<PAGE> 1






================================================================================


                                  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 SEPTEMBER 30, 2003

                                       OR

     |_|         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                 SECURITIES EXCHANGE ACT OF 1934


                         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                        (I.R.S. Employer
  incorporation or organization)                       Identification Number)

              114 EAST LEXINGTON STREET, BALTIMORE, MARYLAND 21202
                    (Address of principal executive offices)

                                 Not Applicable
               (Former name, former address and former fiscal year
                          if changed since last report)

                                 (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 an accelerated filer (as
      defined in Rule 12b-2 of the Act). Yes |X| No |_|

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

      At November 4, 2003, the Registrant had 24,527,039 shares of $1.00 par
      value common stock outstanding.




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<PAGE> 2



                PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
                                TABLE OF CONTENTS

                                                                            Page
PART I - FINANCIAL INFORMATION


Item 1. Financial Statements

        Consolidated Statement of Condition - Unaudited
        September 30, 2003 and 2002 and December 31, 2002                      4

        Consolidated Statement of Income - Unaudited
        Three and nine month periods ended September 30, 2003 and 2002         5

        Consolidated Statement of Cash Flows - Unaudited
        Nine month periods ended September 30, 2003 and 2002                   6

        Notes to Consolidated Financial Statements - Unaudited                 7

Item 2. Management's Discussion and Analysis
        of Financial Condition and Results of Operations                      16

Item 3. Quantitative and Qualitative Disclosures
        About Market Risk                                                     29

Item 4. Required Disclosure                                                   29

PART II - OTHER INFORMATION

Item 1. Legal Proceedings                                                     30

Item 2. Changes in Securities and Use of Proceeds                             30

Item 3. Defaults upon Senior Securities                                       30

Item 4. Submission of Matters to a Vote of Security Holders                   30

Item 5. Other Information                                                     30

Item 6. Exhibits and Reports on Form 8-K                                      30

SIGNATURES                                                                    32

FORWARD-LOOKING STATEMENTS

This report, as well as other written communications made from time to time by
Provident Bankshares Corporation and its subsidiaries (the "Company")
(including, without limitation, the Company's 2002 Annual Report to
Stockholders) and oral communications made from time to time by authorized
officers of the Company, may contain statements relating to the future results
of the Company (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 Company, including with
respect to earnings growth (on both accounting principles generally accepted in
the United States of America (GAAP) and cash basis); revenue growth in retail
banking, lending and other areas; origination volume in the Company's consumer,
commercial and other lending businesses; asset quality and levels of
non-performing assets; 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 Company claims the
protection of the safe harbor for forward-looking statements contained in the
PSLRA.

                                       2


<PAGE> 3


The Company 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:
prevailing economic conditions; changes in interest rates, loan demand, real
estate values and competition, which can materially affect, among other things,
retail banking revenues, revenues from sales on non-deposit investment products,
origination levels in the Company's lending businesses and the level of
defaults, losses and prepayments on loans made by the Company, whether held in
portfolio or sold in the secondary markets; 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
acquisitions and related integration and restructuring activities; and other
economic, competitive, governmental, regulatory and technological factors
affecting the Company's operations, pricing, products and services. The
forward-looking statements are made as of the date of this report, and, except
as may be required by applicable law or regulation, the Company 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.



                                       3


<PAGE> 4


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

CONSOLIDATED STATEMENT OF CONDITION - UNAUDITED
Provident Bankshares Corporation and Subsidiaries
<TABLE>
<CAPTION>
                                                                                      September 30,   December 31,    September 30,
(dollars in thousands, except share amounts)                                              2003             2002            2002
                                                                                     --------------   -------------   --------------
<S>                                                                                     <C>             <C>              <C>
ASSETS:
  Cash and due from banks                                                               $  111,659      $  145,063       $  158,571
  Short-term investments                                                                     2,213           3,129            1,964
  Mortgage loans held for sale                                                              13,157           8,899            7,421
  Securities available for sale                                                          1,970,618       1,993,229        1,916,868
  Loans                                                                                  2,702,255       2,560,563        2,635,325
    Less allowance for loan losses                                                          35,006          33,425           34,615
                                                                                     --------------   -------------   --------------
      Net loans                                                                          2,667,249       2,527,138        2,600,710
                                                                                     --------------   -------------   --------------
  Premises and equipment, net                                                               47,975          47,031           45,494
  Accrued interest receivable                                                               24,988          28,101           30,520
  Intangible assets                                                                          9,034           9,340           10,463
  Other assets                                                                             138,552         128,792          127,161
                                                                                     --------------   -------------   --------------
Total assets                                                                            $4,985,445      $4,890,722       $4,899,172
                                                                                     ==============   =============   ==============

LIABILITIES:
 Deposits:
  Noninterest-bearing                                                                   $  576,482      $  492,661       $  488,674
  Interest-bearing                                                                       2,511,424       2,695,305        2,744,741
                                                                                     --------------   -------------   --------------
    Total deposits                                                                       3,087,906       3,187,966        3,233,415
                                                                                     --------------   -------------   --------------
 Short-term borrowings                                                                     511,838         539,758          487,485
 Long-term debt                                                                          1,047,612         814,546          835,141
 Accrued expenses and other liabilities                                                     21,428          32,817           31,751
                                                                                     --------------   -------------   --------------
    Total liabilities                                                                    4,668,784       4,575,087        4,587,792
                                                                                     --------------   -------------   --------------

STOCKHOLDERS' EQUITY:
  Common stock (par value $1.00) authorized 100,000,000 shares; issued 32,134,460,
   31,737,237 and 31,717,319 shares at September 30,
   2003, December 31, 2002 and September 30, 2002, respectively                             32,134          31,737           31,717
  Additional paid-in capital                                                               297,284         289,698          289,348
  Retained earnings                                                                        145,265         124,862          116,990
  Net accumulated other comprehensive income (loss)                                         (4,689)         14,920           10,438
  Treasury stock at cost - 7,651,317,  7,373,601 and 6,983,601
   shares at  September 30, 2003, December 31, 2002 and
   September 30, 2002, respectively                                                       (153,333)       (145,582)        (137,113)
                                                                                     --------------   -------------   --------------
    Total stockholders' equity                                                             316,661         315,635          311,380
                                                                                     --------------   -------------   --------------
Total liabilities and stockholders' equity                                              $4,985,445      $4,890,722       $4,899,172
                                                                                     ==============   =============   ==============

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


                                                  4

<PAGE> 5


CONSOLIDATED STATEMENT OF INCOME - UNAUDITED
Provident Bankshares Corporation and Subsidiaries
<TABLE>
<CAPTION>

                                                                   Three Months Ended               Nine Months Ended
                                                                    September 30,                    September 30,
                                                            ------------------------------   ------------------------------
(dollars in thousands, except per share data)                    2003            2002             2003             2002
                                                            -------------   --------------   --------------   -------------
<S>                                                             <C>              <C>             <C>             <C>
INTEREST INCOME:
  Loans, including fees                                         $ 37,202         $ 43,309        $ 110,534       $ 135,407
  Investment securities                                           21,187           23,451           68,729          77,723
  Tax-advantaged loans and securities                                367              469            1,146           1,351
  Short-term investments                                               7               16               20              81
                                                            -------------   --------------   --------------   -------------
    Total interest income                                         58,763           67,245          180,429         214,562
                                                            -------------   --------------   --------------   -------------
INTEREST EXPENSE:
  Deposits                                                        10,980           19,572           38,252          66,265
  Short-term borrowings                                            1,169            1,911            3,512           4,616
  Long-term debt                                                   8,577           10,998           28,202          36,395
                                                            -------------   --------------   --------------   -------------
    Total interest expense                                        20,726           32,481           69,966         107,276
                                                            -------------   --------------   --------------   -------------
Net interest income                                               38,037           34,764          110,463         107,286
  Less provision for loan losses                                   2,950            2,150            7,961           8,400
                                                            -------------   --------------   --------------   -------------
Net interest income, after provision for loan losses              35,087           32,614          102,502          98,886
                                                            -------------   --------------   --------------   -------------
NON-INTEREST INCOME:
  Service charges on deposit accounts                             19,453           18,358           56,018          51,890
  Commissions and fees                                             1,085            1,142            3,545           3,742
  Net gains (losses)                                                 746            1,997           (4,899)            186
  Other non-interest income                                        3,339            2,529            8,910           7,843
                                                            -------------   --------------   --------------   -------------
    Total non-interest income                                     24,623           24,026           63,574          63,661
                                                            -------------   --------------   --------------   -------------
NON-INTEREST EXPENSE:
  Salaries and employee benefits                                  19,441           18,709           58,003          54,533
  Occupancy expense, net                                           4,023            3,722           11,997          10,776
  Furniture and equipment expense                                  2,988            2,806            8,809           8,144
  External processing fees                                         5,358            5,138           15,901          15,133
  Other non-interest expense                                       7,520            7,096           23,970          23,048
                                                            -------------   --------------   --------------   -------------
    Total non-interest expense                                    39,330           37,471          118,680         111,634
                                                            -------------   --------------   --------------   -------------
Income before income taxes                                        20,380           19,169           47,396          50,913
Income tax expense                                                 7,072            6,029           10,108          15,893
                                                            -------------   --------------   --------------   -------------
Net income                                                      $ 13,308         $ 13,140         $ 37,288        $ 35,020
                                                            =============   ==============   ==============   =============

NET INCOME PER SHARE AMOUNTS:
  Basic                                                           $ 0.54           $ 0.53           $ 1.52          $ 1.40
  Diluted                                                           0.53             0.52             1.48            1.36


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


                                               5


<PAGE> 6
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
Provident Bankshares Corporation and Subsidiaries


                                                                                                     Nine Months Ended
                                                                                                        September 30,
                                                                                             ---------------------------------
(in thousands)                                                                                    2003               2002
                                                                                             --------------     --------------
<S>                                                                                             <C>                <C>
OPERATING ACTIVITIES:
  Net income                                                                                    $   37,288         $   35,020
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Depreciation and amortization                                                                   27,442             26,607
    Provision for loan losses                                                                        7,961              8,400
    Provision for deferred income tax benefit                                                         (633)            (2,736)
    Net losses (gains)                                                                               4,899               (186)
    Loans originated and held for sale                                                             (98,594)           (47,536)
    Proceeds from sales of loans held for sale                                                      94,939             47,321
    Net decrease (increase) in accrued interest receivable and other assets                           (250)            12,509
    Net increase (decrease) in accrued expenses and other liabilities                              (11,651)               790
                                                                                             --------------     --------------
  Total adjustments                                                                                 24,113             45,169
                                                                                             --------------     --------------
Net cash provided by operating activities                                                           61,401             80,189
                                                                                             --------------     --------------

INVESTING ACTIVITIES:
  Principal collections and maturities of securities available for sale                            687,232            549,229
  Proceeds from sales of securities available for sale                                           1,027,452            966,669
  Purchases of securities available for sale                                                    (1,724,512)        (1,620,546)
  Loan principal collections less originations and purchases                                      (150,980)           129,410
  Purchases of premises and equipment                                                               (8,326)            (6,755)
                                                                                             --------------     --------------
Net cash provided (used) by investing activities                                                  (169,134)            18,007
                                                                                             --------------     --------------

FINANCING ACTIVITIES:
  Net decrease in deposits                                                                        (100,060)          (122,632)
  Net increase (decrease) in short-term borrowings                                                 (27,920)           121,164
  Proceeds from long-term debt                                                                     415,000             95,000
  Payments and maturities of long-term debt                                                       (196,954)          (122,159)
  Proceeds from issuance of stock                                                                    7,983              5,202
  Purchase of treasury stock                                                                        (7,751)           (16,241)
  Cash dividends paid on common stock                                                              (16,885)           (15,779)
                                                                                             --------------     --------------
Net cash provided (used) by financing activities                                                    73,413            (55,445)
                                                                                             --------------     --------------
Increase (decrease) in cash and cash equivalents                                                   (34,320)            42,751
  Cash and cash equivalents at beginning of period                                                 148,192            117,784
                                                                                             --------------     --------------
Cash and cash equivalents at end of period                                                      $  113,872         $  160,535
                                                                                             ==============     ==============

SUPPLEMENTAL DISCLOSURES:
  Interest paid, net of amount credited to deposit accounts                                     $   51,554         $   77,488
  Income taxes paid                                                                                  6,120             23,283


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


                                               6

<PAGE> 7


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Provident Bankshares Corporation and Subsidiaries

SEPTEMBER 30, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Provident Bankshares Corporation ("the Corporation"), a Maryland corporation,
was organized as a bank holding company in 1987, and is the sole stockholder of
Provident Bank ("the Bank"), a Maryland chartered stock commercial bank. The
Bank offers consumer and commercial banking services through a network of branch
offices and ATMs in the Baltimore-Washington corridor of Maryland, Northern
Virginia, and southern York County, Pennsylvania. Related financial services are
offered through its wholly owned subsidiaries. Mutual funds, annuities and
insurance products are offered through Provident Investment Company and leases
through Court Square Leasing Corporation and Provident Lease Corporation.

