |       |  
|                                                                  |  |               |           |   |                               |   |           |                         |  |      |   |  |       |  
|Adjustments for tier 2 capital:                                   |  |               |           |   |                               |   |           |                         |  |      |   |  |       |  
|Allowance for loan losses                                         |  |               | 55,249    |   |                               |   | 55,269    |                         |  |      |   |  |       |  
|Qualified trust preferred securities includable in tier 2 capital |  |               |          |   |                               |   |          |                         |  |      |   |  |       |  
|Allowance for letter of credit losses                             |  |               | 635       |   |                               |   | 635       |                         |  |      |   |  |       |  
|                                                                  |  |               |           |   |                               |   |           |                         |  |      |   |  |       |  
|Total tier 2 capital adjustments                                  |  |               | 55,884    |   |                               |   | 55,904    |                         |  |      |   |  |       |  
|                                                                  |  |               |           |   |                               |   |           |                         |  |      |   |  |       |  
|Total regulatory capital                                          |  | $             | 521,453   |   |                               | $ | 548,666   |                         |  |      |   |  |       |  
|                                                                  |  |               |           |   |                               |   |           |                         |  |      |   |  |       |  
|                                                                  |  |               |           |  
|Risk-weighted assets                                              |  | $             | 5,046,113 |   |                               | $ | 5,057,463 |                         |  |      |   |  |       |  
|Quarterly regulatory average assets                               |  |               | 6,251,468 |   |                               |   | 6,145,549 |                         |  |      |   |  |       |  
|                                                                  |  |               |          
|Ratios:                                                           |  |               |           |   | MinimumRegulatoryRequirements |   |           | To be WellCapitalized | 
|                                                                  |  |              
|                                                                  |  |              
|Tier 1 leverage                                                   |  |               | 7.45      | % |                               |   | 8.02      | %                       |  | 4.00 | % |  | 5.00  | %
|Tier 1 capital to risk-weighted assets                            |  |               | 9.23      |   |                               |   | 9.74      |                         |  | 4.00 |   |  | 6.00  |  
|Total regulatory capital to risk-weighted assets                  |  |               | 10.33     |   |                               |   | 10.85     |                         |  | 8.00 |   |  | 10.00 |  

As of March 31, 2008, the Corporation is considered well capitalized for regulatory purposes.

RESULTS OF OPERATIONS

For Three Months Ended
March 31, 2008 Compared to Three Months Ended March 31, 2007

Financial Highlights

The Corporation reported a net loss of $(17.6) million, or $(0.56) per diluted share, for the quarter ended March 31, 2008 compared to $16.1 million, or $0.50 per
diluted share for the quarter ended March 31, 2007. The Corporations key performance measurements such as return on assets, return on common equity were (1.08)%, and (11.43)%, respectively, for the quarter ended March 31, 2008,
compared to 1.05% and 10.21%, respectively, for the quarter ended March 31, 2007.

The financial results for the quarter ended March 31, 2008
were substantially impacted by a $42.7 million write-down of the investment securities portfolio for securities that were other-than-temporarily impaired and the reversal of interest income associated with four non-performing investment securities
totaling $588 thousand that reflect the economic problems facing the residential finance and construction industries. The decrease in earnings was also impacted by the decline in asset yields that were negatively impacted by the 300 basis point
decline in the benchmark interest rates during the past twelve months. This decline was not fully offset by the decreased expense on interest-bearing liabilities which declined due to aggressive competition for deposits despite a number of steps
taken to re-position the Corporations non-customer funding sources in light of the currently volatile market for funds. This and other activities presented below reflect a decline in net interest



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income of $3.9 million, an increase in provision for loan losses of $2.1 million and a decline in non-interest income by $45.0 million. These declines in
earnings were offset by the decrease in non-interest expense of $3.3 million and income tax expense of $13.9 million, resulting in a $33.7 million decrease in net income.

During the quarter ended March 31, 2008, net interest margin decreased to 3.17% from 3.62%; average total loans increased $358.8 million or 9.3%; average deposits increased $137.2 million or 3.4%; while loan
credit quality declined slightly from the same quarter a year ago as non-performing loans to total loans increased to 0.73% from 0.53% and net charge-offs to average loans were .30% for the quarter compared to 0.08% for the same period a year ago.
Earnings for the quarter ended March 31, 2008 include the following significant transaction and are included in subsequent discussions regarding the results of operations:



| |  |  | Investment securities write-down: In March 2008, the Corporation recorded a $42.7 million pre-tax write-down relating to its REIT trust preferred securities
portfolio and non-agency mortgage-backed portfolio. Following its credit review for the period ended March 31, 2008, the Corporation wrote down the values of certain securities by $42.7 million by reducing their carrying values to current
market values at that date. The $42.7 million was comprised of $19.5 million in the REIT trust preferred securities portfolio and $23.2 million in the non-agency mortgage-backed securities portfolio.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Interest Income

