PROVIDENT BANKSHARES CORP, DEF 14A, 2000-03-06

PROVIDENT BANKSHARES CORP
DEF 14A, 2000-03-06
STATE COMMERCIAL BANKS

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<PAGE> 1

SCHEDULE 14-A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ____)

Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

Provident Bankshares Corporation
--------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Paul M. Aguggia, Muldoon, Murphy & Faucette LLP
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

1) Title of each class of securities to which transaction applies:
................................................................
2) Aggregate number of securities to which transaction applies:
................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
................................................................
4) Proposed maximum aggregate value of transaction:
................................................................

5) Total fee paid:

................................................................

<PAGE> 2

[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
............................................
2) Form, Schedule or Registration Statement No.:
............................................
3) Filing Party:
............................................
4) Date Filed:
............................................

<PAGE> 3

NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD APRIL 19, 2000

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Provident Bankshares Corporation ("Bankshares") will be held on Wednesday, April
19, 2000, at 10:00 a.m. local time, at the offices of Bankshares, 114 East
Lexington Street, Baltimore, Maryland 21202, for the following purposes:

(1) To elect five directors;

(2) To approve the selection of PricewaterhouseCoopers LLP as
independent auditors for 2000;

(3) To act on a shareholder proposal, opposed by the Board of Directors,
as set forth in this Proxy Statement, if presented to the meeting;
and

(4) To transact any other business that may properly come before the
meeting, and at any adjournments thereof, including whether or not
to adjourn the meeting.

Only those holders of record of common stock as of the close of business
on February 21, 2000, are entitled to notice of and to vote at the 2000 Annual
Meeting of Stockholders and any adjournments or postponements thereof.

Please sign, date and mail the accompanying proxy in the enclosed,
self-addressed envelope, whether or not you expect to attend the meeting in
person. You may withdraw your proxy at the meeting should you be present and
desire to vote your shares in person. Your cooperation is respectfully
requested.

By Order of the Board of Directors

/s/ Peter M. Martin

PETER M. MARTIN
Chairman of the Board, President
and Chief Executive Officer

March 6, 2000

<PAGE> 4

PROVIDENT BANKSHARES CORPORATION
114 EAST LEXINGTON STREET
BALTIMORE, MARYLAND 21202

PROXY STATEMENT

SOLICITATION OF PROXIES

This Proxy Statement is being mailed on or about March 6, 2000, to the
stockholders of Provident Bankshares Corporation ("Bankshares") in connection
with the solicitation by the Board of Directors of proxies to be used at the
Annual Meeting of Stockholders to be held on Wednesday, April 19, 2000, at 10:00
a.m. local time, and at any adjournments or postponements thereof, at the
offices of Bankshares, 114 East Lexington Street, Baltimore, Maryland 21202.

The Board of Directors has selected Dennis A. Starliper and Robert L.
Davis, or either of them, to act as proxies with full power of substitution. Any
stockholder giving the enclosed proxy may revoke it at any time prior to its
exercise by giving the Secretary of Bankshares a signed instrument revoking the
proxy or a signed proxy of a later date. If no instructions are specified in the
proxy, it is the intention of the persons named therein to vote FOR the election
of the nominees named herein as directors of Bankshares, FOR the ratification of
PricewaterhouseCoopers LLP and AGAINST the stockholder proposal as discussed
herein. Execution of a proxy confers on the designated proxyholders
discretionary authority to vote the shares in accordance with their best
judgment on such other business, if any, that may properly come before the
Annual Meeting, including without limitation, a motion to adjourn or postpone
the Annual Meeting to another time and/or place for the purpose of soliciting
additional proxies.

EXPENSES OF SOLICITATION

The cost of the solicitation of proxies will be borne by Bankshares. In
addition to the use of the mails, Innisfree M&A Incorporated, a proxy
solicitation firm, will assist Bankshares in soliciting proxies for the Annual
Meeting and will be paid a fee estimated to be $10,000, plus out-of-pocket
expenses. Proxies may also be solicited personally, or by telephone or
telegraph, by officers, directors and regular employees of Bankshares or of
Provident Bank (the "Bank"), none of whom will receive additional compensation
for such services. Brokers and other persons will be reimbursed for their
reasonable expenses in forwarding proxy materials to customers who have a
beneficial interest in the common stock of Bankshares registered in names of
nominees.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

Stockholders are entitled to one vote for each share of common stock, par
value $1.00 per share (the "common stock") registered in their names on the
stock transfer books of Bankshares at the close of business on February 21,
2000, the record date fixed by the Board of Directors. At February 21, 2000, a
total of 25,532,918 shares of common stock were outstanding.

<PAGE> 5

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as to those persons believed by
management to be beneficial owners of more than 5% of the Company's outstanding
shares of common stock on the Record Date or as disclosed in certain reports
received to date regarding such ownership filed by such persons with the Company
and with the SEC, in accordance with Sections 13(d) and 13(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Other than those persons
listed below, the Company is not aware of any person, as such term is defined in
the Exchange Act, that owns more than 5% of Bankshares' common stock as of the
Record Date.

Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
- --------------- ------------------------------- ---------------- ----------
<S> <C> <C> <C>
Common Stock Jerry Zucker 1,370,238(1) 5.40%
Jerry Shearer
Mid-Atlantic Investors
Mid-Atlantic Partners, L.P.
Shearer Enterprises, L.P.
P.O. Box 7574
Columbia, South Carolina 29202
</TABLE>

(1) Based on information disclosed by the group of reporting persons set forth
above in a Schedule 13D filed with the SEC on February 14, 2000.

PROPOSALS TO BE VOTED ON AT THE MEETING

PROPOSAL 1. ELECTION OF DIRECTORS

The Board of Directors of Bankshares currently consists of 17 directors.
Bankshares' Articles of Incorporation provide that the Board of Directors shall
be divided into three classes, as nearly equal in number as possible, with a
class of approximately one-third of the directors being elected at each Annual
Meeting of Stockholders. The terms of five directors of Bankshares will expire
at the time of the Annual Meeting of Stockholders. The positions of these five
directors are to be filled at the Annual Meeting of Stockholders. Therefore,
five incumbent directors have been nominated to be elected to hold office until
the 2003 Annual Meeting of Stockholders or until their respective successors are
elected and qualified or until their earlier resignation or removal. The
nominees are Dr. Calvin W. Burnett, Pierce B. Dunn, Mark K.
Joseph, Peter M. Martin and Sheila K. Riggs.

Bankshares' amended and restated Bylaws provide that the term of office of
a director of Bankshares shall expire upon the date of the annual meeting of
stockholders immediately following the date on which the director reaches 70
years of age unless the Board of Directors of Bankshares shall determine
otherwise. The Board of Directors of Bankshares has determined that Herbert W.
Jorgensen remain as a Bankshares director, notwithstanding that he is 71 years
of age.