The accounting and reporting policies of the Corporation conform with accounting
principles generally accepted in the United States of America ("GAAP") 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 and nine month periods
ended September 30, 2003 are not necessarily indicative of the results that may
be expected for any future quarters or for the year ending December 31, 2003.
For further information, refer to the consolidated financial statements and
notes thereto included in the Provident Bankshares Corporation's Annual Report
on Form 10-K for the year ended December 31, 2002 as filed with the Securities
and Exchange Commission.

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying unaudited 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. Results of operations from entities purchased,
if any, are included from the date of acquisition. Assets and liabilities of
purchased companies are stated at estimated fair values at the date of
acquisition.

Certain prior years' amounts in the accompanying unaudited Consolidated
Financial Statements have been reclassified to conform to the presentation used
for the current year. These reclassifications have no effect on Stockholders'
Equity or Net Income as previously reported.

USE OF ESTIMATES
In preparation of the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the dates of the financial statements and accompanying notes
and the reported amounts of income and expense during the reporting periods.
Estimates and assumptions are utilized in the determination of the allowance for
loan losses, non-accrual loans, asset prepayment rates, other real estate owned,
other than temporary impairment of investment securities, intangible assets,
pension and post-retirement benefits, fair value of financial instruments
disclosures, stock-based compensation, derivative positions, recourse
liabilities, litigation and income taxes. Management believes the following
critical accounting policies affect its more significant judgments and estimates
used in preparation of its consolidated financial statements: allowance for loan
losses, other than temporary impairment of investment securities, asset
prepayment rates and income taxes. It is at least reasonably possible that each
of the Corporation's estimates could change in the near term and the effect of
the change could be material to the Corporation's Consolidated Financial
Statements.

STOCK-BASED COMPENSATION
In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure" ("SFAS No. 148"), an amendment of SFAS
No. 123, "Accounting for Stock-Based Compensation" (collectively, "SFAS No.
123"). The provisions of SFAS No. 123 provide the Corporation with the option of
accruing stock-based employee compensation expense, or applying the provisions
of APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No.
25"), which does not require compensation expense to be recognized. The
Corporation has elected to continue to apply APB No. 25 to account for
stock-based employee compensation. Accordingly, no compensation expense has been
recognized.




                                       7

<PAGE> 8


The following table illustrates the pro forma effect on net income and earnings
per share if the Corporation had applied the fair value provisions of SFAS No.
123 to stock-based employee compensation.
<TABLE>
<CAPTION>

                                                                                                 Nine Months Ended
                                                                                                   September 30,
                                                                                          ---------------------------------
(in thousands, except per share data)                                                          2003              2002
                                                                                          ---------------    --------------
<S>                                                                                             <C>               <C>
NET INCOME:
Net income as reported                                                                          $ 37,288          $ 35,020
  Deduction for total stock-based employee compensation expense determined
   under fair value based method for all awards, net of related tax effects                          801             1,072
                                                                                          ---------------    --------------
Pro forma net income                                                                            $ 36,487          $ 33,948
                                                                                          ===============    ==============

BASIC EARNINGS PER SHARE:
As reported                                                                                       $ 1.52            $ 1.40
Pro forma                                                                                           1.49              1.36

DILUTED EARNINGS PER SHARE:
As reported                                                                                       $ 1.48            $ 1.36
Pro forma                                                                                           1.45              1.32

</TABLE>

The weighted average fair value of all of the options granted during the periods
presented have been estimated using the Black-Scholes option-pricing model with
the following assumptions:

                                                      Nine Months Ended
                                                        September 30,
                                               ---------------------------------
                                                    2003               2002
                                               --------------    ---------------
Dividend yield                                      3.62%              3.72%
Weighted average risk-free interest rate            3.12%              3.11%
Weighted average expected volatility               25.33%             25.68%
Weighted average expected life in years             7.02               6.75


RECENTLY ADOPTED ACCOUNTING PRINCIPLES
In September 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143")
effective for fiscal years beginning after September 15, 2002. SFAS No. 143
establishes standards for recognition and measurement of liabilities for asset
retirement obligations and retirement cost. SFAS No. 143 did not have a
significant impact on the Corporation's earnings, financial condition or equity.

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS
No. 146"). The requirements of SFAS No. 146 are effective prospectively for
qualifying activities initiated after December 31, 2002. SFAS No. 146 applies to
costs associated with an exit activity, including restructuring, or with a
disposal of long-lived assets. SFAS No. 143 did not have a significant impact on
the Corporation's earnings, financial condition or equity.

In April 2003, the FASB issued Statement of Financial Accounting Standard No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" ("SFAS No. 149"), which is generally effective for contracts entered
into or modified after September 30, 2003. This Statement amends and clarifies
financial accounting and reporting for derivative instruments embedded in other
contracts, collectively referred to as "derivatives" and hedging activities
under SFAS No. 133. The adoption of SFAS No. 149 did not have a significant
impact on the Corporation's earnings, financial condition or equity.

In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity" ("SFAS No. 150") effective for financial instruments
entered into or modified after May 31, 2003. This statement establishes
standards for classifying and measuring certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within the scope of the statement (such
as obligations that a reporting entity can or must settle by issuing its own
equity shares) as a liability rather than equity. SFAS No. 150 did not have an
impact on the Corporation's earnings, financial condition or equity.



                                       8

<PAGE> 9


In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("Interpretation No. 45"), which addresses the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees. Interpretation No. 45 also
requires the recognition of a liability by a guarantor at the inception of
certain guarantees. The liability is recognized for the non-contingent component
of the guarantee, which is the obligation to stand ready to perform in the event
that specified triggering events or conditions occur. The initial measurement of
this liability is the fair value of the guarantee at inception. The recognition
of the liability is required even if it is not probable that payments will be
required under the guarantee, or if the guarantee was issued with a premium
payment, or as part of a transaction with multiple elements. The Corporation
adopted the recognition and measurement provisions for all guarantees entered
into or modified after December 31, 2002. The liability associated with these
guarantees amounted to $32 thousand at September 30, 2003, which will be
amortized over the period covered by the guarantees.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("Interpretation No. 46"), which explains
identification of variable interest entities and the assessment of whether to
consolidate those entities. Interpretation No. 46 requires existing
unconsolidated variable interest entities to be consolidated by their primary
beneficiaries if the entities do not effectively disperse risks among the
involved parties. The provisions of Interpretation No. 46 are effective for all
financial statements issued after January 1, 2003. In October of 2003, the FASB
deferred the effective date for applying the provisions of Interpretation No. 46
for variable interest entities created before February 1, 2003 or for public
entities which did not previously issue financial statements reporting variable
interest entity in accordance with Interpretation No. 46. The Corporation holds
no significant variable interests in any entities which would require disclosure
or consolidation.


                                       9

<PAGE> 10


NOTE 2 - INVESTMENT SECURITIES
<TABLE>
<CAPTION>
The aggregate amortized cost and market values of the investment securities portfolio were as follows at the periods indicated.

                                                                                    Gross           Gross
                                                                 Amortized        Unrealized      Unrealized         Fair
(in thousands)                                                     Cost             Gains           Losses           Value
                                                               --------------    -------------   -------------   --------------
<S>                                                               <C>                <C>             <C>            <C>
SEPTEMBER 30, 2003
Securities available for sale:
U.S. Treasury and government
  agencies and corporations                                       $  106,657         $      2        $  4,182       $  102,477
Mortgage-backed securities                                         1,659,851           11,896          14,827        1,656,920
Municipal securities                                                  18,965            1,063               -           20,028
Other debt securities                                                181,765           10,216             788          191,193
                                                               --------------    -------------   -------------   --------------
  Total securities available for sale                             $1,967,238         $ 23,177        $ 19,797       $1,970,618
                                                               ==============    =============   =============   ==============

DECEMBER 31, 2002
Securities available for sale:
U.S. Treasury and government
  agencies and corporations                                       $   54,074         $    199         $     -       $   54,273
Mortgage-backed securities                                         1,767,095           28,258             570        1,794,783
Municipal securities                                                  19,547            1,580               -           21,127
Other debt securities                                                121,656            3,353           1,963          123,046
                                                               --------------    -------------   -------------   --------------
  Total securities available for sale                             $1,962,372         $ 33,390         $ 2,533       $1,993,229
                                                               ==============    =============   =============   ==============

SEPTEMBER 30, 2002
Securities available for sale:
U.S. Treasury and government
  agencies and corporations                                       $   82,155         $  1,306         $     -       $   83,461
Mortgage-backed securities                                         1,645,790           23,362           1,604        1,667,548
Municipal securities                                                  20,692            1,710               -           22,402
Other debt securities                                                148,016              455           5,014          143,457
                                                               --------------    -------------   -------------   --------------
  Total securities available for sale                             $1,896,653         $ 26,833         $ 6,618       $1,916,868
                                                               ==============    =============   =============   ==============
</TABLE>

At September 30, 2003, net unrealized gains on securities available for sale,
net of taxes, of $2.2 million were reflected as a component of Net Accumulated
Other Comprehensive Income ("OCI"). This compared to net unrealized gains, net
of taxes, of $12.9 million at September 30, 2002 and $19.8 million at December
31, 2002. For further details regarding investment securities at December 31,
2002, refer to Notes 1 and 3 of the Consolidated Financial Statements
incorporated by reference from the Corporation's 10-K.

Net realized gains on investment securities were $341 thousand for the quarter
ended September 30, 2003 compared to net realized gains of $3.1 million for the
same quarter of 2002. For the nine months ended September 30, 2003, net realized
gains were $8.6 million compared to net realized gains of $2.1 million for the
same period of 2002. These net gains (losses) on investment securities are
included in net gains (losses) in the Consolidated Statement of Income.