The Corporations principal source of
revenue is net interest income, the difference between interest income on earning assets and interest expense on deposits and borrowings. Interest income is presented on a tax-equivalent basis to recognize associated tax benefits in order to provide
a basis for comparison of yields with taxable earning assets. The following table presents information regarding the average balance of assets and liabilities, as well as the total dollar amounts of interest income from average interest-earning
assets and interest expense on average interest-bearing liabilities and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing annualized income or expense by the average balances of assets or
liabilities, respectively, for the periods presented. Nonaccrual loans are included in average loan balances; however, accrued interest income has been excluded from these loans. The tables on the following pages also analyze the reasons for the
changes from year-to-year in the principal elements that comprise net interest income. Rate and volume variances presented for each component will not total the variances presented on totals of interest income and interest expense because of shifts
from year-to-year in the relative mix of interest-earning assets and interest-bearing liabilities.



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Consolidated Average Balances and Analysis of Changes in Tax Equivalent Net Interest Income

Three Months Ended March 31, 2008 and 2007



|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|-------------------------------------------------------------- | -------------- | -------------------------------- | -------------- |  | -------------------------------- | ------ |  | -------------- | - | -------------- | - | ---------- |  | - | ------ |  | ---- | -
|(dollars in thousands) (tax-equivalent basis)                  |                | Three Months EndedMarch 31, 2008 |                |  | Three Months EndedMarch 31, 2007 |       
|                                                               |               
|                                                               | AverageBalance |                                  | Income/Expense |  | Yield/Rate                       |        |  | AverageBalance |   | Income/Expense |   | Yield/Rate | 
|                                                               |                |                                  |                |  |                                 
|Assets:                                                        |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Interest-earning assets:                                       |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Originated and acquired residential                            |                | $                                | 290,093        |  | $                                | 4,411  |  | 6.12           | % |                | $ | 325,377    |  | $ | 5,072  |  | 6.32 | %
|Home equity                                                    |                |                                  | 1,085,752      |  |                                  | 15,682 |  | 5.81           |   |                |   | 996,519    |  |   | 17,072 |  | 6.95 |  
|Marine                                                         |                |                                  | 357,963        |  |                                  | 4,927  |  | 5.54           |   |                |   | 373,271    |  |   | 5,017  |  | 5.45 |  
|Other consumer                                                 |                |                                  | 24,962         |  |                                  | 460    |  | 7.41           |   |                |   | 27,678     |  |   | 549    |  | 8.04 |  
|Commercial mortgage                                            |                |                                  | 445,465        |  |                                  | 7,335  |  | 6.62           |   |                |   | 450,402    |  |   | 7,991  |  | 7.20 |  
|Residential construction                                       |                |                                  | 613,126        |  |                                  | 10,241 |  | 6.72           |   |                |   | 585,987    |  |   | 12,615 |  | 8.73 |  
|Commercial construction                                        |                |                                  | 475,882        |  |                                  | 7,385  |  | 6.24           |   |                |   | 371,302    |  |   | 7,263  |  | 7.93 |  
|Commercial business                                            |                |                                  | 936,933        |  |                                  | 15,932 |  | 6.84           |   |                |   | 740,810    |  |   | 13,732 |  | 7.52 |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Total loans                                                    |                |                                  | 4,230,176      |  |                                  | 66,373 |  | 6.31           |   |                |   | 3,871,346  |  |   | 69,311 |  | 7.26 |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Loans held for sale                                            |                |                                  | 9,810          |  |                                  | 155    |  | 6.35           |   |                |   | 11,016     |  |   | 176    |  | 6.48 |  
|Short-term investments                                         |                |                                  | 2,718          |  |                                  | 36     |  | 5.33           |   |                |   | 4,039      |  |   | 97     |  | 9.74 |  
|Taxable investment securities                                  |                |                                  | 1,425,086      |  |                                  | 19,731 |  | 5.57           |   |                |   | 1,525,929  |  |   | 22,378 |  | 5.95 |  
|Tax-advantaged investment securities                           |                |                                  | 154,757        |  |                                  | 2,433  |  | 6.32           |   |                |   | 137,406    |  |   | 1,886  |  | 5.57 |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Total investment securities                                    |                |                                  | 1,579,843      |  |                                  | 22,164 |  | 5.64           |   |                |   | 1,663,335  |  |   | 24,264 |  | 5.92 |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Total interest-earning assets                                  |                |                                  | 5,822,547      |  |                                  | 88,728 |  | 6.13           |   |                |   | 5,549,736  |  |   | 93,848 |  | 6.86 |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Less: allowance for loan losses                                |                |                                  | 55,171         |  |                                  |        |  |                |   |                |   | 45,248     |  |   |        |  |      |  