<PAGE> 6

The proxies solicited hereby, unless directed to the contrary, will be
voted FOR the election as directors of all five nominees listed in the following
table. In order to be elected, a majority of the shares present at a meeting of
stockholders, duly called and at which a quorum is present, must be voted FOR
the election of each nominee. Each nominee has consented to serve as a director,
if elected. The Board of Directors has no reason to believe that any nominee
will be unwilling or unable to serve as a director but, if for any reason any
nominee is not willing or able to serve as a director, the accompanying proxy
will be voted FOR a substitute nominee chosen by the Board of Directors.

INFORMATION CONCERNING NOMINEES

The following table presents information concerning persons nominated by
the Board of Directors for election as directors of Bankshares to serve until
the 2003 Annual Meeting of Stockholders or until their successors have been
elected and qualified or until their earlier resignation or removal. Except as
indicated, the nominees have been officers of the organizations named below or
of affiliated organizations as their principal occupations for more than five
years.

AGE, PRINCIPAL OCCUPATION, POSITION WITH BANKSHARES AND THE BANK, AND
NAME OF DIRECTORS BENEFICIAL OWNERSHIP OF COMMON STOCK AT DECEMBER 31, 1999 (PERCENTAGE OF CLASS)(#)
- ----------------------------- -------------------------------------------------------------------------------------
<S> <C>
Dr. Calvin W. Burnett........ Dr. Burnett, age 67, has been a director of the Bank since 1984 and of
Bankshares since its organization in 1987. He is President of Coppin
State College, Baltimore, Maryland, and serves as Chairperson of
Bankshares' Nominating Committee.
11,433 shares (*)(1)

Pierce B. Dunn............... Mr. Dunn, age 49, has been a director of the Bank since 1988 and of
Bankshares since its organization. He is Chairman of the Board of
MIRCON, Inc., an environmental and engineering company.
51,697 shares(*)(2)

Mark K. Joseph............... Mr. Joseph, age 61, has been a director of the Bank and Bankshares
since 1993. He is Chairman and Chief Executive Officer of Municipal
Mortgage and Equity, LLC, a lender which invests in real estate backed
tax exempt bonds. Mr. Joseph is also Chairman of the Board and
founder of The Shelter Group, a real estate development, property and
asset management company. Mr. Joseph serves as Chairperson of
Bankshares' Audit Committee.
24,344 shares (*)(3)

Peter M. Martin.............. Mr. Martin, age 62, Chairman of the Board, President and Chief
Executive Officer of Bankshares and the Bank, has been employed by
Bankshares and the Bank since 1990. He became a director of the Bank
and Bankshares in 1990.
358,877 shares (1.2%)(4)

Sheila K. Riggs.............. Mrs. Riggs, age 56, has been a director of the Bank since 1982 and of
Bankshares since its organization. Mrs. Riggs is the Chairman of the
Maryland Health and Higher Education Facilities Authority, which
issues bonds to finance health care and higher education facilities. Mrs.
Riggs serves as Chairperson of Bankshares' Compensation Committee.
54,509 shares (*)(5)
</TABLE>
3

<PAGE> 7

INFORMATION CONCERNING CONTINUING DIRECTORS AND NAMED EXECUTIVE OFFICER

The following table presents information concerning directors of
Bankshares whose terms of office will continue after the 2000 Annual Meeting of
Stockholders and Named Executive Officers who are not directors of Bankshares.
As indicated, some directors will serve until the 2001 Annual Meeting of
Stockholders, and other directors will serve until the 2002 Annual Meeting of
Stockholders. Except as indicated, the directors have been officers of the
organizations named below or of affiliated organizations as their principal
occupations for more than five years.

<TABLE>
<CAPTION>
AGE, PRINCIPAL OCCUPATION, POSITION WITH BANKSHARES AND THE BANK, AND
NAME OF DIRECTORS BENEFICIAL OWNERSHIP OF COMMON STOCK AT DECEMBER 31, 1999 (PERCENTAGE OF CLASS)(#)
- ----------------------------- -------------------------------------------------------------------------------------
<S> <C>

DIRECTORS SERVING UNTIL
2001

Robert B. Barnhill, Jr....... Mr. Barnhill, age 55, has been a director of the Bank and Bankshares
since 1992. He is Chairman, Chief Executive Officer and founder of
TESSCO Technologies, Incorporated, a supplier to the wireless
communication industry.
14,154 shares (*)(3)

Melvin A. Bilal.............. Mr. Bilal, age 57, has been a director of the Bank and Bankshares since
1992. He is with Chapman Worldwide Financial Services. Previously,
he was the owner and Managing Executive of the Bilal Group, Inc., a
provider of long and short term staffing needs. Prior to this position, he
was President and founder of Security America Services, Inc., a
security consulting firm.
12,080 shares (*)(3)

Ward B. Coe, III, Esquire.... Mr. Coe, age 54, has been a director of the Bank and Bankshares since
1997. He is Managing Partner of the law firm of Whiteford, Taylor &
Preston, LLP.
11,414 shares (*)(6)

Frederick W. Meier, Jr....... Mr. Meier, age 56, has been a director of the Bank and Bankshares
since 1997. He is President of Lord Baltimore Capital Corp., formerly
ATAPCO Capital Management Group. Prior to being elected to this
position in 1996, he was an Executive Vice President of First National
Bank of Maryland and First Maryland Bancorp.
13,565 shares (*)(6)

Sister Rosemarie Nassif...... Sister Nassif, age 58, has been a director of the Bank and Bankshares
since 1992. She is the President of Holy Names College, Oakland,
California. Previously, she was Executive Director of the Fund for
Educational Excellence. Prior to this position, she was President of the
College of Notre Dame of Maryland.
11,936 shares (*)(7)

</TABLE>

DIRECTORS SERVING UNTIL
2002

Thomas S. Bozzuto............ Mr. Bozzuto, age 53, has been a director of the Bank and Bankshares
since 1998. He is the Chief Executive Officer of The Bozzuto Group,
a full-service residential company located in Greenbelt, Maryland.
9,944 shares (*)(8)

Charles W. Cole, Jr.......... Mr. Cole, age 64, has been a director of the Bank and Bankshares since
1995. Mr. Cole is Chairman of the Board of Legg Mason Trust.
Previously, he was Vice Chairman of the Board and Managing Director
of Brown Investment Advisory and Trust Co., an investment advisory
and trust company. Prior to this position he was the President and
Chief Executive Officer of First Maryland Bancorp and the First
National Bank of Maryland.
14,628 shares (*)(9)

Barbara B. Lucas............. Ms. Lucas, age 54, is Senior Vice President and Corporate Secretary of
The Black & Decker Corporation. She has been a director of the Bank
and Bankshares since 1996.
13,735 shares (*)(10)