                                       10


<PAGE> 11

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

A summary of loans outstanding is shown in the table below as of the periods
indicated.
<TABLE>
<CAPTION>
                                               September 30,     December 31,     September 30,
(in thousands)                                     2003             2002              2002
                                             ---------------   --------------   ---------------
<S>                                             <C>              <C>               <C>
Acquired residential mortgage                   $   584,886      $   545,323       $   599,010
Other consumer                                      977,758          881,151           873,607
                                             ---------------   --------------   ---------------
  Total consumer                                  1,562,644        1,426,474         1,472,617
Commercial business                                 374,888          376,065           373,646
Residential real estate construction                160,519          119,732           112,438
Commercial real estate construction                 201,906          238,344           237,055
Residential real estate mortgage                     90,268          168,869           208,304
Commercial real estate mortgage                     312,030          231,079           231,265
                                             ---------------   --------------   ---------------
  Total loans                                   $ 2,702,255      $ 2,560,563       $ 2,635,325
                                             ===============   ==============   ===============
</TABLE>

The following table reflects the activity in the allowance for loan losses for
the periods indicated.
<TABLE>
<CAPTION>
                                                                      Three Months Ended                  Nine Months Ended
                                                                        September 30,                       September 30,
                                                                --------------------------------   --------------------------------
(in thousands)                                                      2003              2002              2003              2002
                                                                --------------   ---------------   --------------   ---------------
<S>                                                                  <C>               <C>              <C>               <C>
Balance at beginning of period                                       $ 34,047          $ 34,719         $ 33,425          $ 34,611
Provision for loan losses                                               2,950             2,150            7,961             8,400
Transfer to other liabilities                                               -                 -             (262)                -
Less loans charged-off, net of recoveries:
  Acquired residential mortgage                                         1,346             2,394            4,739             6,862
  Other consumer                                                          440               264              963               957
  Commercial business                                                     195              (331)             455               635
  Residential real estate mortgage                                         10                65              (39)               97
  Commercial real estate mortgage                                           -              (138)               -              (155)
                                                                --------------   ---------------   --------------   ---------------
Net charge-offs                                                         1,991             2,254            6,118             8,396
                                                                --------------   ---------------   --------------   ---------------
Balance at end of period                                             $ 35,006          $ 34,615         $ 35,006          $ 34,615
                                                                ==============   ===============   ==============   ===============
</TABLE>

                                                     11

<PAGE> 12


NOTE 4 - INTANGIBLE ASSETS

In September 2000, the Corporation acquired Harbor Federal Bancorp using the
purchase method of accounting and allocated the purchase price to the fair value
of the net assets acquired. This allocation resulted in $8.3 million of goodwill
and $2.6 million of deposit-based intangibles. Effective January 1, 2002, the
Corporation adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS No. 142") which provides guidance
on accounting for goodwill. Under the provisions of SFAS No. 142, the
Corporation ceased amortization of goodwill, however, the Corporation continues
to amortize the deposit-based intangible over seven years. Testing of goodwill
balances was completed at the time of the implementation of SFAS No. 142 and no
impairment of goodwill existed at that date. The Corporation continues to
periodically monitor the balances for any indication of potential impairment in
addition to annual impairment testing of the goodwill balances.

The table below presents an analysis of the goodwill and deposit-based
intangible activity for the period indicated.
<TABLE>
<CAPTION>
                                                            Accumulated     Deposit-Based     Accumulated
(in thousands)                               Goodwill      Amortization      Intangible       Amortization        Total
                                          -------------   --------------  ----------------  ---------------   -------------
<S>                                           <C>               <C>              <C>             <C>              <C>
Balance at December 31, 2002                  $ 8,314           $ (622)          $ 2,600         $   (952)        $ 9,340
Amortization expense for the nine
      months ended September 30, 2003               -                -                -              (306)           (306)
                                          -------------   --------------  ----------------  ---------------   -------------
Balance at September 30, 2003                 $ 8,314           $ (622)          $ 2,600         $ (1,258)        $ 9,034
                                          =============   ==============  ================  ===============   =============
</TABLE>

NOTE 5 - DEPOSITS

The table below presents deposits as of the periods indicated.
<TABLE>
<CAPTION>

                                                                        September 30,    December 31,     September 30,
(in thousands)                                                              2003             2002             2002
                                                                       -------------    -------------     -------------
<S>                                                                      <C>              <C>              <C>
Noninterest-bearing                                                      $  576,482       $  492,661       $  488,674
Money market/demand                                                         889,170          847,966          829,390
Savings                                                                     703,318          662,021          654,453
Direct time certificates of deposit                                         678,504          775,546          805,423
Brokered certificates of deposit                                            240,432          409,772          455,475
                                                                       -------------    -------------    -------------
  Total deposits                                                         $3,087,906       $3,187,966       $3,233,415
                                                                       =============    =============    =============
</TABLE>

NOTE 6 - SHORT-TERM BORROWINGS

The table below presents short-term borrowings as of the periods indicated.
<TABLE>
<CAPTION>

                                                                      September 30,    December 31,    September 30,
(in thousands)                                                            2003            2002             2002
                                                                     -------------    ------------    -------------
<S>                                                                     <C>             <C>              <C>
Securities sold under repurchase agreements                             $ 242,790       $ 233,748        $ 305,889
Federal funds purchased                                                   267,000         304,000          179,525
Other short-term borrowings                                                 2,048           2,010            2,071
                                                                     -------------    ------------    -------------
  Total short-term borrowings                                           $ 511,838       $ 539,758        $ 487,485
                                                                     =============    ============    =============
</TABLE>


                                                       12


<PAGE> 13


NOTE 7 - LONG-TERM DEBT

The table below presents long-term debt as of the periods indicated.
<TABLE>
<CAPTION>

                                                                      September 30,    December 31,    September 30,
(in thousands)                                                            2003             2002            2002
                                                                     --------------   -------------   -------------
<S>                                                                    <C>              <C>             <C>
Fixed rate Federal Home Loan Bank advances                             $  137,038       $ 292,609       $ 306,323
Varible rate Federal Home Loan Bank advances                              766,231         351,826         351,639
Trust preferred securities                                                 75,593          76,986          75,929
Term repurchase agreements                                                 68,750          93,125         101,250
                                                                    --------------   -------------   -------------
  Total long-term debt                                                 $1,047,612       $ 814,546       $ 835,141
                                                                    ==============   =============   =============
</TABLE>

NOTE 8 - DERIVATIVE FINANCIAL INSTRUMENTS

The Corporation uses derivatives to hedge the interest rate risks inherent with
its funding costs. Fair value hedges which meet the criteria for effectiveness
have changes in the fair value of the derivative and the designated hedged item
recognized in earnings. At and during all periods presented, the derivatives
designated as fair value hedges were proven to be effective. Accordingly, the
designated hedges and the associated hedged items were marked to fair value by
an equal and offsetting amount of $8.5 million and $11.7 million for the nine
months ended September 30, 2003 and 2002, respectively. Cash flow hedges have
the effective portion of changes in the fair value of the derivative recorded in
OCI. At September 30, 2003 and 2002, the Corporation recorded a cumulative
decline in the fair value of derivatives of $4.4 million and $2.5 million,
respectively, net of taxes, in OCI to reflect the effective portion of cash flow
hedges. Amounts recorded in OCI are recognized into earnings concurrent with the
impact of the hedged item on earnings. For the nine months ended September 30,
2003 the Corporation had an ineffective portion of a hedge which resulted in a
$97 thousand charge to earnings. For the nine months ended September 30, 2002,
the Corporation had no ineffective portions of hedges.

The table below presents the Corporation's open derivative positions for the
periods indicated.
<TABLE>
<CAPTION>

(in thousands)                                                Notional       Credit Risk         Fair          Unamortized
Derivative Type                      Hedge Objective           Amount           Amount           Value           Premium
------------------------------   ------------------------  ---------------  ---------------  --------------   --------------
<S>                                                             <C>               <C>             <C>            <C>
SEPTEMBER 30, 2003
Interest rate swaps:
  Pay fixed/receive variable     Borrowing cost                 $ 430,000         $      -        $ (3,644)      $        -
  Pay fixed/receive variable     Loan rate risk                    43,909                -            (296)               -
  Receive fixed/pay variable     Borrowing cost                    70,000            8,783           8,783                -
Interest rate caps/corridors     Borrowing cost                   202,000            1,405           1,405            1,503
                                                           ---------------  ---------------  --------------   --------------
                                                                $ 745,909         $ 10,188        $  6,248       $    1,503
                                                           ===============  ===============  ==============   ==============

DECEMBER 31, 2002
Interest rate swaps:
  Pay fixed/receive variable     Borrowing cost                 $  45,000         $      -        $ (3,396)      $        -
  Receive fixed/pay variable     Borrowing cost                   157,750           12,368          12,368                -
Interest rate caps/corridors     Borrowing cost                   162,000               37              37              415
                                                           ---------------  ---------------  --------------   --------------
                                                                $ 364,750         $ 12,405        $  9,009       $      415
                                                           ===============  ===============  ==============   ==============

SEPTEMBER 30, 2002
Interest rate swaps:
  Pay fixed/receive variable     Deposit/borrowing cost         $  45,000         $      -        $ (3,401)      $        -
  Receive fixed/pay variable     Borrowing cost                   157,750           11,690          11,690                -
Interest rate caps/corridors     Borrowing cost                   162,000                -              81              553
                                                           ---------------  ---------------  --------------   --------------
                                                                $ 364,750         $ 11,690        $  8,370       $      553
                                                           ===============  ===============  ==============   ==============
</TABLE>


                                                     13


<PAGE> 14


NOTE 9 - OTHER COMPREHENSIVE INCOME (LOSS)

Presented below is a reconciliation of net income to comprehensive income (loss)
indicating the components of other comprehensive income for the periods
indicated.
<TABLE>
<CAPTION>

                                                               Three Months Ended               Nine Months Ended
                                                                 September 30,                     September 30,
                                                         -------------------------------   -----------------------------
(in thousands)                                                2003             2002             2003            2002
                                                         --------------   --------------   -------------   -------------
<S>                                                           <C>              <C>             <C>             <C>
Net income                                                    $ 13,308         $ 13,140        $ 37,288        $ 35,020
Other comprehensive income (loss):
  Gain (loss) on derivatives recognized in
   other comprehensive income                                      415           (1,561)         (3,017)         (2,842)
  Unrealized holding gain (loss) on debt securities            (27,119)          21,580         (18,531)         30,952
  Less reclassification adjustment for
   gains included in net income                                    341            3,063           8,620           2,118
                                                         --------------   --------------   -------------   -------------
Other comprehensive income (loss) before tax                   (27,045)          16,956         (30,168)         25,992
Income tax (benefit) related to items
  of other comprehensive income                                 (9,466)           5,935         (10,559)          9,097
                                                         --------------   --------------   -------------   -------------
Other comprehensive income (loss), after tax                   (17,579)          11,021         (19,609)         16,895
                                                         --------------   --------------   -------------   -------------
Comprehensive income (loss)                                   $ (4,271)        $ 24,161        $ 17,679        $ 51,915
                                                         ==============   ==============   =============   =============
</TABLE>

NOTE 10- NET GAINS (LOSSES)

Net gains (losses) include the following components for the periods indicated.
<TABLE>
<CAPTION>
                                                                 Three Months Ended                 Nine Months Ended
                                                                    September 30,                     September 30,
                                                           ------------------------------    -------------------------------
(in thousands)                                                 2003             2002             2003             2002
                                                           -------------    -------------    -------------    --------------
<S>                                                            <C>            <C>             <C>                <C>
Net gains (losses):
  Securities                                                   $ 341          $ 3,063         $  8,620           $ 2,118
  Asset sales                                                    405              275            1,779               382
  Debt extinguishment                                              -           (1,341)         (15,298)           (2,314)
                                                           -------------    -------------    -------------    --------------
Net gains (losses)                                             $ 746          $ 1,997         $ (4,899)          $   186
                                                           =============    =============    =============    ==============
</TABLE>

NOTE 11 - PER SHARE INFORMATION
<TABLE>
<CAPTION>
The following table presents a summary of per share data and amounts for the periods indicated.