|Cash and due from banks                                        |                |                                  | 101,630        |  |                                  |        |  |                |   |                |   | 112,091    |  |   |        |  |      |  
|Other assets                                                   |                |                                  | 642,323        |  |                                  |        |  |                |   |                |   | 617,919    |  |   |        |  |      |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Total assets                                                   |                | $                                | 6,511,329      |  |                                  |        |  |                |   |                | $ | $6,234,498 |  |   |        |  |      |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Liabilities and Stockholders Equity:                          |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Interest-bearing liabilities:                                  |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Interest-bearing demand deposits                               |                | $                                | 458,059        |  |                                  | 543    |  | 0.48           |   |                | $ | 518,115    |  |   | 652    |  | 0.51 |  
|Money market deposits                                          |                |                                  | 653,693        |  |                                  | 4,477  |  | 2.75           |   |                |   | 542,751    |  |   | 4,472  |  | 3.34 |  
|Savings deposits                                               |                |                                  | 518,370        |  |                                  | 508    |  | 0.39           |   |                |   | 598,591    |  |   | 591    |  | 0.40 |  
|Direct time deposits                                           |                |                                  | 1,085,109      |  |                                  | 11,472 |  | 4.25           |   |                |   | 1,184,343  |  |   | 13,295 |  | 4.55 |  
|Brokered time deposits                                         |                |                                  | 874,356        |  |                                  | 11,210 |  | 5.16           |   |                |   | 526,907    |  |   | 6,544  |  | 5.04 |  
|Short-term borrowings                                          |                |                                  | 811,651        |  |                                  | 6,089  |  | 3.02           |   |                |   | 662,715    |  |   | 7,742  |  | 4.74 |  
|Long-term debt                                                 |                |                                  | 771,672        |  |                                  | 8,487  |  | 4.42           |   |                |   | 793,976    |  |   | 10,965 |  | 5.60 |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Total interest-bearing liabilities                             |                |                                  | 5,172,910      |  |                                  | 42,786 |  | 3.33           |   |                |   | 4,827,398  |  |   | 44,261 |  | 3.72 |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Noninterest-bearing demand deposits                            |                |                                  | 643,161        |  |                                  |        |  |                |   |                |   | 724,805    |  |   |        |  |      |  
|Other liabilities                                              |                |                                  | 75,349         |  |                                  |        |  |                |   |                |   | 42,459     |  |   |        |  |      |  
|Stockholders equity                                           |                |                                  | 619,909        |  |                                  |        |  |                |   |                |   | 639,836    |  |   |        |  |      |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Total liabilities and stockholders equity                     |                | $                                | 6,511,329      |  |                                  |        |  |                |   |                | $ | 6,234,498  |  |   |        |  |      |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Net interest-earning assets                                    |                | $                                | 649,637        |  |                                  |        |  |                |   |                | $ | 722,338    |  |   |        |  |      |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Net interest income (tax-equivalent)                           |                |                                  |                |  |                                  | 45,942 |  |                |   |                |   |            |  |   | 49,587 |  |      |  
|Less: tax-equivalent adjustment                                |                |                                  |                |  |                                  | 953    |  |                |   |                |   |            |  |   | 652    |  |      |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Net interest income                                            |                |                                  |                |  | $                                | 44,989 |  |                |   |                |   |            |  | $ | 48,935 |  |      |  
|                                                               |                |                                  |                |  |                                  |        |  |                |   |                |   |            |  |   |        |  |      |  
|Net yield on interest-earning assets on a tax-equivalent basis |                |                                  |                |  |                                  |        |  | 3.17           | % |                |   |            |  |   |        |  | 3.62 | %



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Consolidated Average Balances and Analysis of Changes in Tax Equivalent Net Interest Income (Continued)