Francis G. Riggs............. Mr. Riggs, age 62, has been a director of the Bank since 1972 and of
Bankshares since its organization. Mr. Riggs is an Executive Vice
President and director of Riggs, Counselman, Michaels & Downes,
Inc., an insurance brokerage company.
88,680 shares (*)(11)

Carl W. Stearn............... Mr. Stearn, age 67, served as Chairman of the Board and Chief
Executive Officer of Bankshares and the Bank prior to
his retirement on April 15, 1998. He became a director
of Bankshares and the Bank in 1990. Mr. Stearn serves
as Chairperson of Bankshares' Executive
Committee.
257,182 shares (1%)(12)

Enos K. Fry.................. Mr. Fry, age 56, has been Group Manager - Washington Metro Area, of
the Bank since 1997. Prior to joining the Bank, he served in various
executive capacities with Citizens Savings Bank, F.S.B. ("Citizens
Savings"), including President, Director, and Vice Chairman of the
Board, until Citizens Savings was acquired by the Bank in 1997.
129,805 shares (*)(13)

Herbert W. Jorgensen......... Mr. Jorgensen, age 71, served as Chairman of the Board and Chief
Executive Officer of Citizens Savings from April 1994 until it was
acquired by the Bank in August 1997. Prior to this position, he served
as Vice Chairman of the Board of Directors of Citizens Savings.
125,712 shares (*)(14)
</TABLE>

AGE, PRINCIPAL OCCUPATION, POSITION WITH BANKSHARES AND THE BANK, AND
NAME OF DIRECTORS BENEFICIAL OWNERSHIP OF COMMON STOCK AT DECEMBER 31, 1999 (PERCENTAGE OF CLASS)(#)
- ----------------------------- -------------------------------------------------------------------------------------
<S> <C>
Gary N. Geisel............... Mr. Geisel, age 51, joined the Bank in 1997 as Group Manager,
Community Banking. Prior to joining the Bank, he was an executive
officer with Citizens Bank of Maryland. He has been a member of the
Bank's Office of the Chairman since its creation in 1999.
77,983 shares (*)(15)

John P. Novak................ Mr. Novak, age 53, is Group Manager, Consumer Banking and a
member of the Bank's Office of the Chairman. Previously he served as
the Bank's Managing Director, Consumer Lending Division.
62,714 shares (*)(16)

Richard J. Oppitz............ Mr. Oppitz, age 53, is Group Manager, Commercial Banking, and a
member of the Bank's Office of the Chairman. Previously, he served as
the Bank's Managing Director, Credit Administration Division.
70,070 shares (*)(17)

Dennis A. Starliper.......... Mr. Starliper, age 52, was elected Group Manager and Chief Financial
Officer during 1999. Previously, he served as the Bank's Treasurer and
Managing Director, Treasury Division.
42,163 shares (*)(18)
</TABLE>

# Unless otherwise indicated by footnote, each individual has sole voting and
dispositive powers as to all shares indicated.
* Owns less than one percent of the outstanding common stock.
(1) Includes 6,743 shares subject to a currently exercisable stock option and
1,556 shares subject to a stock option not currently exercisable. The
remainder of the shares are held directly.
(2) Includes 8,420 shares, subject to a currently exercisable stock option;
3,405 shares subject to a stock option not currently exercisable; 27,105
shares held as trustee; 1,566 shares held as custodian; and 124 shares held
by spouse. The remainder of the shares are held directly.
(3) Includes 8,420 shares subject to a currently exercisable stock option and
3,405 shares subject to a stock option not currently exercisable. The
remainder of the shares are held directly.
(4) Includes 80,717 shares subject to a currently exercisable stock option;
160,611 shares subject to a stock option not currently exercisable and
7,078 shares held in the Retirement Savings Plan for the benefit of Mr.
Martin. The remainder of the shares are held directly.
(5) Includes 5,868 shares subject to a currently exercisable stock option;
3,405 shares subject to a stock option not currently exercisable; and 2,198
shares held as custodian. The remainder of the shares are held directly.
(6) Includes 6,275 shares subject to a currently exercisable stock option and
4,631 shares subject to a stock option not currently exercisable. The
remainder of the shares are held directly.
(7) Includes 7,261 shares subject to a currently exercisable stock option and
3,405 shares subject to a stock option not currently exercisable. The
remainder of the shares are held directly.
(8) Includes 5,250 shares subject to a currently exercisable stock option;
2,100 shares subject to a stock option not currently exercisable; and 1,050
shares held by spouse. The remainder of the shares are held directly.
(9) Includes 7,143 shares subject to a currently exercisable stock option and
3,405 shares subject to a stock option not currently exercisable. The
remainder of the shares are held directly.
(10) Includes 6,725 shares subject to a currently exercisable stock option and
4,631 shares subject to a stock option not currently exercisable. The
remainder of the shares are held directly.
(11) Includes 5,868 shares subject to a currently exercisable stock option;
3,405 shares subject to a stock option not currently exercisable; 12,033
shares held as custodian; and 2,898 shares which represent Mr. Riggs
beneficial interest in shares owned by Riggs, Counselman, Michaels &
Downes, Inc. The remainder of the shares are held directly.
(12) Includes 84,813 shares subject to a currently exercisable stock option;
137,015 shares subject to a stock option not currently exercisable; and
9,826 shares held in the retirement savings plan for the benefit of
Mr. Stearn. The remainder of the shares are held directly.
(13) Includes 37,697 shares subject to a currently exercisable stock option;
23,820 shares subject to a stock option not currently exercisable; 6,180
shares held in an IRA for the benefit of Mr. Fry; 9,324 shares held in the
Retirement Savings Plan for the benefit of Mr. Fry; 16,573 shares held by
spouse; and 1,181 held in an IRA for the benefit of spouse. The remainder
of the shares are held directly.
(14) Includes 100,429 shares subject to a currently exercisable stock option;
7,354 shares held in an IRA for the benefit of Mr. Jorgensen; and 3,440
shares held by spouse. The remainder of the shares are directly held.
(15) Includes 40,793 shares subject to a currently exercisable stock option;
33,820 shares subject to a stock option not currently exercisable; and
1,598 shares held in the Retirement Savings Plan for the benefit of
Mr. Geisel. The remainder of the shares are held directly.
(16) Includes 25,358 shares subject to a currently exercisable stock option;
33,820 shares subject to a stock option not currently exercisable; and
1,349 shares held in the Retirement Savings Plan for the benefit of
Mr. Novak. The remainder of the shares are held directly.
(17) Includes 26,573 shares subject to a currently exercisable stock option;
33,820 shares subject to a stock option not currently exercisable; and
8,997 shares held in the Retirement Savings Plan for the benefit of
Mr. Oppitz. The remainder of the shares are held directly.
(18) Includes 18,807 shares subject to a currently exercisable stock option;
10,411 shares subject to a stock option not currently exercisable; and
12,250 shares held in the Retirement Savings Plan for the benefit of
Mr. Starliper. The remainder of the shares are held directly.