                                                             Three Months Ended              Nine Months Ended
                                                                September 30,                   September 30,
                                                        -----------------------------   -----------------------------
(in thousands, except per share data)                       2003            2002            2003            2002
                                                        -------------   -------------   -------------   -------------
<S>                                                       <C>             <C>             <C>             <C>
Qualifying net income                                     $ 13,308        $ 13,140        $ 37,288        $ 35,020
Basic EPS shares                                            24,556          24,840          24,483          25,035
Basic EPS                                                 $   0.54        $   0.53        $   1.52        $   1.40
Dilutive shares                                                649             653             629             772
Diluted EPS shares                                          25,205          25,493          25,112          25,807
Diluted EPS                                               $   0.53        $   0.52        $   1.48        $   1.36
</TABLE>


                                                       14

<PAGE> 15


NOTE 12 - COMMITMENTS AND CONTINGENCIES

COMMITMENTS
The table below presents commitments to extend credit in the form of consumer,
commercial real estate and business loans for the period indicated.
                                                             September 30,
(in thousands)                                                   2003
                                                            --------------
Commercial business and real estate                            $ 393,538
Consumer revolving credit                                        290,112
Residential mortgage credit                                       16,162
Performance standby letters of credit                             53,730
Commercial letters of credit                                          52
                                                           --------------
  Total loan commitments                                       $ 753,594
                                                           ==============

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

SECURITIZATIONS AND RECOURSE PROVISION
From 1999 through 2001, the Corporation securitized a total of $946 million of
its acquired residential mortgage loan portfolio. These loans were securitized
with Fannie Mae and the respective securities were placed into the Corporation's
investment portfolio.

The loans underlying the securities were securitized with full recourse to the
Corporation for any losses. The maximum potential recourse obligation was $65.8
million and $159.1 million at September 30, 2003 and 2002, respectively. A
recourse liability was established by the Corporation based upon management's
current assessment of the credit risk inherent in the loans. The recourse
liability amounted to $1.5 million and $2.8 million at September 30, 2003 and
2002, respectively. The recourse liability is evaluated periodically for
adequacy. Net charge-offs to the recourse liability amounted to $1.1 million and
$850 thousand for the nine months ended September 30, 2003 and 2002,
respectively. At September 30, 2003, $1.0 million of loans with potential
recourse were 90 days or more past due.

NOTE 13 - RECENT DEVELOPMENTS

On November 3, 2003, the Corporation announced it had reached a definitive
agreement to acquire Southern Financial Bancorp, Inc. ("Southern Financial").
Southern Financial is headquartered in Warrenton Virginia and is the holding
company for Southern Financial Bank. Following its pending acquisition of Essex
Bancorp, Inc., Southern Financial will have approximately $1.5 billion in assets
and operate 33 offices in the Northern Virginia areas of Fairfax, Loudoun and
Prince William Counties as well as Richmond, Charlottesville and the Tidewater
areas. Pursuant to the agreement, Southern Financial will be merged with and
into the Corporation. Shareholders of Southern Financial will receive 1.0875
shares of Corporation common stock and $11.125 in cash for each Southern
Financial share outstanding, subject to possible adjustment under certain
circumstances. The transaction is valued at approximately $330 million, or
$44.50 per common share of the Southern Financial common stock. The transaction,
which is subject to approval by regulatory authorities and the Corporation's and
Southern Financial's shareholders, is expected to close in the second quarter of
calendar year 2004.

The Corporation and Southern Financial will be filing a joint proxy
statement/prospectus and other relevant documents concerning the merger with the
United States Securities and Exchange Commission. The Corporation urges
investors to read the joint proxy statement/prospectus and any other relevant
documents to be filed with the SEC, because they contain important information.




                                       15



<PAGE> 16

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

FINANCIAL REVIEW

Provident Bankshares Corporation ("the Corporation"), a Maryland corporation,
was organized as a bank holding company in 1987, and is the sole stockholder of
Provident Bank ("the Bank"), a Maryland chartered stock commercial bank. The
Bank offers consumer and commercial banking services through a network of 114
banking offices and 183 ATMs in the Baltimore-Washington corridor of Maryland,
Northern Virginia, and southern York County, Pennsylvania. At September 30,
2003, the branch network consisted of 58 traditional full service branch
locations, 52 in-store branches and 4 ATM Plus banking offices. The in-store and
ATM Plus offices are located in supermarkets and national retail superstores. Of
the 114 banking offices, 58% are located in the Baltimore region and 42% are
located in the metropolitan Washington D.C. region. The Bank offers related
financial services through its wholly owned subsidiaries. Mutual funds,
annuities and insurance products are offered through Provident Investment
Company and leases through Court Square Leasing Corporation and Provident Lease
Corporation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Discussion and analysis of financial condition and results of operations are
based on the consolidated financial statements of the Corporation, which are
prepared in accordance with accounting principles generally accepted in the
United States of America ("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 disclosure of
contingent assets and liabilities. Management evaluates estimates on an on-going
basis including those related to the allowance for loan losses, non-accrual
loans, asset prepayment rates, other real estate owned, other than temporary
impairment of investment securities, intangible assets, pension and
post-retirement benefits, stock-based compensation, derivative positions,
recourse liabilities, 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. Actual results may
differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies affect its more
significant judgments and estimates used in preparation of its consolidated
financial statements: allowance for loan losses, other than temporary impairment
of investment securities, asset prepayment rates and income taxes. Each estimate
is discussed below. The financial impact of each estimate, to the extent
significant to financial results, is discussed in the applicable sections of
Management's Discussion and Analysis. It is at least reasonably possible that
each of the Corporation's estimates could change in the near term and the affect
of the change could be material to the Corporation's Consolidated Financial
Statements.

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 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.

For portfolios such as consumer loans, commercial business loans and loans
secured by real estate, the determination of the allocated allowance is
conducted at an aggregate, or pooled, level. Each quarter, twelve-month rolling
loss rates for homogenous pools of loans in the consumer portfolio provide the
basis for the allocated reserve. Historical loss rates also provide the basis


                                       16


<PAGE> 17

for reserves allocated to pools within the commercial portfolios. 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, 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, speculative 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 monthly to review the credit quality of the
loan portfolios and at least quarterly with executive management 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, the Audit Committee and the Board of Directors. Such
reviews also assist management in establishing the level of the allowance.

Management believes that it uses the best 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 as a result of the factors discussed above.

The Bank is examined periodically by the Federal Deposit Insurance Corporation
and, accordingly, as part of this exam, 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.

OTHER THAN TEMPORARY IMPAIRMENT OF INVESTMENT SECURITIES
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. The
term "other than temporary" is not intended to indicate that the decline is
permanent. It indicates that the prospects for a near term recovery of value are
not necessarily favorable, or that there is a lack of evidence to support fair
values equal to, or greater than, the carrying value of the investment. 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.

ASSET PREPAYMENT RATES
The Corporation purchases 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. The purchase premiums and discounts associated with these
assets are amortized or accreted to interest income over the estimated life of
the related assets. The estimated life is calculated by projecting future
prepayments and the resulting principal cash flows until maturity. Management
makes prepayment rate projections by utilizing actual prepayment speed
experience and available market information on like-kind instruments. The
assumed 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.

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 carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period indicated by the enactment date. A

                                       17

<PAGE> 18

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. The judgment about the level of future taxable
income is dependent to a great extent on matters that may, at least in part, be
beyond the Bank's control. 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.

FINANCIAL CONDITION

At September 30, 2003, total assets were $5.0 billion, up slightly from $4.9
billion at December 31, 2002. The Corporation continued to migrate the
composition of the balance sheet by focusing resources on growth in core
business lines, resulting in a higher percentage of core loans and deposits on
the balance sheet, while non-core loan and deposit balances continued to
decline. The Corporation experienced growth in all of its markets, and opened
one in-store branch and closed one traditional branch in the Washington
metropolitan area during the quarter.

ASSET COMPOSITION
The following table summarizes the composition of the Bank's average earning
assets for the periods indicated.
<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                September 30,                   $               %
                                                       -------------------------------
(dollars in thousands)                                     2003             2002            Variance         Variance
                                                       --------------   --------------    -------------    -------------
<S>                                                     <C>               <C>              <C>                  <C>
Investments                                             $  1,993,040      $ 1,914,305      $   78,735             4.1 %
Other earning assets                                          15,404            8,672           6,732            77.6
Core loans:
  Consumer                                                   928,730          811,417         117,313            14.5
  Commercial business                                        355,002          343,577          11,425             3.3
  Real estate                                                630,095          524,259         105,836            20.2
                                                       --------------   --------------    -------------
    Total core loans                                       1,913,827        1,679,253         234,574            14.0
                                                       --------------   --------------    -------------
Non-core loans:
  Consumer                                                   694,637          895,848        (201,211)          (22.5)
  National syndicated loans                                   31,499           67,103         (35,604)          (53.1)
                                                       --------------   --------------    -------------
    Total non-core loans                                     726,136          962,951        (236,815)          (24.6)
                                                       --------------   --------------    -------------
Total loans                                                2,639,963        2,642,204          (2,241)           (0.1)
                                                       --------------   --------------    -------------
Total average earning assets                            $  4,648,407      $ 4,565,181      $   83,226             1.8 %
                                                       ==============   ==============    =============
</TABLE>
Total average earning assets increased by $83 million to $4.6 billion in the
third quarter of 2003 ("the 2003 quarter") compared to the third quarter of 2002
("the 2002 quarter"). While total average loan balances remained flat at $2.6
billion, the mix changed favorably, with a $235 million increase in average core
loan balances offsetting a $237 million decrease in average non-core loan
balances. Management defines core loans as those loans originated by the Bank,
as well as purchases of participations in syndicated loans in the Bank's defined
market area. Non-core loans are defined as purchased loans, participations in
syndicated loans outside the Bank's defined market area, and Bank-originated
loans from discontinued product lines.

The Corporation's expanded presence in the Baltimore-Washington metropolitan
region facilitated the robust 14% growth in average core loans, which comprise
72% of total average loans in the 2003 quarter. The core loan growth of $235
million was evenly split between consumer and commercial loans. Average core
consumer loans, comprised of direct consumer and marine loans, increased $117
million, or 14%, in the 2003 quarter compared to the 2002 quarter. Production of
direct consumer loans, primarily home equity loans and lines generated by the
Bank's retail branches, phone center and Internet unit, totaled $141 million in
the 2003 quarter. This was more than double the production in the 2002 quarter
of $60 million, and was 29% higher than production in the second 2003 quarter.
Average core consumer loan balances from the Washington market grew 33% in the
2003 quarter compared to the 2002 quarter, reflecting the Bank's continued
expansion into that market. The strong production in the current year resulted
in average home equity loan and line balances of $433 million in the 2003
quarter, a $64 million increase from the comparable 2002 quarter. Marine loans,
which are originated indirectly through brokers but underwritten individually by
the Bank, also had strong performance, with average marine loan balances up 15%
to $456 million in the 2003 quarter. Average core commercial business, real
estate construction and commercial mortgage loans also continued to show steady
growth, evidenced by an increase of $117 million, or 14%, in the 2003 quarter
compared to the 2002 quarter. The growth in average core commercial loans
continued to be evenly balanced by region, with growth of 17% in the Washington
market and 11% in the Baltimore market for the 2003 quarter compared to the 2002
quarter.