Three Months Ended March 31, 2008 and 2007



|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|--------------------------------------------- | ------------------------------------------------ | - | -------- | ------- | ----------------------------------------------- | ----- | -------------- |  | - | ------- | - |  | ----------- | -- |  | ------------- | ------ | - |  | - | ------ | -
|(dollars in thousands) (tax-equivalent basis) |                                                  |   |          |         | 2008/2007Income/ExpenseVarianceDue to Change In |      
|                                              |                                                 
|                                              | 2008 Quarter to 2007 Quarter Increase/(Decrease) |   |         
|                                              | AverageBalance                                   |   |          | %Change |                                                 |       | Income/Expense |  |   | %Change |   |  | AverageRate |    |  | AverageVolume |       
|                                              |                                                  |   |          |         |                                                
|Assets:                                       |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Interest-earning assets:                      |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Originated and acquired residential           |                                                  | $ | (35,284  | )       |                                                 | (10.8 | )%             |  | $ | (661    | ) |  | (13.0       | )% |  | $             | (153   | ) |  | $ | (508   | )
|Home equity                                   |                                                  |   | 89,233   |         |                                                 | 9.0   |                |  |   | (1,390  | ) |  | (8.1        | )  |  |               | (2,893 | ) |  |   | 1,503  |  
|Marine                                        |                                                  |   | (15,308  | )       |                                                 | (4.1  | )              |  |   | (90     | ) |  | (1.8        | )  |  |               | 89     |   |  |   | (179   | )
|Other consumer                                |                                                  |   | (2,716   | )       |                                                 | (9.8  | )              |  |   | (89     | ) |  | (16.2       | )  |  |               | (40    | ) |  |   | (49    | )
|Commercial mortgage                           |                                                  |   | (4,937   | )       |                                                 | (1.1  | )              |  |   | (656    | ) |  | (8.2        | )  |  |               | (577   | ) |  |   | (79    | )
|Residential construction                      |                                                  |   | 27,139   |         |                                                 | 4.6   |                |  |   | (2,374  | ) |  | (18.8       | )  |  |               | (2,958 | ) |  |   | 584    |  
|Commercial construction                       |                                                  |   | 104,580  |         |                                                 | 28.2  |                |  |   | 122     |   |  | 1.7         |    |  |               | (1,725 | ) |  |   | 1,847  |  
|Commercial business                           |                                                  |   | 196,123  |         |                                                 | 26.5  |                |  |   | 2,200   |   |  | 16.0        |    |  |               | (1,305 | ) |  |   | 3,505  |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Total loans                                   |                                                  |   | 358,830  |         |                                                 | 9.3   |                |  |   | (2,938  | ) |  | (4.2        | )  |  |               |        |   |  |   |        |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Loans held for sale                           |                                                  |   | (1,206   | )       |                                                 | (10.9 | )              |  |   | (21     | ) |  | (11.9       | )  |  |               | (3     | ) |  |   | (18    | )
|Short-term investments                        |                                                  |   | (1,321   | )       |                                                 | (32.7 | )              |  |   | (61     | ) |  | (62.9       | )  |  |               | (35    | ) |  |   | (26    | )
|Taxable investment securities                 |                                                  |   | (100,843 | )       |                                                 | (6.6  | )              |  |   | (2,647  | ) |  | (11.8       | )  |  |               | (1,299 | ) |  |   | (1,348 | )
|Tax-advantaged investment securities          |                                                  |   | 17,351   |         |                                                 | 12.6  |                |  |   | 547     |   |  | 29.0        |    |  |               | 284    |   |  |   | 263    |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Total investment securities                   |                                                  |   | (83,492  | )       |                                                 | (5.0  | )              |  |   | (2,100  | ) |  | (8.7        | )  |  |               |        |   |  |   |        |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Total interest-earning assets                 |                                                  |   | 272,811  |         |                                                 | 4.9   |                |  |   | (5,120  | ) |  | (5.5        | )  |  |               | (9,863 | ) |  |   | 4,743  |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Less: allowance for loan losses               |                                                  |   | 9,923    |         |                                                 | 21.9  |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Cash and due from banks                       |                                                  |   | (10,461  | )       |                                                 | (9.3  | )              |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Other assets                                  |                                                  |   | 24,404   |         |                                                 | 3.9   |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Total assets                                  |                                                  | $ | 276,831  |         |                                                 | 4.4   |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Liabilities and Stockholders Equity:         |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Interest-bearing liabilities:                 |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Interest-bearing demand deposits              |                                                  | $ | (60,056  | )       |                                                 | (11.6 | )              |  |   | (109    | ) |  | (16.7       | )  |  |               | (40    | ) |  |   | (69    | )
|Money market deposits                         |                                                  |   | 110,942  |         |                                                 | 20.4  |                |  |   | 5       |   |  | 0.1         |    |  |               | (850   | ) |  |   | 855    |  
|Savings deposits                              |                                                  |   | (80,221  | )       |                                                 | (13.4 | )              |  |   | (83     | ) |  | (14.0       | )  |  |               | (9     | ) |  |   | (74    | )
|Direct time deposits                          |                                                  |   | (99,234  | )       |                                                 | (8.4  | )              |  |   | (1,823  | ) |  | (13.7       | )  |  |               | (803   | ) |  |   | (1,020 | )
|Brokered time deposits                        |                                                  |   | 347,449  |         |                                                 | 65.9  |                |  |   | 4,666   |   |  | 71.3        |    |  |               | 162    |   |  |   | 4,504  |  
|Short-term borrowings                         |                                                  |   | 148,936  |         |                                                 | 22.5  |                |  |   | (1,653  | ) |  | (21.4       | )  |  |               | (3,189 | ) |  |   | 1,536  |  
|Long-term debt                                |                                                  |   | (22,304  | )       |                                                 | (2.8  | )              |  |   | (2,478  | ) |  | (22.6       | )  |  |               | (2,186 | ) |  |   | (292   | )
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Total interest-bearing liabilities            |                                                  |   | 345,512  |         |                                                 | 7.2   |                |  |   | (1,475  | ) |  | (3.3        | )  |  |               | (4,683 | ) |  |   | 3,208  |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Noninterest-bearing demand deposits           |                                                  |   | (81,644  | )       |                                                 | (11.3 | )              |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Other liabilities                             |                                                  |   | 32,890   |         |                                                 | 77.5  |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Stockholders equity                          |                                                  |   | (19,927  | )       |                                                 | (3.1  | )              |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Total liabilities and stockholders equity    |                                                  | $ | 276,831  |         |                                                 | 4.4   |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Net interest-earning assets                   |                                                  | $ | (72,701  | )       |                                                 | (10.1 | )              |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Net interest income (tax-equivalent)          |                                                  |   |          |         |                                                 |       |                |  |   | (3,645  | ) |  | (7.4        | )  |  | $             | (5,180 | ) |  | $ | 1,535  |  
|Less: tax-equivalent adjustment               |                                                  |   |          |         |                                                 |       |                |  |   | 301     |   |  | 46.2        |    |  |               |        |   |  |   |        |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  
|Net interest income                           |                                                  |   |          |         |                                                 |       |                |  | $ | (3,946  | ) |  | (8.1        | )  |  |               |        |   |  |   |        |  
|                                              |                                                  |   |          |         |                                                 |       |                |  |   |         |   |  |             |    |  |               |        |   |  |   |        |  