<PAGE> 10

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of December 31, 1999, the number of
shares of common stock beneficially owned by all directors and Named Executive
Officers of Bankshares and its subsidiaries as a group.
<TABLE>
<CAPTION>

AMOUNT AND NATURE(1)
OF BENEFICIAL PERCENT
OWNERSHIP OF CLASS
----------------------- -----------
<S> <C> <C>
All directors and executive officers as a group (21 persons)..... 1,498,398 ____ %

- --------------------
(1) Shares subject to currently exercisable options or exercisable within 60 days
that are held by directors and officers are deemed to be outstanding for the
purpose of computing the percentage of outstanding common stock beneficially
owned by all directors and executive officers as a group.
</TABLE>

COMMITTEES

Bankshares has standing Audit, Compensation and Nominating Committees of
the Board of Directors. The members of each of the named committees serve at the
discretion of the Board of Directors.

The Audit Committee (Messrs. Joseph, Barnhill, Coe, Cole, Dunn, Jorgensen
and Meier) reviews and reports to the Board of Directors on examinations of the
Bank and its subsidiaries by regulatory authorities, recommends independent
accountants for appointment by the Boards of Bankshares and the Bank, reviews
the scope of the work of the independent accountants and their reports, and
reviews the activities and actions of the Bank's internal auditors. The Audit
Committee met five (5) times during 1999.

The Compensation Committee (Mrs. Riggs, Lucas, Sister Nassif and Messrs.
Bozzuto, Cole, Dunn and Riggs), reviews and determines salaries and other
benefits for executive and senior management of Bankshares and its subsidiaries,
reviews and determines employees to whom stock options are to be granted and the
terms of such grants, and reviews the selection of officers who participate in
incentive and other compensatory plans and arrangements. The Compensation
Committee met five (5) times during 1999.

The Nominating Committee (Dr. Burnett, Mrs. Lucas, and Messrs. Bilal,
Bozzuto and Coe) nominates persons for election to the Board of Directors of
Bankshares and the Bank. The Nominating Committee will consider shareholder
recommendations submitted to it in writing in care of Bankshares in accordance
with Bankshares Bylaws. The Nominating Committee met one (1) time during 1999.

DIRECTORS' COMPENSATION

The Board of Directors of Bankshares held twelve (12) meetings during
1999. The Board of Directors of the Bank met twelve (12) times during 1999. All
of the directors of Bankshares, excluding Mr. Joseph, attended at least 75% of
the total number of Bankshares' board meetings held and committee meetings on
which such director served during 1999. Each outside director of Bankshares and
the Bank receives an annual retainer of $14,000 for service as director. Each
outside director also receives a fee of $750 for attendance at regular or
special Board meetings, except that a single fee is paid if Board

<PAGE> 11

meetings for Bankshares and the Bank are held on the same day. Finally, outside
directors who are members of committees of the Board receive a fee of $750 for
attendance at committee meetings, while the chairpersons of such committees
receive a fee of $900. Total directors' fees paid by Bankshares and the Bank
during 1999 were $392,250.

The Bank and Bankshares have a deferred compensation plan for outside
directors. Each year, a director may elect to defer payment of all or part of
the director's fees for that year until the individual ceases to be a director.
Interest is earned on the deferred amount at the prime rate. Payment of the
deferred amount may be made to the director or to his or her beneficiary. In
addition, non-employee directors are eligible to receive options under the
Provident Bankshares Corporation Amended and Restated Stock Option Plan (the
"Stock Option Plan"). Finally, a Non-Employee Directors' Severance Plan exists
which provides that if a director's service is terminated following a "change in
control" of Bankshares or the Bank, as defined in the Plan, such director is
entitled to receive a payment equal to five times the directors' annual
retainer.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

The report of the Compensation Committee and the stock performance graph
shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except as to the extent that Bankshares specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Recommendations regarding all of the components of the compensation of the
Chairman, President and Chief Executive Officer of Bankshares are made by the
seven member Compensation Committee of the Board and are approved by the Board
of Directors. The Board of Directors did not reject or modify in any material
way any of the recommendations of the Compensation Committee during fiscal year
1999. Each member of the Compensation Committee is a non-employee director. The
following report has been prepared by the Compensation Committee and addresses
the compensation policies of Bankshares for 1999 as they affected Mr. Martin,
the Chairman, President and Chief Executive Officer, and other Named Executive
Officers.

EXECUTIVE OFFICER COMPENSATION POLICIES AND OBJECTIVES

The policies and objectives of the Compensation Committee are designed to
assist Bankshares and its subsidiaries in attracting and retaining qualified
executives, to recognize individual contributions toward the achievement of
short-term and long-term performance goals and to closely align the financial
interests of the senior managers of Bankshares and its subsidiaries with those
of its stockholders. In furtherance of these objectives, Bankshares maintains a
compensation program for executive officers which consists of both cash and
equity-based compensation. From time to time the Compensation Committee retains
independent compensation consultants to work with it on executive compensation
matters. The Compensation Committee also has access to competitive data
regarding executive compensation levels and practices.

<PAGE> 12

EXECUTIVE COMPENSATION PROGRAMS AND RELATIONSHIP TO PERFORMANCE

The annual compensation of the Named Executive Officers of Bankshares
consists of a base salary and an annual bonus. In the case of Messrs. Martin,
Geisel, Novak and Oppitz, this annual bonus is determined under the terms of the
Provident Bankshares Corporation Executive Incentive Plan ("EIP") and, in the
case of Mr. Starliper, the Group Management Incentive Plan ("GMIP"). The
Compensation Committee establishes, on an annual basis, the base salary of the
Chief Executive Officer, generally based upon a review of the performance of the
Chief Executive Officer during the prior year and competitive data for that
position. The Chief Executive Officer recommends to the Compensation Committee a
salary level for the other Named Executive Officers based upon a performance
review of each executive officer. The Compensation Committee also approves the
participation of key executives in the EIP and the GMIP and is responsible for
the granting of options under the Stock Option Plan.

EXECUTIVE INCENTIVE PLAN

Under the EIP, for purposes of establishing incentive awards, three
after-tax net income targets for the upcoming year are established: threshold,
budget and maximum. Additionally, the Compensation Committee sets a percentage
of base salary to be eligible to be received as incentive compensation at each
of the threshold, budget and maximum targets. If actual after-tax net income
reaches the threshold, budget or maximum targets, participants will
automatically receive 75% of the designated percentage of base salary as
incentive compensation. The remaining 25% of the award potential is based on
individual performance against goals, namely: management of the company with
emphasis on development and retention of key personnel; implementation of new
initiatives; financial progress in addition to net earnings; and risk
management. In the event that actual after-tax net income is less than the
threshold after-tax net income target, no incentive compensation is payable. The
Compensation Committee reviews the terms of the EIP each year to assure that, in
operation, it is furthering the Committee's compensation policy objectives.
Incentive compensation earned under the EIP is paid within one month of the end
of the fiscal year of the Bank. Payment of all or any part of the incentive
compensation earned under the Executive Incentive Plan may be deferred.