                                       18


<PAGE> 19


Consistent with the execution of its key strategies, the Corporation's average
non-core loan balances continued to decline significantly, decreasing $237
million, or 25%, in the 2003 quarter. The largest component of non-core consumer
loans is the portfolio of acquired residential mortgage loans (consisting of
home equity loans and lines), which declined by $40 million to an average
balance for the quarter of $573 million. The decline was a result of the level
of payoffs and resultant amortization of loan purchase premiums, partially
offset by additional purchases. In the 2003 quarter, the Corporation purchased
$96 million in loans secured by residential real estate, all of which are in
first lien position. Purchases for the current quarter included $24 million in
loans to borrowers residing in the Bank's footprint. Provident will service
these loans and will cultivate additional relationships with the borrowers.
Management intends to continue to purchase residential loans to maintain an
average acquired portfolio size between $500 million and $600 million. The
average balances of other non-core consumer portfolios, consisting of
residential mortgage and indirect auto loan product lines that are no longer
offered by the Bank, declined by $161 million from the 2002 quarter. The
non-core syndicated portfolio average balances declined $36 million, or 53%, in
the 2003 quarter. The remaining $31 million average balances of non-core
syndicated loans represent a diversified portfolio of loans which are performing
as agreed and amortizing according to their terms and conditions.

The growth in the investment portfolio average balances of $79 million in the
2003 quarter compared to the 2002 quarter occurred as excess cash flows were
reinvested into the investment portfolio. Cashflows were predominately invested
in a combination of 15 year conventional MBS and 7/1 hybrid ARMs, as well as
floating rate asset backed securities. Investment portfolio average balances
declined $139 million from the second 2003 quarter to the third 2003 quarter.

ASSET QUALITY
Non-performing assets were $24.2 million at September 30, 2003, or 0.90% of
loans outstanding, slightly improved from the December 31, 2002 level of $24.9
million, or 0.97% and the September 30, 2002 level of $24.5 million, or 0.93%.
At September 30, 2003, $18.5 million of the $20.3 million of total
non-performing loans were in the consumer and residential mortgage loan
portfolios, which are collateralized by 1 to 4 family residences. With the vast
majority of non-performing loans already written down to net fair value,
management expects little further loss. Commercial and real estate
non-performing loans remained at historically low levels in the 2003 quarter.
Total 90-day delinquent loans decreased $3.6 million at September 30, 2003 from
the level at December 31, 2002. In the acquired mortgage portfolio (comprised of
nearly 80% first lien loans), delinquencies have declined consistently, reaching
their lowest level in several years.

As a result of the growth and mix in the commercial and consumer loan
portfolios, the Corporation increased the level of the allowance by $1.6 million
from the December 31, 2002 level to $35.0 million at September 30, 2003. At
September 30, 2003, the allowance represents 1.30% of total loans outstanding
and 172% of non-performing loans. Portfolio-wide net charge-offs represented
0.30% of average loans for the 2003 quarter, continuing to improve from 0.41% in
the December 2002 quarter and 0.34% in the September 2002 quarter.

Although no assurances can be given, management believes that non-performing
assets will remain relatively stable in the near term. Management believes that
the allowance at September 30, 2003 represents its best estimate of probable
losses inherent in the portfolio.



                                       19

<PAGE> 20

<TABLE>
<CAPTION>

ASSET QUALITY SUMMARY

                                                                                    September 30,     December 31,    September 30,
(dollars in thousands)                                                                  2003             2002             2002
                                                                                  ---------------   --------------   --------------
<S>                                                                                   <C>              <C>                <C>
NON-PERFORMING ASSETS:
Acquired residential mortgage                                                         $ 16,122         $ 18,070           $ 16,626
Other consumer                                                                             266              460                642
Commercial business                                                                      1,810              514                 88
Residential real estate construction                                                       134              136                213
Residential real estate mortgage                                                         2,002            1,953              2,776

                                                                                ---------------   --------------   ----------------
  Total non-accrual loans                                                               20,334           21,133             20,345
Total renegotiated loans                                                                     -                -                  -
                                                                                ---------------   --------------   ----------------
  Total non-performing loans                                                            20,334           21,133             20,345
Total other assets and real estate owned                                                 3,916            3,796              4,105
                                                                                ---------------   --------------   ----------------
  Total non-performing assets                                                         $ 24,250         $ 24,929           $ 24,450
                                                                                ===============   ==============   ================

90-DAY DELINQUENCIES:
Acquired residential mortgage                                                         $  4,276         $  5,108           $  5,601
Other consumer                                                                             723            1,023              1,391
Commercial business                                                                        380              320                648
Residential real estate mortgage                                                         5,899            8,377              8,099
                                                                                ---------------   --------------   ----------------
  Total 90-day delinquencies                                                          $ 11,278         $ 14,828           $ 15,739
                                                                                ===============   ==============   ================

ASSET QUALITY RATIOS:
Non-performing loans to loans                                                            0.75%            0.83%              0.77%
Non-performing assets to loans                                                           0.90%            0.97%              0.93%
Allowance for loan losses to loans                                                       1.30%            1.31%              1.31%
Net charge-offs in quarter to average loans                                              0.30%            0.41%              0.34%
Allowance for loan losses to non-performing loans                                      172.16%          158.16%            170.14%

</TABLE>

                                                       20


<PAGE> 21


SOURCES OF FUNDS

DEPOSITS AND BORROWINGS
<TABLE>
<CAPTION>
The following table summarizes the composition of the Bank's average deposit and borrowing balances for the periods indicated.

                                                                Three Months Ended
                                                                   September 30,                $               %
                                                          ------------------------------
(dollars in thousands)                                        2003            2002          Variance        Variance
                                                          -------------   --------------  -------------   -------------
<S>                                                        <C>             <C>             <C>                <C>
Core deposits:
  Consumer                                                 $ 2,365,441     $ 2,333,725     $  31,716            1.4 %
  Commercial                                                   504,287         384,197       120,090           31.3
                                                          -------------   --------------  -------------
    Total core deposits                                      2,869,728       2,717,922       151,806            5.6
Non-core deposits                                              282,405         519,125      (236,720)         (45.6)
                                                          -------------   --------------  -------------
    Total deposits                                           3,152,133       3,237,047       (84,914)          (2.6)
                                                          -------------   --------------  -------------
Borrowings:
  Federal funds purchased                                      284,987         199,190        85,797           43.1
  FHLB advances                                                842,317         672,566       169,751           25.2
  Repurchase agreements and other                              302,489         358,497       (56,008)         (15.6)
  Trust preferred securities                                    68,159          68,087            72            0.1
                                                          -------------   --------------  -------------
    Total borrowings                                         1,497,952       1,298,340       199,612           15.4
                                                          -------------   --------------  -------------
    Total average deposits and borrowings                  $ 4,650,085     $ 4,535,387     $ 114,698            2.5 %
                                                          =============   ==============  =============
</TABLE>

Total average deposit balances decreased $85 million in the 2003 quarter
compared to the 2002 quarter. Average non-core deposits (composed of brokered
CDs) decreased $237 million, or 46%, from matured CDs that were not replaced
with non-core funding. As a result of the Corporation's focus on its core
business lines, average core deposits generated from the Bank's consumer and
commercial customer base continued to grow steadily, replacing $152 million of
the brokered CD runoff. Excluding average direct time deposits, which decreased
$132 million from the 2002 quarter to the 2003 quarter, average deposit balances
increased $284 million, or 10%, from the 2002 quarter to the 2003 quarter.
Deposit growth from the commercial sector was particularly strong during the
same period, with a net increase in average balances of $120 million, or 31%, in
the 2003 quarter, of which $102 million was in non-interest-bearing accounts.
Regionally, core deposits in the Washington market increased 14% and core
deposits in the Baltimore market increased 3%. In the 2003 quarter, average core
deposits comprised 91% of average total deposits.

Average borrowings increased $200 million in the third quarter of 2003 compared
to the 2002 quarter. Average federal funds purchased ("fed funds") increased $86
million, reflecting management's desire to match fund more of the Bank's
prime-based loan portfolio with these borrowings. Average Federal Home Loan Bank
("FHLB") borrowings increased $170 million over 12 months, however FHLB
borrowings declined $73 million from June 30, 2003 to September 30, 2003.

LIQUIDITY
An important component of the Bank'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. The Bank's
Asset/Liability Management Committee has established general guidelines for
maintaining prudent levels of liquidity. The committee continually monitors the
amount and sources of available liquidity, and the cost required for obtaining
it. Management believes the Bank has sufficient liquidity to meet funding needs
in the foreseeable future.

The Bank's primary source of liquidity is the assets it possesses, which can be
pledged as collateral for secured borrowings or alternatively sold to raise cash
levels. An objective of liquidity management is to optimize the use of this
collateral to minimize funding costs. The Bank's primary sources for raising
secured borrowings are the FHLB and securities broker/dealers. At September 30,
2003, $1.2 billion of secured borrowings were employed, with sufficient
collateral available to immediately raise an additional $619 million. After
covering $303 million of unsecured funds that mature in the next three months,
the excess liquidity position of $316 million is well in excess of projected
liquidity requirements for the next 12 months. Additionally, over $400 million
of assets are maintained as collateral with the Federal Reserve that is
available as a contingent funding source.



                                       21

<PAGE> 22


The Bank also has several unsecured funding sources available. At September 30,
2003, the Bank possessed over $800 million of fed funds lines, of which only
$267 million were in use at quarter-end. Brokered CDs, which typically cost 10 -
25 basis points more than secured funds of a similar maturity, remain a viable
funding alternative, however management has not used this source since 2001 in
accordance with its strategy to reduce non-core funding. Existing brokered CD
average balances declined by $75 million in the third quarter of 2003 from the
second quarter of 2003. The unsecured debt markets are also a potential
alternative to raise funds but have not been employed since 2000 given the
Bank's ability to raise funds at lower interest rates in the secured funds
markets.

As an alternative to raising secured funds, the Bank can raise liquidity through
asset sales. At September 30, 2003, over $500 million of the Bank's investment
portfolio is not pledged as collateral for borrowings, and is immediately
saleable at a market value equaling or exceeding its amortized cost basis.
Additionally, over a 90-day time frame, much of the Bank's $1.6 billion consumer
loan portfolio is saleable in an efficient market.

Commitments to lend funds to customers affect the Bank's determination of
sufficient liquidity. The borrowing requirements of customers include
commitments to extend credit and unused availability of lines of credit, which
totaled $754 million at September 30, 2003 (see Note 12 to the unaudited
consolidated financial statements). Historically, many of the commitments expire
without being fully drawn; therefore, the total commitment amounts do not
necessarily represent future cash requirements.

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.
These dividends are utilized to pay dividends to stockholders, repurchase shares
and pay interest on trust preferred securities. 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 which could have a material impact on the Corporation.

MARKET RISK AND INTEREST RATE SENSITIVITY
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 direction 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. The simplest involves the
mismatch of maturities between fixed rate assets and liabilities. A second risk,
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 is priced using the CD yield curve or LIBOR yield
curve. These different yield curves typically do not move in lock-step with one
another. A third risk, options risk, exists in the form of prepayment volatility
in residential mortgage loans and other consumer loans. Prepayment risk
increases when long-term interest rates, such as the 10 year Treasury Note rate
or the 30 year mortgage rate, decline substantially. Prepayment volatility
complicates funding strategies in which the goal is to maintain a stable spread
between asset yields and borrowing rates.

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 U.S. Treasuries
and Interest Rate Swaps. The results of these shocks are measured in two forms:
first, the impact on net interest margin and earnings over one and two year time
frames; and second, the impact on the market value of equity. There are several
advantages of simulation analysis over traditional gap analysis. 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.



                                       22

<PAGE> 23



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 October 1, 2003 and evenly ramp-up or down over a six-month period. The
effect on net interest income would be for the next 12 months. Given the
interest environment at September 30, 2003, a 200 basis point drop in rate is
unlikely and has not been shown.