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The net interest margin, on a tax-equivalent basis, decreased 45 basis points to 3.17% from 3.62% for the quarter ended
March 31, 2007. The decline was primarily caused by the 73 basis point decline in asset yields that were negatively impacted by a reversal of $588 thousand of interest income related to certain investment securities that were considered
other-than-temporarily impaired. In addition, asset yields were negatively impacted by the 300 basis point decline in the benchmark interest rates during the past twelve months that were not fully offset by the 39 basis point decline in
interest-bearing liabilities due to aggressive competition for deposits throughout the industry and from a number of steps taken to re-position the Corporations non-customer funding sources in light of the currently volatile market for funds.
In addition, higher cost brokered certificate of deposits were increased during the current quarter as an alternative source of funding asset growth as a result of the decline in customer deposits.

Year over year average earning assets increased to $5.8 billion as a result of strong internally generated loan growth being more than funded by the planned reductions
in wholesale assets. The net loan growth of $394.1 million in relationship-based loans was offset by planned reductions of $35.3 million in originated and acquired loans and an $83.5 million reduction in investment securities due to the 2007
year-end write-down and principal pay downs. The yields on investments and loans declined 28 and 95 basis points, respectively. The yield decline in the loan and investment portfolios resulted from the decrease in year over year market interest
rates and the composition of these portfolios. Interest-bearing liabilities increased by $345.5 million while the average rate paid decreased by 39 basis points. The decrease in the average rate paid was primarily due to the shift in deposit and
borrowing mix in addition to the decline in interest rates that impacted interest bearing demand deposits, money market deposits, savings, time deposits and short and long-term debt. Interest expense was also negatively impacted by an $81.6 million
decline in average noninterest-bearing demand deposit balances during the year as customers shifted their deposits to interest-bearing deposits or outside the institution.

The 6.13% yield on earning assets decreased 73 basis points from the first quarter of 2007 as a result of declining interest rates, reversal of interest income and the change in asset mix, while total interest-bearing
liabilities decreased by only 39 basis points to 3.33%. Net interest income on a tax-equivalent basis was $45.9 million in the quarter ended March 31, 2008 compared to $49.6 million in the quarter ended March 31, 2007. Total interest
income decreased by $5.1 million and total interest expense decreased by $1.5 million resulting in a decline in net interest income on a tax-equivalent basis of $3.6 million. Growth in the key loan portfolios of home equity, commercial real estate
and business banking that were more than offset by the declining interest rates were the primary drivers of the $5.1 million decrease in total interest income. The impact from declining rates and the change in deposit mix were the primary causes of
the decline in interest expense of $1.5 million.