GROUP MANAGEMENT INCENTIVE PLAN

Under the GMIP, for purposes of establishing incentive awards, after-tax
net income targets for the upcoming year are established with a threshold and a
maximum, based on the annual budget of Bankshares as approved by the Board of
Directors. Additionally, the Compensation Committee sets a sliding scale
percentage of base salary eligible to be received as incentive compensation. If
actual after-tax net income reaches the threshold or maximum targets, Mr.
Starliper receives a percentage of base salary as incentive compensation. If the
actual after-tax net income is less than the maximum, but greater than the
threshold or budgeted after-tax net income targets, the percentage of base
salary which may be received as incentive compensation is increased
proportionately. The award potential is based on corporate and individual
performance goals. In the event that actual after-tax net income is less than
the threshold after-tax income target, no incentive compensation is payable. The
Compensation Committee reviews the terms of the GMIP each year to assure that,
in operation, it is furthering the Committee's compensation policy objectives.
Incentive compensation earned under the GMIP is paid within one month of the end
of the fiscal year of the Bank. Payment of all or any part of the incentive
compensation earned under the GMIP may be deferred.

<PAGE> 13

STOCK OPTION PLAN

Long-term incentives for the Named Executive Officers are provided through
the Stock Option Plan. The Stock Option Plan authorizes the issuance of
non-qualified stock options to key officers and certain employees of Bankshares
and its subsidiaries. Subject to the general limits prescribed by the Stock
Option Plan, the Compensation Committee has the authority to determine the
individuals to whom stock options are awarded, the terms of the options and the
number of shares subject to each option. Although the Compensation Committee's
decisions are discretionary and no specific formula is used in the decision
making, the number of options granted is based generally upon position level and
performance. Through the award of stock options, the objective of aligning the
long-range interests of the executive officers with those of the stockholders is
met by providing the executive officers with the opportunity to build a
meaningful ownership stake in Bankshares.

OTHER COMPENSATION PLANS

The Named Executive Officers participate in the corporation's health and
welfare and qualified retirement plans on the same terms as non-executive
employees who meet the applicable eligibility criteria, subject to any legal
limitations on the amounts that may be contributed or the benefits that may be
payable under these plans.

In addition to the qualified retirement plans, the Bank maintains a
Supplemental Executive Retirement Income Plan ("Supplemental Plan") in which Mr.
Martin participates. The Supplemental Plan provides additional benefits to Mr.
Martin upon retirement equal to 72.3% of 70% of final pay, reduced by Social
Security and the age-65 benefit accrued under the Bank's Pension Plan and then
proportionately reduced for less than 25 years of service. The Supplemental Plan
is unfunded, so that amounts payable represent unsecured liabilities of the
Bank, subject to the claims of secured creditors. The Bank has also purchased
four insurance policies on the life of Mr. Martin. Two policies are split-dollar
arrangements, subject to collateral assignment agreements. The other two are
corporate-owned life insurance policies.

CHIEF EXECUTIVE OFFICER COMPENSATION

The Compensation Committee set Mr. Martin's base compensation for the
fiscal year 1999 at $433,350, which represents a 7% increase over his 1998 base
salary. Mr. Martin was appointed Chairman and Chief Executive Officer effective
April 15, 1998. Prior to that, he served as President and Chief Operating
Officer. In establishing his base salary, the Compensation Committee reviewed
Mr. Martin's performance for the prior year and also considered the compensation
of chief executive officers of banking organizations in the Baltimore
metropolitan area. The increase for 1999 reflects the Compensation Committee's
recognition of Mr. Martin's contribution to the successful implementation of
measures to improve the efficiency of the Bank, as demonstrated by the earnings
growth of Bankshares and increase in the return on and amount of shareholder
equity. The budget target for 1999 was exceeded, resulting in a formula and
performance driven payout of $216,675.

COMPENSATION OF OTHER NAMED EXECUTIVE OFFICERS

Recommendations regarding the base salary of the other Named Executive
Officers are made to the Compensation Committee by the Chief Executive Officer
and are either approved or modified by the Compensation Committee. The
recommendation as to the salaries of the other Named Executive Officers is based
upon a review of his performance during the prior year by the Chief Executive
Officer. The Compensation Committee did not reject or modify in any material way
any of the recommendations

<PAGE> 14

of the Chief Executive Officer concerning the base salary of the other Named
Executive Officers for 1999.

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE PROVIDENT BANKSHARES
CORPORATION BOARD OF DIRECTORS.

SHEILA K. RIGGS (CHAIRPERSON)
THOMAS S. BOZZUTO
CHARLES W. COLE, JR.
PIERCE B. DUNN
BARBARA B. LUCAS
SISTER ROSEMARIE NASSIF
FRANCIS G. RIGGS

<PAGE> 15

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table sets forth the compensation paid or allocated for
services rendered to Bankshares and the Bank in all capacities during the years
ended December 31, 1999, 1998 and 1997 (i) to the current Chairman, President
and Chief Executive Officer of Bankshares; (ii) to the four other members of
executive management whose 1999 compensation exceeded $100,000 and (iii) a
former executive officer (collectively hereinafter referred to as the Named
Executive Officers).

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- -------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
SALARY BONUS COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(4) SARS(#)(5) ($)(6)
- --------------------------- ------ --------- ------- ------------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
Peter M. Martin............ 1999 $438,350 $216,675 $ 3,846(4) 50,000(5) $ 72,951(6)
Chairman of the Board, 1998 405,000 121,500 4,358 -- 56,527
President and Chief 1997 375,000 112,500 4,823 -- 68,150
Executive Officer(1)

Gary N. Geisel(2).......... 1999 226,000 90,400 -- 25,000 7,200
Group Manager, Community
Banking

John F. Novak(2)........... 1999 211,000 84,400 -- 25,000 7,200
Group Manager, Consumer
Banking

Richard J. Oppitz(2)....... 1999 205,000 82,000 -- 25,000 7,200
Group Manager, Commercial
Banking

Dennis A. Starliper........ 1999 195,000 46,000 -- 6,000 7,200
Group Manager and
Chief Financial Officer