                                                     Projected Percentage

         Interest Rate Scenario                 Change in Net Interest Income
         ----------------------                 -----------------------------
           -100 basis points                               -5.1%

           No change                                         -

           +100 basis points                               +1.7%

           +200 basis points                               +1.8%

The isolated modeling environment, assuming no action by management, shows that
the Corporation's net interest income volatility is less than 6% under probable
single direction scenarios. The Corporation's one year forward earnings are
slightly asset sensitive, which will result in net interest income moving in the
same direction as future interest rates.

The Corporation maintains an overall interest rate management strategy that
incorporates structuring of investments, purchased funds, variable rate loan
products, and derivatives in order to minimize significant fluctuations in
earnings or market values (see Note 8 to unaudited financial statements). The
Bank continues to employ hedges to mitigate interest rate risk. Borrowings
totaling over $500 million have been employed which reset their rates monthly or
quarterly based on the level of long-term interest rates - specifically, the
10-year constant maturity swap rate - rather than short-term rates, to offset
the effect of mortgage prepayments on asset yields. There is a high correlation
between changes in the 10 year constant maturity swap rate and the 30 year
mortgage rate. Additionally, $544 million notional amount in interest rate swaps
were in force to reduce interest rate risk, and $202 million of interest rate
caps were employed to protect the interest margin from rising interest rates in
the future.

CAPITAL RESOURCES
Total stockholders' equity was $317 million at September 30, 2003, an increase
of $1.0 million from December 31, 2002. The change in stockholders' equity for
the nine months ended September 30, 2003 was attributable to $37.3 million in
earnings and $8.0 million from the issuance of common stock relating to the
exercise of stock options. This was partially offset by dividends paid of $16.9
million and a decrease of $19.6 million in accumulated other comprehensive
income ("OCI"). OCI decreased due primarily to a decline in market value of
available-for-sale securities. Capital was also reduced by $7.8 million from the
repurchase of 277,716 shares of the Corporation's common stock at an average
price of $28.75. The Corporation is authorized to repurchase an additional
722,284 shares under its current authorization.

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:
<TABLE>
<CAPTION>
                                                                                                    Minimum
                                                           September 30,       December 31,        Regulatory        To be "Well
                                                                2003               2002           Requirements       Capitalized"
                                                         -----------------   ---------------   -----------------   ---------------
<S>                                                            <C>                <C>               <C>                 <C>
Tier 1 leverage ratio                                           7.61%              7.47%             4.00%               5.00%
Tier 1 capital to risk-weighted assets                         11.99%             11.62%             4.00%               6.00%
Total regulatory capital to risk-weighted assets               13.11%             12.70%             8.00%              10.00%
</TABLE>


                                       23


<PAGE> 24


RESULTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2002

OVERVIEW
The Corporation recorded net income for the quarter ended September 30, 2003 of
$13.3 million or $.53 per diluted share, with return on average common equity of
16.63% and return on assets of 1.06%. The financial results for the 2003 quarter
compared to the 2002 quarter, represented by increases of 1.3% in net income and
1.9% in diluted earnings per share, demonstrated margin stability, continued
growth in all of the Corporation's core loan and deposit businesses and
continued progress in asset quality.

Net income was comparable to the prior year's third quarter. Increases of $3.3
million in net interest income and a $0.6 million increase in non-interest
income offset increases in provision, non-interest expense and income tax
expense of $0.8 million, $1.9 million and $1.0 million, respectively, compared
to the 2002 quarter. These items are discussed in more detail, as follows.

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, for purposes of analysis, is presented
on a tax-equivalent basis to recognize associated tax benefits. This
presentation provides a basis for comparison of yields with taxable earning
assets. The discussion of net interest income should be read in conjunction with
the table on the following pages. The table analyzes the reasons for the changes
from period-to-period 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 period-to-period in the relative mix of interest-earning
assets and interest-bearing liabilities.




                                       24

<PAGE> 25
<TABLE>
<CAPTION>

Comparative Analysis of Average Balances, Interest Income and Expense and Interest Yields and Rates

                                     ----------------------------------------------------------------
                                          Three Months Ended              Three Months Ended
                                          September 30, 2003              September 30, 2002
                                     ----------------------------------------------------------------
(dollars in thousands)                Average     Income/   Yield/    Average     Income/   Yield/
(tax-equivalent basis)                Balance     Expense   Rate      Balance     Expense   Rate
                                     -----------  --------- --------------------  --------- ---------
<S>                                  <C>           <C>       <C>     <C>          <C>        <C>
ASSETS
Interest-earning assets:
  Home equity                        $  433,193    $ 5,395   4.94 %  $  369,341   $  5,665   6.09 %
  Marine                                455,867      6,287   5.47       397,002      6,813   6.81
  Acquired residential mortgage         573,449      8,972   6.21       613,457     10,967   7.09
  Other direct consumer                  39,670        773   7.73        45,074        869   7.65
  Other indirect consumer                20,085        382   7.55        54,980      1,028   7.42
  Residential mortgage                  101,103      2,110   8.28       227,411      4,349   7.59
                                     -----------  ---------          -----------  ---------
    Total consumer                    1,623,367     23,919   5.85     1,707,265     29,691   6.90
  Commercial business                   355,002      5,150   5.76       343,577      5,802   6.70
  Real estate construction              334,702      3,567   4.23       296,668      3,568   4.77
  Commercial mortgage                   295,393      4,320   5.80       227,591      3,672   6.40
  Non-core SNCs                          31,499        278   3.50        67,103        778   4.60
                                     -----------  ---------          -----------  ---------
    Total loans                       2,639,963     37,234   5.60     2,642,204     43,511   6.53
                                     -----------  ---------          -----------  ---------
  Loans held for sale                    11,912        172   5.73         6,340        107   6.70
  Short-term investments                  3,492          7   0.80         2,332         16   2.72
  Taxable investment securities       1,974,264     21,187   4.26     1,893,581     23,427   4.91
  Tax-advantaged investment securities   18,776        331   6.99        20,724        375   7.18
                                     -----------  ---------          -----------  ---------
    Total investment securities       1,993,040     21,518   4.28     1,914,305     23,802   4.93
                                     -----------  ---------          -----------  ---------
      Total interest-earning assets   4,648,407     58,931   5.03     4,565,181     67,436   5.86
                                     -----------  ---------          -----------  ---------
Less allowance for loan losses          (34,472)                        (34,385)

Cash and due from banks                 116,487                          97,755
Other assets                            254,537                         232,236
                                     -----------                     -----------
   Total assets                      $4,984,959                      $4,860,787
                                     ===========                     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Demand/money market deposits       $  895,396      1,797   0.80    $  804,225      2,282   1.13
  Savings deposits                      708,493        680   0.38       657,405      1,772   1.07
  Direct time deposits                  691,228      4,116   2.36       822,964      7,193   3.47
  Brokered time deposits                282,405      4,387   6.16       519,125      8,325   6.36
  Short-term borrowings                 515,080      1,142   0.88       452,750      1,911   1.67
  Long-term debt                        982,872      8,604   3.47       845,590     10,998   5.16
                                     -----------  ---------          -----------  ---------
        Total interest-bearing
           liabilities                4,075,474     20,726   2.02     4,102,059     32,481   3.14
                                     -----------  ----------         -----------  ---------
Noninterest-bearing demand deposits     574,611                         433,328
Other liabilities                        17,296                          28,120
Common stockholders' equity             317,578                         297,280
                                     -----------                     -----------
   Total liabilities and
     stockholders' equity            $4,984,959                      $4,860,787
                                     ===========                     ===========
Net interest-earning assets          $  572,933                      $  463,122
                                     ===========                     ===========
Net interest income (tax-equivalent)                38,205                          34,955
Less tax-equivalent adjustment                        (168)                           (191)
                                                  ---------                       ---------
Net interest income                                $38,037                        $ 34,764
                                                  =========                       =========
Net yield on interest-earning assets                         3.26 %                          3.04 %
</TABLE>
<TABLE>
<CAPTION>
                                                                                                                  2003/2002
                                                                                                           Income/Expense Variance
                                                                     2003/2002 Increase/(Decrease)             Due to Change In
                                                           ----------------------------------------------  -------------------------
(dollars in thousands)                                       Average       %       Income/       %           Average      Average
(tax-equivalent basis)                                       Balance     Change    Expense    Change          Rate        Volume
                                                           ------------  -------   ---------  -----------  ------------ ------------
<S>                                                        <C>            <C>     <C>           <C>          <C>           <C>
ASSETS
Interest-earning assets:
  Home equity                                              $   63,852     17.3 %  $   (270)     (4.8)%       $ (1,161)     $   891
  Marine                                                       58,865     14.8        (526)     (7.7)          (1,451)         925
  Acquired residential mortgage                               (40,008)    (6.5)     (1,995)    (18.2)          (1,310)        (685)
  Other direct consumer                                        (5,404)   (12.0)        (96)    (11.0)               9         (105)
  Other indirect consumer                                     (34,895)   (63.5)       (646)    (62.8)              17         (663)
  Residential mortgage                                       (126,308)   (55.5)     (2,239)    (51.5)             366       (2,605)
                                                          ------------            ---------
    Total consumer                                            (83,898)    (4.9)     (5,772)    (19.4)
  Commercial business                                          11,425      3.3        (652)    (11.2)            (840)         188
  Real estate construction                                     38,034     12.8          (1)     (0.0)            (431)         430
  Commercial mortgage                                          67,802     29.8         648      17.6             (368)       1,016
  Non-core SNCs                                               (35,604)   (53.1)       (500)    (64.3)            (155)        (345)
                                                          ------------            ---------
    Total loans                                                (2,241)    (0.1)     (6,277)    (14.4)
                                                          ------------            ---------
  Loans held for sale                                           5,572     87.9          65      60.7              (17)          82
  Short-term investments                                        1,160     49.7          (9)    (56.3)             (15)           6
  Taxable investment securities                                80,683      4.3      (2,240)     (9.6)          (3,206)         966
  Tax-advantaged investment securities                         (1,948)    (9.4)        (44)    (11.7)              (9)         (35)
                                                          ------------            ---------
    Total investment securities                                78,735      4.1      (2,284)     (9.6)
                                                          ------------            ---------
      Total interest-earning assets                            83,226      1.8      (8,505)    (12.6)          (9,715)       1,210
                                                          ------------            ---------
Less allowance for loan losses                                    (87)     0.3
Cash and due from banks                                        18,732     19.2
Other assets                                                   22,301      9.6
                                                          ------------
    Total assets                                            $ 124,172      2.6
                                                          ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Demand/money market deposits                             $   91,171     11.3        (485)    (21.3)            (722)         237
  Savings deposits                                             51,088      7.8      (1,092)    (61.6)          (1,220)         128
  Direct time deposits                                       (131,736)   (16.0)     (3,077)    (42.8)          (2,048)      (1,029)
  Brokered time deposits                                     (236,720)   (45.6)     (3,938)    (47.3)            (253)      (3,685)
  Short-term borrowings                                        62,330     13.8        (769)    (40.2)          (1,004)         235
  Long-term debt                                              137,282     16.2      (2,394)    (21.8)          (3,986)       1,592
                                                          ------------            ---------
    Total interest-bearing liabilities                        (26,585)    (0.6)    (11,755)    (36.2)         (11,546)        (209)
                                                          ------------            ---------
Noninterest-bearing demand deposits                           141,283     32.6
Other liabilities                                             (10,824)   (38.5)
Common stockholders' equity                                    20,298      6.8
                                                          ------------
   Total liabilities and
     stockholders' equity                                  $  124,172      2.6
                                                          ============
Net interest-earning assets                                $  109,811     23.7
                                                          ============
Net interest income (tax-equivalent)                                               3,250       9.3         $  1,831      $ 1,419
Less tax-equivalent adjustment                                                        23     (12.0)
                                                                                ---------
Net interest income                                                             $  3,273       9.4
                                                                                =========
</TABLE>


                                                       25

<PAGE> 26

Net interest income on a tax-equivalent basis totaled $38.2 million in the 2003
quarter, compared to $35.0 million in the 2002 quarter, while the net interest
margin expanded to 3.26% from 3.04%. A decline of $8.5 million in total interest
income was more than offset by a decline in total interest expense of $11.8
million. Generally, favorable changes in the mix of interest-bearing liabilities
offset growth in earning assets at lower yields, primarily in the investment
portfolio. The margin benefited further from a $141 million increase in
noninterest-bearing deposits during the period.