Future growth in net interest income will depend upon consumer and commercial loan demand, growth in
deposits and the general level of interest rates.

Provision for Loan Losses

The provision for loan losses was $3.1 million for the quarter ending March 31, 2008 compared to $1.1 million for the same quarter a year ago. The $2.1 million growth in the provision for loan losses in the
quarter ended March 31, 2008 was the result of increased net charge-offs and non-performing assets along with overall loan growth. The allowance for loan losses to total loans was 1.31% at March 31, 2008. The Corporation continues to
emphasize quality underwriting as well as aggressive management of charge-offs and potential problem loans within this uncertain market to minimize the exposure to charge-offs. In the quarter ended March 31, 2008, net charge-offs were $3.1
million, or 0.30% of average loans, compared to $736 thousand, or 0.08% of average loans, in the quarter ended March 31, 2007. The increase reflects an increase in commercial business net charge-offs of $1.8 million and of two residential real
estate construction loans totaling $320 thousand. Total consumer loan net charge-offs as a percentage of average total consumer loans were 0.21% in the quarter ended March 31, 2008, compared to 0.15% in the same period a year ago. Total
commercial loan net charge-offs as a percentage of average commercial loans were 0.36%, an increase from 0.02% in the same period a year ago.

Non-Interest Income

Total non-interest income (loss) declined $45.0 million to a loss of $15.1 million in the quarter ending March 31,
2008. The current quarter includes a $42.7 million write-down of the Corporations REIT trust preferred portfolio and non-agency mortgage-backed securities portfolio. Core non-interest income, which excludes the net gains (losses) and the
impairment on investment securities, declined $944 thousand to $27.7 million in the quarter ending March 31, 2008.

The decline in core non-interest
income was driven by lower deposit fee income, which declined $1.1 million, or 5.2%, to $21.0 million in the quarter ended March 31, 2008. The decrease in deposit fee income reflects $1.2 million in retail deposit fees mainly associated with
NSF fees that were offset slightly by an increase in commercial deposit fees of $56 thousand for



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the quarter ending March 31, 2008. The decline in consumer deposit fees was negatively impacted by the September 2007 sale of deposits which negatively
impacted deposit fee income by $505 thousand.

Commissions and fees declined 6.0%, or $100 thousand, to $1.6 million in the quarter ending March 31,
2008 primarily due to decreased sales by Provident Investment Company, the Banks wholly owned subsidiary which offers securities through an affiliation with a securities broker-dealer, as well as insurance products as an agent.

During the first quarter of 2008, the Corporation recorded write-down of $42.7 million relating to other-than-temporary impairment on its REIT trust preferred and
non-agency MBS securities portfolio. Originally $105 million, the REIT trust preferred securities portfolio was written down by $47.5 million in December 2007, and was written down an additional $19.5 million due to further credit impairment of
certain home builders and mortgage REITs that represent the collateral for these securities. In addition, the Corporations wrote down $23.2 million of its non-agency mortgage-backed securities portfolio resulting from elevated delinquency and
foreclosure levels of the national residential mortgages which collateralize these pooled securities.

The Corporation recorded $191 thousand in net losses
from sale or disposition of assets or liabilities in the quarter ending March 31, 2008, compared to net gains of $1.2 million in the same quarter a year ago. The net losses in the quarter ending March 31, 2008 were composed primarily of
$217 thousand loss on early redemption of brokered certificates of deposit, offset by a slight gain of $26 thousand from asset sales from the disposition of loans, foreclosed property and fixed assets. The quarter ending March 31, 2007 included
securities sales that were focused on reducing sensitivity to changes in interest rates. These transactions generated net gains of $212 thousand. The prior year quarter also included net gains of $180 thousand from the sale of mortgage loans, $767
thousand gain from the sale of a branch facility, $153 thousand from debt extinguishments of $5.8 million from FHLB borrowings and net losses of $109 thousand from other asset sales and other real estate write-downs.

In the quarters ending March 31, 2008 and 2007, certain derivative transactions did not qualify for hedge accounting treatment and as a result, the gains and losses
associated with these derivatives are recorded in non-interest income. The net cash settlement also related to these derivatives which represents interest income and expense on non-designated interest rate swaps are recorded as part of non-interest
income. The net derivative activities associated with these derivatives were a net gain of $39 thousand for the quarter ending March 31, 2008, compared to a net gain of $143 thousand gain in the quarter ending March 31, 2007.