James R. Wallis(3)......... 1999 $199,000 -- -- 15,000 7,200
1998 189,000 43,000 -- 10,500 7,500
1997 180,000 42,000 -- -- 7,125
</TABLE>
- --------------------------------------
(1) The Board of Directors of Bankshares appointed Mr. Martin to serve as
Chairman of the Board, President and Chief Executive Officer of Bankshares
effective April 15, 1998. Prior to this appointment, Mr. Martin served as
President and Chief Operating Officer of Bankshares and the Bank.
(2) Messrs. Geisel, Novak and Oppitz were appointed to the Bank's newly created
Office of the Chairman effective July 21, 1999.
(3) In November 1999 and the Board of Directors appointed Mr. Starliper as Group
Manager and Chief Financial Officer to replace Mr. Wallis.
(4) Represents grossed-up reimbursement for the tax effect of reportable
incremental imputed income for the split dollar insurance agreements.
(5) None of the disclosed options held by the Named Executive Officers are
currently exercisable. See "Stock Option Grants."
(6) The amounts shown in this column for the last fiscal year are derived from
the following figures: (i) Mr. Martin: $7,200 allocated under the Bank's
401(k) plan, and $65,751 in economic value of Bank-paid split-dollar life
insurance premiums; (ii) Messrs. Geisel, Novak, Oppitz, Starliper and
Wallis: $7,200 allocated under the Bank's 401(k) plan.

<PAGE> 16

CHANGE IN CONTROL AGREEMENTS

Bankshares and the Bank have entered into Change in Control Agreements
with each of the Named Executive Officers. Each Change in Control Agreement (the
"Agreement") provides for a 36-month term. Each Agreement provides that
commencing on the date of the Agreement's execution, the term of the Agreement
will be extended for one day each day until such time as the Board of Directors
or the Executive elects not to extend the term of the Agreement by giving
written notice to the other party.

Each Agreement provides that at any time following a "change in control"
of Bankshares or the Bank, as defined in the Change in Control Agreements, if
Bankshares or the Bank terminates the Executive's employment for any reason
other than cause, or if the Executive terminates his employment following
demotion, loss of title, office or significant authority, a reduction in annual
compensation or benefits, or relocation of the principal place of employment by
more than 20 miles following a change in control, the Executive, or in the event
of death, the Executive's beneficiary would be entitled to receive a payment
equal to 2.99 times the Executive's average annual taxable compensation as
reported on Form W-2 with the Internal Revenue Service for the five preceding
taxable years or such lesser number of years in the event that the Executive has
been employed by Bankshares or the Bank for less than five years. Bankshares and
the Bank will also continue the Executive's life, medical, and disability
coverage. Such coverage shall cease upon the expiration of 36 full calendar
months following the date of termination or the date the Executive secures
comparable employment by an employer other than Bankshares or the Bank,
whichever comes first. If the Executive voluntarily resigns from Bankshares or
the Bank within one year following a change in control, but prior to an event of
termination described above, the Executive would be entitled to receive a payout
equal to six (6) times his then current monthly taxable compensation. Payments
to the Executive under the Bank's change in control agreements will be
guaranteed by Bankshares in the event that payments or benefits are not paid by
the Bank.

Payments and benefits under the Change in Control Agreements may
constitute an excess parachute payment under Section 280G of the Internal
Revenue Code, resulting in the imposition of an excise tax on the recipient and
denial of the deduction for such excess amount to Bankshares and the Bank.

STOCK OPTION GRANTS

As discussed above and as an inducement to attract and retain qualified
managers and employees, Bankshares maintains the Stock Option Plan. The
following table lists all grants of options under the Stock Option Plan to the
Named Executive Officers for 1999 and contains certain information about
potential value of those options based upon certain assumptions as to the
appreciation of the Company's stock over the life of the option. However, none
of the options discussed in the following table as granted to Messrs. Geisel,
Novak and Oppitz become vested and exercisable until and unless the stock of
Bankshares attains a market value of at least $30.00 per share and sustains such
market value for a period of at least 21 calendar days during the term of the
option. During 1999, 473,900 shares subject to options were granted to 144
persons.

OPTIONS GRANTS IN LAST FISCAL YEAR

POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTIONS(1)
- ---------------------------------------------------------------------------------- -------------------
% OF TOTAL
NUMBER OF OPTION/SARS EXERCISE OR
SECURITIES GRANTED TO BASE
UNDERLYING EMPLOYEES PRICE
OPTIONS/ IN PER EXPIRATION
NAME SARS GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ---- ------------ ------------- ----------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Martin.......... 50,000 10.6% $20.06 10/20/09 $50,000 $100,000

Gary N. Geisel........... 25,000 5.3 20.06 10/20/09 25,000 50,000

John F. Novak............ 25,000 5.3 20.06 10/20/09 25,000 50,000

Richard J. Oppitz........ 25,000 5.3 20.06 10/20/09 25,000 50,000

Dennis A. Starliper...... 6,000 1.3 20.06 10/20/09 6,000 12,000

James R. Wallis.......... 15,000 3.2 20.06 N/A N/A N/A(2)
</TABLE>
(1) The fair market value on the date of grant was $20.06. Actual gains, if any,
on stock option exercises and common stock holdings are dependent on the
future performance of the common stock and overall stock market conditions.
There can be no assurance that the amounts reflected in this table will be
realized.
(2) These options were not exercised within thirty (30) days of Mr. Wallis'
leaving his employment with Bankshares. Therefore, consistent with the terms
of the Stock Option Plan, these options have been cancelled.

STOCK OPTION EXERCISES AND HOLDINGS

The following table reflects all stock option exercises by the Named
Executive Officers during 1999 and includes the number of shares covered by all
remaining unexercised stock options as of December 31, 1999. Also reported are
the values for "in-the-money" options which represent the difference between the
exercise price of any such remaining unexercised options and the year-end market
price of the common stock.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE

SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
EXERCISE(#) REALIZED($) OPTIONS/SARS AT FY-END(#) AT FY-END ($)(1)
------------------------ -------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ---------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Martin................. 20,000 $365,725 80,717 160,611 $631,719 $566,957
Chairman of the Board,
President and Chief Executive
Officer

Gary N. Geisel.................. -- N/A 40,793 33,820 13,892 --
Group Manager, Community
Banking

John F. Novak................... -- N/A 25,358 33,820 -- --
Group Manager, Consumer
Banking

Richard J. Oppitz............... -- N/A 26,573 33,820 11,105 --
Group Manager, Commercial
Banking

Dennis A. Starliper............. -- N/A 18,807 10,411 189,555 --
Group Manager, Chief
Financial Officer
- --------------------------------
(1)The closing price of the common stock on December 31, 1999 was $17.31.
</TABLE>

<PAGE> 19

PENSION PLANS

The following table sets forth the estimated annual pension benefits
payable to a participant at normal retirement age (age 65) under the Bank's
Pension Plan and its Supplemental Plan, based on both the remuneration that is
covered under such plans and years of service with Bankshares and its
subsidiaries.