The yield on earning assets was 5.03% in the 2003 quarter, compared to 5.86% in
the 2002 quarter, a decline of 83 basis points, reflecting the general decline
in interest rates during the period. The $8.5 million decrease in total interest
income was primarily attributable to two factors. First, higher yielding home
equity loans, investments, and marine loans prepaid substantially, and were
replaced with like product at lower yields. Additionally, $161 million (average
balance) of residential mortgages and indirect consumer loans with higher yields
prepaid and were replaced with investment securities at lower yields.

The average rate paid on interest-bearing liabilities declined 112 basis points
to 2.02% in the 2003 quarter, versus 3.14% in the 2002 quarter. The favorable
changes in deposit mix, from higher rate non-core and retail CDs into lower rate
demand and savings deposits, had a positive impact on deposit interest expense
of $8.6 million. Interest expense on borrowings decreased $3.2 million in the
2003 quarter from the prior year quarter, primarily resulting from the
extinguishment of $140 million of higher rate FHLB borrowings in the second 2003
quarter, and the repricing of floating rate FHLB borrowings throughout the
period.

Future growth in net interest income will primarily 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 $2.9 million for the 2003 quarter, up from
$2.1 million in the 2002 quarter. Loan balances in the 2003 quarter increased
$105 million more than loan balances increased in the 2002 quarter, resulting in
an increased provision. This was partially offset by lower net charge-offs of
$2.0 million in the 2003 quarter compared to $2.3 million in the 2002 quarter.
The 12% decline in net charge-offs resulted from a 44% reduction in net
charge-offs on the acquired residential loan portfolio for the current quarter
versus the prior year quarter. On an overall basis, net charge-offs as a
percentage of average loans were 0.30% in the 2003 quarter compared to 0.34% in
the 2002 quarter.

NON-INTEREST INCOME
Total non-interest income increased to $24.6 million in the 2003 quarter from
$24.0 million in the 2002 quarter. Comparing the 2003 quarter to the 2002
quarter, total non-interest income, excluding the net gains described below, was
$23.9 million and $22.0 million, respectively, which represents a 8% increase
from period to period. Exclusive of the net gains, non-interest income, as a
percentage of combined net interest margin and non-interest income, was 39% for
both quarters.

The improvement in non-interest income continued to be driven by deposit service
charges, which increased $1.1 million, or 6%, to $19.5 million from the 2002
quarter to the 2003 quarter. The increase in deposit fees was primarily the
result of strong consumer and commercial deposit account growth. As a result of
the new retail debit card interchange structure, per transaction interchange
revenue was cut by 33% beginning on August 1, 2003. Strong increases in the
average number of active cards and average purchases per card mitigated the
reduced per transaction revenue, and as a result, debit card revenues decreased
only slightly from $2.4 million in the 2002 quarter to $2.2 million for the 2003
quarter.

Commissions and fees of $1.1 million were level with the amounts in the prior
year quarter. Commissions and fees are primarily generated from Provident
Investment Company, Inc., which offers annuities and mutual funds through an
affiliation with a securities broker-dealer, as well as property and casualty
insurance products as an agent. While the volume of investment sales has
increased, the commission level has decreased, resulting in flat period over
period results. Other non-interest income increased 32% to $3.3 million in the
2003 quarter. Other non-interest income is composed primarily of loan fees (25%
increase), cash surrender value income associated with bank-owned life insurance
(5% decrease) and operating lease income ($172 thousand or 48% increase).
Additionally, the Corporation received $300 thousand in additional income in the
2003 quarter relating to a change in the relationship associated with its
affinity credit card program.

Net gains (losses) are composed of security gains and losses, losses from the
extinguishment of debt, and gains and losses on sales of loans, foreclosed
property and fixed assets, which occur in the ordinary course of business. The
Corporation recorded $746 thousand in net gains for the 2003 quarter, compared
to net gains of $2.0 million in the same period in 2002. The net gains in 2003
were composed of $341 thousand in net gains on the sales of investment
securities and $405 thousand in net gains relating to the favorable disposition
of certain loans, fixed assets and foreclosed property.

                                       26


<PAGE> 27



NON-INTEREST EXPENSE
Non-interest expense increased $1.9 million, or 5.0%, in the 2003 quarter
compared to the comparable 2002 quarter. $1.3 million of the increase was
directly attributable to the opening of 13 new branches and 4 ATM Plus locations
during the last twelve months, impacting salaries and employee benefits,
occupancy and furniture and fixture expense. The growth in non-interest expense,
other than that which was impacted by branch expansion, was contained to an
annual growth rate of less than 2%. External processing fees increased $220
thousand, or 4.3%, due to increases in the volume of processing. The expense
associated with the recourse reserve on securitized loans, which is included in
other non-interest expense, increased $191 thousand in the 2003 quarter,
reflecting chargeoff activity in the quarter.

INCOME TAXES
In the 2003 quarter, the Corporation recorded $7.1 million of income tax expense
on pre-tax income of $20.4 million, resulting in an effective tax rate of 34.7%.
In the 2002 quarter, the Corporation recorded $6.0 million of income tax expense
on pre-tax income of $19.2 million, resulting in an effective tax rate of 31.5%.
The change in the effective tax rate in the 2003 quarter is primarily due to
state tax expense which added approximately 2.8% to the Corporation's effective
tax rate.


FOR NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2002

The Corporation recorded net income of $37.3 million or $1.48 per diluted share
for the nine months ended September 30, 2003, compared to $35.0 million or $1.36
per diluted share in the prior year.

Tax-equivalent net interest income for the nine months of 2003 increased 2.9% to
$111.0 million compared to the 2002 period, reflecting a $3.1 million increase
from period to period. Interest income declined $34.2 million, but was offset by
a decline in interest expense of $37.3 million. Average interest-earning assets
increased $69 million while average interest-bearing liabilities decreased $18
million during the past year. The margin benefited further from a $114 million
increase in noninterest-bearing deposits during the period. These shifts, in
addition to the general decline in interest rates, had the effect of increasing
the level of net interest income as well as increasing the net interest margin
by 4 basis points to 3.21% in 2003 from 3.17% in 2002.




                                       27

<PAGE> 28
<TABLE>
<CAPTION>

Comparative Analysis of Average Balances, Interest Income and Expense and Interest Yields and Rates

                                                Nine Months Ended               Nine Months Ended
                                               September 30, 2003              September 30, 2002
                                     ----------------------------------------------------------------
(dollars in thousands)                Average     Income/   Yield/    Average     Income/   Yield/
(tax-equivalent basis)                Balance     Expense   Rate      Balance     Expense   Rate
                                     ----------- ---------- -------------------- ---------- ---------
<S>                                  <C>          <C>        <C>     <C>          <C>        <C>
ASSETS
Interest-earning assets:
  Home equity                        $  398,564   $ 15,450   5.18 %  $  363,395   $ 16,866   6.21 %
  Marine                                441,435     18,832   5.70       374,679     19,320   6.89
  Acquired residential mortgage         538,208     26,064   6.47       659,203     38,019   7.71
  Other direct consumer                  40,504      2,411   7.96        46,318      2,680   7.74
  Other indirect consumer                25,386      1,478   7.78        67,795      3,802   7.50
  Residential mortgage                  126,536      7,347   7.76       258,330     14,958   7.74
                                     ----------- ----------          ----------- ----------
    Total consumer                    1,570,633     71,582   6.09     1,769,720     95,645   7.23
  Commercial business                   350,167     15,495   5.92       333,611     16,783   6.73
  Real estate construction              321,865     10,489   4.36       283,034     10,183   4.81
  Commercial mortgage                   268,686     12,086   6.01       224,341     10,960   6.53
  Non-core SNCs                          39,403      1,085   3.68        71,530      2,494   4.66
                                     ----------- ----------          ----------- ----------
    Total loans                       2,550,754    110,737   5.80     2,682,236    136,065   6.78
                                     ----------- ----------          ----------- ----------
  Loans held for sale                    10,823        458   5.66         5,135        253   6.59
  Short-term investments                  2,760         20   0.97         5,204         81   2.08
  Taxable investment securities       2,039,235     68,729   4.51     1,839,933     77,724   5.65
  Tax-advantaged investment securities   18,983      1,001   7.05        21,187      1,041   6.57
                                     ----------- ----------          ----------- ----------
    Total investment securities       2,058,218     69,730   4.53     1,861,120     78,765   5.66
                                     ----------- ----------          ----------- ----------
      Total interest-earning assets   4,622,555    180,945   5.23     4,553,695    215,164   6.32
                                     ----------- ----------          ----------- ----------
Less allowance for loan losses          (33,333)                        (34,331)
Cash and due from banks                 111,038                          93,181
Other assets                            255,987                         244,581
                                     -----------                     -----------
   Total assets                      $4,956,247                      $4,857,126
                                     ===========                     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Demand/money market deposits       $  875,129      5,194   0.79    $  777,785      6,956   1.20
  Savings deposits                      698,685      2,737   0.52       646,559      5,427   1.12
  Direct time deposits                  723,518     14,461   2.67       838,177     23,616   3.77
  Brokered time deposits                345,355     15,860   6.14       623,538     30,266   6.49
  Short-term borrowings                 449,475      3,385   1.01       370,015      4,617   1.67
  Long-term debt                      1,005,830     28,329   3.77       859,642     36,394   5.66
                                     ----------- ----------          ----------- ----------
    Total interest-bearing
       liabilities                    4,097,992     69,966   2.28     4,115,716    107,276   3.48
                                     ----------- ----------          ----------- ----------
Noninterest-bearing demand deposits     528,071                         413,868
Other liabilities                        20,806                          29,714
Common stockholders' equity             309,378                         297,828
                                     -----------                     -----------
   Total liabilities and
     stockholders' equity            $4,956,247                      $ 4,857,126
                                     ===========                     ===========
Net interest-earning assets          $  524,563                      $  437,979
                                     ===========                     ===========
Net interest income
  (tax-equivalent)                                 110,979                         107,888
Less tax-equivalent adjustment                        (516)                           (602)
                                                 ----------                      ----------
Net interest income                               $110,463                        $107,286
                                                 ==========                      ==========
Net yield on interest-earning assets                         3.21 %                          3.17 %
</TABLE>
<TABLE>
<CAPTION>