Other non-interest income increased $408 thousand to $5.1 million, due to increased income associated with commercial and consumer loan fees and bank owned life
insurance income.

Non-Interest Expense

Total
non-interest expense declined $3.3 million, or 6.1%, to $51.4 million in the quarter ending March 31, 2008. The significant declines in non-interest expense in the current quarter include declines of $1.2 million in salaries and employee
benefits, $1.3 million in other non-interest expense and $793 thousand in restructuring activities expense.

The $1.2 million decrease in salaries and
benefits was driven primarily by lower average staffing levels of approximately 257 positions over the past 12 months as a result of actions taken by the corporate-wide efficiency program. Base salary expense declined $1.2 million due to the lower
number of full time equivalent employees concentrated in the consumer banking and organizational support groups, partially offset by annual merit increases. Salary and employee benefits expense were also positively impacted by declines of $272
thousand in payroll taxes, $179 thousand in 401K match expense and $163 thousand in pension related benefits. These declines in expenses were partially offset by increases in commission and incentives of $278 thousand and $312 thousand of deferred
salary expense associated with new loan originations. In addition, the quarter ending March 31, 2007 included a severance expense of $347 thousand.

Occupancy expense decreased $132 thousand from the quarter ending March 31, 2007 due to lower occupancy repairs and maintenance and lower building and leasehold depreciation resulting from the closure and sale of branches in 2007.

External processing fees increased by $158 thousand as a result of higher credit reports and outsourced fees that were offset by lower ATM fees.

Restructuring activities costs were $74 thousand in the first quarter of 2008 compared to $867 thousand for the same period a year ago. In the first
quarter of 2007, the restructuring costs were directly related to seven branch closures. In the current quarter, the costs relate to branch closures and severance costs associated with staff reductions that were incurred through actions taken by the
corporate-wide efficiency program. The corporate-wide efficiency program is expected to be completed in early 2008.



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Other non-interest expense decreased by $1.3 million from the same period a year ago mainly as a result of a reduction in
consulting fees, marketing, communication, postage, operational losses and amortization of deposit intangibles. These declines were offset by higher legal and professional fees.

Income Taxes

The Corporation accounts for income taxes under the asset/liability method. Deferred tax assets and
liabilities are recognized for the future consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as operating loss and tax credit carry
forwards. A valuation allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred tax assets will not become realizable. It is at least reasonably possible that
managements judgment about the need for a valuation allowance for deferred taxes could change in the near term. The valuation allowance was $3.8 million at March 31, 2008 versus $2.8 million at March 31, 2007. The Corporations
valuation allowance relates to state net operating losses that are unlikely to be utilized in the foreseeable future.

In the first quarter ending
March 31, 2008, the Corporation recorded income tax benefit of $7.1 million on pre-tax loss of $24.7 million, an effective tax rate of 28.6%. In the first quarter ending March 31, 2007, the Corporation recorded income tax expense of $6.9
million on pre-tax income of $23.0 million, an effective tax rate of 29.9%. The decline in the effective tax rate for the quarter ending March 31, 2008 was mainly due to the impact on the effective tax rate from lower pre-tax income combined
with increased tax-advantaged income.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

For
information regarding market risk at December 31, 2007, see Interest Sensitivity Management and Note 14 to the Consolidated Financial Statements in the Corporations Form 10-K filed with the Securities and Exchange Commission
on February 29, 2008. The market risk of the Corporation has not experienced any material changes as of March 31, 2008 from December 31, 2007. Additionally, refer to Item 2  Managements Discussion and Analysis of
Financial Condition and Results of Operations for additional quantitative and qualitative discussions about market risk at March 31, 2008.



|Item 4. | Controls and Procedures
|------- | -----------------------

The Corporations management,
including the Corporations principal executive officer and principal financial officer, have evaluated the effectiveness of the Corporations disclosure controls and procedures, as such term is defined in Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by
this report, the Corporations disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Corporation files or submits under the Exchange Act with the
Securities and Exchange Commission (the SEC) (1) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and (2) is accumulated and communicated to the
Corporations management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, no change in the Corporations
internal control over financial reporting occurred during the quarter ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Corporations internal control over financial reporting.

PART II  OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

The Corporation is involved in various legal
actions that arise in the ordinary course of its business. All active lawsuits entail amounts which management believes to be, individually and in the aggregate, immaterial to the financial condition and the results of operations of the Corporation.