YEARS OF SERVICE
------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- --------------- --------- --------- ---------- ----------- ---------

125,000 26,250 35,000 43,750 43,750 43,750
150,000 31,500 42,000 52,500 52,500 52,500
175,000 36,750 49,000 61,250 61,250 61,250
200,000 42,000 56,000 70,000 70,000 70,000
225,000 47,250 63,000 78,750 78,750 78,750
250,000 52,500 70,000 87,500 87,500 87,500
275,000 57,750 77,000 96,250 96,250 96,250
300,000 63,000 84,000 105,000 105,000 105,000
325,000 68,250 91,000 113,750 113,750 113,750
350,000 73,500 98,000 122,500 122,500 122,500
375,000 78,750 105,000 131,250 131,250 131,250
400,000 84,000 112,000 140,000 140,000 140,000
425,000 89,250 119,000 148,750 148,750 148,750
450,000 94,500 126,000 157,500 157,500 157,500

The following table sets forth the respective years of service credited
for Pension Plan purposes as of December 31, 1999, and the estimated years of
service at the respective normal retirement dates for the Named Executive
Officers.

YEARS OF SERVICE YEARS OF SERVICE
NAME AT 12/31/99 AT NORMAL RETIREMENT
- ----------------------- ----------------- ----------------------

Peter M. Martin........ 9.8 13.4
Gary N. Geisel......... 2.9 16.6
John F. Novak.......... 8.5 19.7
Richard J. Oppitz...... 6.8 18.8
Dennis A. Starliper.... 14.5 26.5

The Pension Plan Table reflects the annual benefit payable at the
executive's 65th birthday in the form of an annuity for the executive's life
with a 15-year guarantee in favor of the executive's spouse. Under this form,
should the executive die within 15 years after the benefits start, the
executive's surviving spouse, if any, will continue to receive the same pension
benefits until the end of that 15-year period.

<PAGE> 20

The Pension Plan Table reflects the maximum benefit payable under the
Provident Bank of Maryland Pension Plan, a tax-qualified funded plan and certain
Supplemental Retirement Income Agreements providing 50% of the excess (unfunded
benefits). The benefits reflected in the Table are offset or reduced by 100% of
the executive's estimated primary Social Security benefit.

Bankshares maintains the Supplemental Executive Retirement Income Plan for
certain executive officers which will pay 50% of the difference between 70% of
final pay and the amounts paid by the pension plan and Social Security benefits,
except in the case of Mr. Stearn, the former Chairman of the Board and Chief
Executive Officer, where Bankshares will pay 100% of the difference prior to
December 31, 1999 and 67% for payments made thereafter. Compensation used in
calculating the annual normal retirement benefit amounts reflected in the
Pension Plan Table is the executive's highest rate of base annual salary,
reported in the third column of the Summary Compensation Table, and does not
include bonuses or other amounts reported in any of the remaining columns of the
Summary Compensation Table.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Francis G. Riggs is a director of Bankshares and the Bank, and a member of
the Compensation Committee. Mr. Riggs is Executive Vice President and a director
of Riggs, Counselman, Michaels & Downes, Inc. From January l to December 31,
1999, the Bank paid Riggs, Counselman, Michaels & Downes, Inc. $580,726 for
premiums related to insurance services.

<PAGE> 21

PERFORMANCE GRAPH

The SEC requires that Bankshares include in this proxy statement a
line-graph comparing cumulative stockholder returns as of December 31 for each
of the last five years among the common stock, a broad market index and either a
nationally-recognized industry standard or an index of peer companies selected
by Bankshares, assuming in each case both an initial $100 investment and
reinvestment of dividends. Consistent with past practice, the Board of Directors
has selected the Nasdaq Market Index as the relevant broad market index because
prices for the common stock are quoted on Nasdaq National Market. Additionally,
the Board of Directors has selected the Middle Atlantic Banks Index as the
relevant industry standard because such index consists of financial institutions
which are headquartered in the mid-Atlantic region and the Board believes that
such institutions generally possess assets, liabilities and operations more
similar to those of Bankshares and its subsidiaries than other
publicly-available indices.

[PERFORMANCE GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Summary

12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Provident Bankshares Corporation 100.00 145.62 196.94 346.10 288.27 216.17
Middle Atlantic Bank Index 100.00 147.17 196.61 320.65 352.96 279.30
Nasdaq Market Index 100.00 129.71 161.18 197.16 278.08 490.46

Notes:
A. The lines represent yearly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the yearly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.00 for 1994.
</TABLE>

<PAGE> 22

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Bankshares' executive officers and directors, and persons who own more than 10%
of any registered class of Bankshares' equity securities, to file reports of
ownership and changes in ownership with the SEC. Executive officers, directors
and greater than 10% stockholders are required by regulation to furnish
Bankshares with copies of all Section 16(a) reports they file.

Based solely on its review of the copies of the reports its has received
and written representations provided to Bankshares from the individuals required
to file the reports, Bankshares believes that each of its executive officers and
directors has complied with applicable reporting requirements for transactions
in Bankshares common stock during the fiscal year ended December 1999.

CERTAIN TRANSACTIONS WITH MANAGEMENT

Periodically, the Bank may engage in lending transactions in the ordinary
course of business with its officers and directors, as well as entities
associated with such persons. Such transactions are made in the ordinary course
of business and on substantially the same terms, including interest rate and
collateral, as those prevailing at the time for comparable transactions with
other persons. Loans to such persons do not involve more than the normal risk of
collectibility or present other unfavorable features.

PROPOSAL 2. TO APPROVE THE SELECTION OF
INDEPENDENT AUDITORS FOR THE YEAR 2000

The Board of Directors of Bankshares has appointed the firm of
PricewaterhouseCoopers LLP, certified public accountants, as independent
auditors for Bankshares for the year 2000, subject to the approval of the
stockholders. PricewaterhouseCoopers LLP, which has served as independent
auditors for Bankshares and the Bank since 1990, has advised Bankshares that
neither the firm nor any of its partners or associates has any direct financial
interest in or any connection with Bankshares or any of its subsidiaries other
than as independent auditors. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement if they desire to do so and to respond to appropriate
questions.

The Board of Directors seeks stockholder approval of its selection of
PricewaterhouseCoopers LLP as its independent auditors to Bankshares for the
year 2000.

The Board of Directors recommends a vote FOR this Proposal. Proxies will
be voted FOR this Proposal unless otherwise instructed by the persons giving the
proxy.

PROPOSAL 3. STOCKHOLDER PROPOSAL

Mid-Atlantic Investors submitted the proposal set forth below, which may
be presented for a vote at the meeting. The proposal is required to be included
in the Proxy Statement by the rules of the Securities and Exchange Commission
and is not endorsed by the Board of Directors nor is the Board of Directors
responsible in any way for the contents of the proposal or the accompanying
statement. The Board of Directors recommends a vote AGAINST approval of Proposal
3. The address and shareholdings of the proponent will be furnished upon request
to the Secretary of Bankshares.