                                                                                                                2003/2002
                                                                                                        Income/Expense Variance
                                                               2003/2002 Increase/(Decrease)                Due to Change In
                                                        ---------------------------------------------  -------------------------
(dollars in thousands)                                   Average       %       Income/       %           Average      Average
(tax-equivalent basis)                                   Balance     Change    Expense    Change          Rate        Volume
                                                        -----------  -------   ---------  -----------  ------------ ------------
<S>                                                      <C>          <C>      <C>          <C>           <C>          <C>
ASSETS
Interest-earning assets:
  Home equity                                            $  35,169      9.7 %  $ (1,416)     (8.4)%       $ (2,949)    $  1,533
  Marine                                                    66,756     17.8        (488)     (2.5)          (3,628)       3,140
  Acquired residential mortgage                           (120,995)   (18.4)    (11,955)    (31.4)          (5,574)      (6,381)
  Other direct consumer                                     (5,814)   (12.6)       (269)    (10.0)              75         (344)
  Other indirect consumer                                  (42,409)   (62.6)     (2,324)    (61.1)             140       (2,464)
  Residential mortgage                                    (131,794)   (51.0)     (7,611)    (50.9)              41       (7,652)
                                                        -----------            ---------
    Total consumer                                        (199,087)   (11.2)    (24,063)    (25.2)
  Commercial business                                       16,556      5.0      (1,288)     (7.7)          (2,092)         804
  Real estate construction                                  38,831     13.7         306       3.0           (1,013)       1,319
  Commercial mortgage                                       44,345     19.8       1,126      10.3             (918)       2,044
  Non-core SNCs                                            (32,127)   (44.9)     (1,409)    (56.5)            (449)        (960)
                                                        -----------            ---------
    Total loans                                           (131,482)    (4.9)    (25,328)    (18.6)

  Loans held for sale                                        5,688    110.8         205      81.0              (40)         245
  Short-term investments                                    (2,444)   (47.0)        (61)    (75.3)             (32)         (29)
  Taxable investment securities                            199,302     10.8      (8,995)    (11.6)         (16,820)       7,825
  Tax-advantaged investment securitie                       (2,204)   (10.4)        (40)     (3.8)              73         (113)
                                                        -----------            ---------
    Total investment securities                            197,098     10.6      (9,035)    (11.5)
                                                        -----------            ---------
      Total interest-earning assets                         68,860      1.5     (34,219)    (15.9)         (37,427)       3,208
                                                        -----------            ---------
Less allowance for loan losses                                 998     (2.9)
Cash and due from banks                                     17,857     19.2
Other assets                                                11,406      4.7
                                                        -----------
   Total assets                                          $ 99,121      2.0
                                                        ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Demand/money market deposits                           $  97,344     12.5      (1,762)    (25.3)          (2,553)         791
  Savings deposits                                          52,126      8.1      (2,690)    (49.6)          (3,097)         407
  Direct time deposits                                    (114,659)   (13.7)     (9,155)    (38.8)          (6,225)      (2,930)
  Brokered time deposits                                  (278,183)   (44.6)    (14,406)    (47.6)          (1,552)     (12,854)
  Short-term borrowings                                     79,460     21.5      (1,232)    (26.7)          (2,085)         853
  Long-term debt                                           146,188     17.0      (8,065)    (22.2)         (13,556)       5,491
                                                        -----------            ---------
    Total interest-bearing
       liabilities                                         (17,724)    (0.4)    (37,310)    (34.8)         (36,850)        (460)
                                                        -----------            ---------
Noninterest-bearing demand deposits                        114,203     27.6
Other liabilities                                           (8,908)   (30.0)
Common stockholders' equity                                 11,550      3.9
                                                        -----------
   Total liabilities and
     stockholders' equity                                $  99,121      2.0
                                                        ===========
Net interest-earning assets                              $  86,584     19.8
                                                        ===========
Net interest income
  (tax-equivalent)                                                                3,091       2.9         $   (577)    $  3,668
Less tax-equivalent adjustment                                                       86     (14.3)
                                                                               ---------
Net interest income                                                            $  3,177       3.0
                                                                               =========
</TABLE>

                                                     28

<PAGE> 29


The provision for loan losses for the first nine months of 2003 was $8.0
million, a decrease of $439 thousand from the first nine months of 2002.
Increases in loan balances in 2003 relative to 2002 resulted in an increased
provision, which was more than offset by a reduction of $2.3 million in net
charge-offs. The reduced net charge-offs of $6.1 million in 2003 were
attributable to improvement in the acquired residential loan portfolio. Net
charge-offs as a percentage of average loans were 0.32% in 2003 compared to
0.42% in 2002.

Total non-interest income of $63.6 million for the nine months ended September
30, 2003 was flat to the nine months ended September 30, 2002. However,
excluding net gains (losses), non-interest income increased 8% to $68.5 million
for the nine months in 2003. This increase was primarily the result of deposit
service charges that rose $4.1 million, or 8%, due to increases in the Bank's
retail and commercial deposit customer base. Other non-interest income was $1.1
million higher in 2003 due to increases in loan fees, operating lease income and
mortgage banking fees.

Net losses were $4.9 million for the nine months ended September 30, 2003,
compared to net gains of $200 thousand for the nine months ended September 30,
2002. Losses of $15.3 million from the extinguishment of $140 million of FHLB
borrowings were partially offset by net gains on the sales of investment
securities of $8.6 million and $1.8 million of net gains on the disposition of
loans, fixed assets and foreclosed property, which occur in the ordinary course
of business. The prior year's net gains were composed of $2.1 million in net
security gains and $400 thousand in gains from asset sales partially offset by
$2.3 million in losses from the extinguishment of $90 million of debt.

Non-interest expense of $118.7 million for the nine months ended September 30,
2003 increased $7.0 million, or 6%, compared to the same period one year ago,
reflecting the Bank's efforts to contain costs while pursuing its branch
expansion efforts. The majority of the increase was in salaries and employee
benefits, which increased by $3.5 million, or 6%, due primarily to increased
staffing from branch expansion efforts. The remaining $3.5 million of increase
was spread among all categories, and reflects primarily the incremental impacts
of the branch expansion efforts.

The Corporation recorded income tax expense of $10.1 million in the first nine
months of 2003 based on pre-tax income of $47.4 million. Because of the
realization of the one-time net benefit of $5.8 million associated with the
realization of accumulated state income tax benefits of $8.9 million in the
second quarter of 2003, the effective tax rate of 21.3% is not comparable to the
effective tax rate of 31.2% for the same period of 2002. Exclusive of the tax
benefit realized in the current year, the effective tax rate would have been
32.6%.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For information regarding market risk at December 31, 2002, see "Interest
Sensitivity Management" and Note 11 to the Consolidated Financial Statements in
the Corporation's Form 10-K filed with the Securities and Exchange Commission on
March 7, 2003. The market risk of the Corporation has not experienced any
material changes as of September 30, 2003 from December 31, 2002. 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 September 30, 2003.

Item 4. Required Disclosure

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 September 30, 2003 that has materially affected, or is reasonably
likely to materially affect, the Corporation's internal control over financial
reporting.



                                       29

<PAGE> 30

PART II - OTHER INFORMATION

  Item 1.  Legal Proceedings

               The Corporation is involved in various legal actions arising in
               the ordinary course of business. All such actions, in the
               aggregate, involve amounts that are believed by management to be
               immaterial to the financial condition and results of operations
               of the Corporation.

  Item 2.  Changes in Securities and Use of Proceeds - None

  Item 3.  Defaults Upon Senior Securities - None

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

  Item 5.  Other Information - None

  Item 6.  Exhibits and Reports on Form 8-K

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

                (3.1)  Articles of Incorporation of Provident Bankshares
                       Corporation (1)
                (3.2)  Articles of Amendment to Articles of Incorporation of
                       Provident Bankshares Corporation (1)
                (3.3)  Fourth Amended and Restated By-Laws of Provident
                       Bankshares Corporation (2)
                (3.4)  Form of Stock Certificate of Provident Bankshares
                       Corporation (3)
                (4.1)  Stockholder Protection Rights Agreement, as amended (4)
                (4.2)  Indenture of Provident Trust I, relating to the Junior
                       Subordinated Debentures (5)
                (4.3)  Amended and Restated Trust Agreement of Provident Trust
                       I (5)
                (4.4)  Form of Exchange Capital Securities Certificate for
                       Provident Trust I (5)
                (4.5)  Form of Exchange Guarantee Agreement of Provident Trust
                       I, relating to the Exchange of Capital Securities (5)
                (4.6)  Form of Indenture of Provident Bankshares Corporation
                       of Provident Trust II, relating to the Junior
                       Subordinated Debentures (6)
                (4.7)  Form of Amended and Restated Trust Agreement of
                       Provident Trust II (6)
                (4.8)  Form of Guarantee Agreement of Provident Trust II (6)
                (11.0) Statement Re: Computation of Per Share Earnings (7)
                (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
                (32.0) Section 1350 Certifications

          (b) Reports on Form 8-K filed with the Securities and Exchange
              Commission

               On July 17, 2003, the Company furnished a Form 8-K related to a
          press release announcing its financial results for the quarter ended
          June 30, 2003, and to file supplemental financial information,
          including a comparative analysis of average balances, interest income
          and expenses, and interest yields and rates (three months ended June
          30, 2003 versus three months ended June 30, 2002), the Company's
          unaudited Consolidated Statement of Income for the three and six
          months ended June 30, 2003 and the Company's unaudited Consolidated
          Statement of Condition at June 30, 2003.

               On September 4, 2003, the Company furnished a Form 8-K related to
          a slide presentation. The presentation materials summarize certain
          information regarding the Corporation's operating strategies,
          financial results and results of operations posted to the
          Corporation's website on September 4, 2003.

                On October 17, 2003, the Company furnished a Form 8-K related to
          a press release announcing its financial results for the quarter ended
          September 30, 2003, and to file supplemental financial information,
          including a comparative analysis of average balances, interest income
          and expenses, and interest yields and rates (three months ended
          September 30, 2003 versus three months ended September 30, 2002), the
          Company's unaudited Consolidated Statement of Income for the three and
          nine months ended September 30, 2003 and the Company's unaudited
          Consolidated Statement of Condition at September 30, 2003.

               On November 4, 2003, the Company furnished a Form 8-K containing
          the Agreement and Plan of Reorganization dated November 3, 2003, by
          and between Provident Bankshares Corporation ("Provident Bankshares")
          and Southern Financial Bancorp, Inc. ("Southern Financial") pursuant
          to which Southern Financial will merge with Provident Bankshares.

       (1)Incorporated by reference from Provident's Registration Statement on
          Form S-8 (File No. 333-58881) filed with the Commission on July 10,
          1998.

                                       30

<PAGE> 31


(2)   Incorporated by reference from Provident's Quarterly Report on Form 10-Q
      (File No. 0-16421) for the quarter ended March 31, 2000, filed with the
      Commission on May 10, 2000.

(3)   Incorporated by reference from Provident's Registration Statement on Form
      S-1 (File No. 3315873) filed with the Commission on July 17, 1987.

(4)   Incorporated by reference from Provident's Quarterly Report on Form 10-Q
      (File No. 0-16421) for the quarter ended June 30, 1998, filed with the
      Commission on August 14, 1998.

(5)   Incorporated by reference from Provident's Registration Statement on
      Form S-4 (File No. 333-58959) filed with the Commission on July 13, 1998.

(6)   Incorporated by reference from Provident's Registration Statement on
      Form S-3 (File No. 333-30678) filed with the Commission on February 18,
      2000.

(7)   Included in Note 11 to the Unaudited Consolidated Financial Statements on
      Page 14 hereof.




                                       31

<PAGE> 32



                                   SIGNATURES


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


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



November 12, 2003                      /s/ Gary N. Geisel
                                       ------------------
                                       Gary N. Geisel
                                       Chairman and Chief Executive Officer



November 12, 2003                      /s/ Dennis A. Starliper
                                       -----------------------
                                       Dennis A. Starliper
                                       Chief Financial Officer







                                       32

<PAGE> 33

<TABLE>
<CAPTION>


                                          EXHIBIT INDEX


        Exhibit               Description                                            Sequential Page Number
        -------               -----------                                            ----------------------

         <S>        <C>                                                                          <C>
        (31.1)      Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer            34
        (31.2)      Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer            35
        (32.0)      Section 1350 Certifications                                                  36

</TABLE>





                                       33