In 2005, a lawsuit captioned Bednar v. Provident Bank of Maryland was initiated by a former Bank customer against the Bank in the Circuit Court for
Baltimore City (Maryland) asserting that, upon early payoff, the Banks recapture of home equity loan closing costs initially paid by the Bank on the borrowers behalf constituted a prepayment charge prohibited by state law. The Baltimore
City Circuit Court ruled in the Banks favor, finding that the recapture of loan closing costs was not an unlawful charge, a position consistent with that taken by the State of Maryland Commissioner of Financial Regulation. However, on
appeal, the Maryland Court of Appeals reversed this ruling and found in favor of the borrower. The case was remanded to the trial court for further proceedings. The potential damages for this individual matter are not material to the
Corporations results of operations. However, the complaint is styled as a class action complaint. To date, no class has



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been certified. Management believes that the Bank has meritorious defense against this action and intends to vigorously defend the litigation. On
April 8, 2008, the Governor of Maryland signed legislation that limits the potential recovery of Bank customers in the Bednar litigation to the amount of closing costs recovered by the Bank upon early payoff. As a result, the Bank believes
that, even if a class is certified, the potential damages in the Bednar litigation would not be material to the Banks results of operations.



|Item 1A. | Risk Factors
|-------- | ------------

In addition to the other information set forth in
this report, the reader should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in the Corporations Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect the
Corporations business, financial condition or future results. The risks described in the Corporations Annual Report on Form 10-K are not the only risks that the Corporation faces. Additional risks and uncertainties not currently known to
the Corporation or that the Corporation currently deem to be immaterial also may have a material adverse effect on the Corporations business, financial condition and/or operating results.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

During
1998, the Corporation initiated a stock repurchase program for its outstanding stock. Under this plan, the Corporation approved the repurchase of specific additional amounts of shares without any specific expiration date. As the Corporation
fulfilled each specified repurchase amount, additional amounts were approved. On June 17, 2005, and on January 17, 2007 the Corporation approved an additional stock repurchase of up to 1.3 million and 1.6 million shares,
respectively. Currently, the maximum number of shares remaining to be purchased under this plan is 750,174. All shares have been repurchased pursuant to the publicly announced plan. The repurchase plan is currently suspended. The timing of
repurchasing shares in the future will depend on the Corporation meeting its targeted capital ratios. No plans expired during the three months ended March 31, 2008 and there were no shares repurchased in the first quarter of 2008.



|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
|------- | --------

The exhibits and financial statements filed as a part of
this report are as follows:



|       |  |                                                                                               
|------ |  | ----------------------------------------------------------------------------------------------
|(3.1)  |  | Articles of Incorporation of Provident Bankshares Corporation (1)                             
|       | 
|(3.2)  |  | Articles of Amendment to the Articles of Incorporation of Provident Bankshares Corporation (1)
|       | 
|(3.3)  |  | Seventh Amended and Restated By-Laws of Provident Bankshares Corporation (2)                  
|       | 
|(11.0) |  | Statement re: Computation of Per Share Earnings (3)                                           
|       | 
|(31.1) |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                             
|       | 
|(31.2) |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                             
|       | 
|(32.1) |  | Section 1350 Certification of Chief Executive Officer                                         
|       | 
|(32.2) |  | Section 1350 Certification of Chief Financial Officer                                         



|(1) | Incorporated by reference from Registrants Registration Statement on Form S-8 (File No. 33-58881) filed with the Commission on July 10, 1998.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference from Registrants Current Report on Form 8-K (File No. 0-16421) filed with the Commission on October 18, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(3) | Included in Note 16 to the Unaudited Condensed Consolidated Financial Statements.
|--- | ---------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.



|            |  |                              |  |                                                     
|----------- |  | ---------------------------- |  | ----------------------------------------------------
|            |  | Principal Executive Officer:
|            |  |                             
|May 9, 2008 |  | By                           |  | /s/ Gary N. Geisel                                  
|            |  |                              |  | Gary N. Geisel                                      
|            |  |                              |  | Chairman of the Board and Chief Executive Officer   
|            | 
|            |  | Principal Financial Officer:
|            |  |                             
|May 9, 2008 |  | By                           |  | /s/ Dennis A. Starliper                             
|            |  |                              |  | Dennis A. Starliper                                 
|            |  |                              |  | Executive Vice President and Chief Financial Officer



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|        |  |                                                                  
|------- |  | -----------------------------------------------------------------
|EXHIBIT |  | DESCRIPTION                                                      
|31.1    |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|        | 
|31.2    |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|        | 
|32.1    |  | Section 1350 Certification of Chief Executive Officer            
|        | 
|32.2    |  | Section 1350 Certification of Chief Financial Officer            



47