<PAGE> 23

The proposal is as follows:

RESOLVED, that the stockholders hereby inform the board of directors that
it is the desire of the stockholders that the board of directors immediately
take the necessary steps to achieve a sale, merger or other acquisition of
Provident Bankshares Corporation on terms that will maximize stockholder value
as promptly as possible.

The Stockholder's supporting statement is as follows:

Mid-Atlantic wants the board of directors to take the necessary steps to
have Provident bought by another company because we believe that is the only way
for stockholders to receive the greatest value for their Provident stock.
Mid-Atlantic believes that selling Provident will result in:

o An immediate increase in market value of Provident stock;
o A probable increase in dividend income; and
o Improved growth potential for stockholder value.

Of course, none of these results can be guaranteed but the recent history of
mergers of financial institutions indicates that such results are possible
Merger with a larger more geographically diverse financial institution would
also reduce the risk to stockholders of being dependent on the economy of a
relatively small geographic area.

The value of Provident to its stockholders is measured by the market value
of Provident stock. Provident stock has not performed well recently. Even when
management has managed to improve Provident's earnings, the improvement has not
been mirrored in the stock price. Neither has management's practice of raising
dividends slightly each quarter caused the value of the stock to increase
significantly.

Other financial institutions that are regarded as potential acquirors of
Provident enjoy substantially higher price to earnings ratios than does
Provident. They operate more efficiently than Provident. They represent an
opportunity for Provident stockholders to upgrade to a higher quality stock.

Mid-Atlantic believes that the time to find a merger partner is now.
Continuing consolidation of financial institutions is reducing the number of
potential acquirors. Pending and recent regulatory changes could further limit
the number of interested acquirors or reduce the prices they will pay. Waiting
also deprives stockholders of the opportunity to benefit from the growth of an
acquiror which is probably more robust than Provident's.

Many of the potential acquirors of Provident will not aggressively pursue
an acquisition of Provident unless Provident's management expresses some
interest in being acquired. So far, management of Provident appears not to be
interested in being acquired. The purpose of our proposal is to tell management
that the stockholders want management to seek out opportunities for Provident to
be acquired in a way that will maximize the value of owning Provident stock.

This is your opportunity to express your opinion. Mid-Atlantic urges you
to VOTE YES on this proposal.

<PAGE> 24

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS VOTE AGAINST
STOCKHOLDER PROPOSAL #3 FOR THE FOLLOWING REASONS:

The Bankshares Board of Directors strongly believes that adoption of this
proposal would not be in the best interests of the stockholders of Bankshares.
The Board of Directors is committed to maximizing long-term stockholder value in
accordance with its fiduciary duties and believes that this resolution would
undermine the ability of the Board to fulfill such duties.

The Board believes that its current business strategy is enhancing
long-term stockholder value. The Company has established a strong competitive
position in the Baltimore-Washington corridor. This position and the strength of
its past and present financial performance are testament to the success of the
Company's corporate and expansion strategies. Over the last year, Bankshares
produced double digit earnings growth of 13.1% and growth in earnings per share
of 13.6%. Return on common equity grew to 14.6% and average loans increased
13.1%. Non interest income increased 14.8%. Simultaneously, the Company improved
its operating efficiency. Bankshares itself invested in the Board's business
strategy by repurchasing 168,100 shares of stock under the current buyback plan.
While the market price does not reflect these results, we believe that this is
attributable to overall market conditions. We recognize that the market price of
Bankshares stock has declined. That decline, however, occurred in a market in
which the stock prices of many of our peer banking organizations also declined.

The Board believes that it would be very unfortunate for stockholders if
Bankshares sacrificed its long-term business strategy for pursuit of a
short-term gain that may or may not be obtainable, given current market
conditions. The Board notes that in a number of recent mergers, the stock of the
acquiring bank has declined sharply upon announcement of the merger. The Board
also notes that intergration and other difficulties have led to severe declines
in the prices of stocks of a number of acquirors. Nevertheless, the Board
regularly reviews, with the assistance of outside advisors, including its
investment banker, its strategic focus and regularly considers strategic actions
that may be taken to maximize long-term stockholder value. The Board has been
and will continue to be open to the full range of strategic options which may
allow Bankshares' stockholders to realize the intrinsic long-term value of
Bankshares. Bankshares has not adopted a "just say no" policy.

The Board is concerned that the adoption of this proposal could undermine
Bankshares, and would thus be detrimental to the financial interests of
Bankshares and its stockholders. Although the non-binding proposal does not
require the Board to take any action, the Board believes that its adoption would
result in uncertainty regarding Bankshares' future that would adversely affect
its ability to retain and attract customers and its ability to retain and
attract personnel, as well as its ability to enter into arrangements or
alliances with third parties.

The Board of Directors also believes that the adoption of this proposal
could adversely affect its ability to affect a strategic merger or sale of
Bankshares on the most favorable terms possible to stockholders if such a course
of action were determined to be appropriate. A company's decision to pursue a
strategic transaction involves consideration of a set of complex factors
including the evaluation of the economic prospects of the company and the impact
of market and industry conditions on the timing of the transaction. The
resolution appears to urge immediate action on the part of the Board. Given the
current trading range of Bankshares' common stock and its strong growth
prospects, the Board

<PAGE> 25

believes it is not likely that immediate action will constitute the most
probable avenue by which the stockholders may realize the intrinsic long-term
value of Bankshares.

OTHER MATTERS

The Board of Directors is not aware of any other matter to be presented
for action at the meeting, other than the matters previously set forth in this
Proxy Statement.

If any other business is properly brought before this meeting, the persons
named in the proxy form attached to this Proxy Statement will vote such proxy in
accordance with their best judgment concerning such business.

VOTING PROCEDURES

As to the election of directors, the proxy card being provided by the
Board of Directors enables a shareholder to vote "FOR" the election of nominees
proposed by the Board, or to "WITHHOLD" authority to vote for one or more of the
nominees being proposed. Under Bankshares' Bylaws, directors are elected by a
majority of the votes present, without regard to either; (i) broker non-votes;
or (ii) proxies as to which authority to vote for one or more of the nominees
being proposed is withheld.

As to the ratification of PricewaterhouseCoopers LLP as independent
auditors of Bankshares and the stockholder proposal, by checking the appropriate
box, a shareholder may: (i) vote "FOR" the item; (ii) vote "AGAINST" the item,
or (iii) "ABSTAIN" from voting on such item. Action on such matters are
determined by a majority of the votes cast at a meeting at which a quorum is
present, without regard to either (i) broker non-votes or (ii) proxies marked
"ABSTAIN" as to that matter.

Stockholder votes are tabulated manually by Bankshares. Proxies received
by Bankshares, if such proxies are properly executed and delivered, will be
voted in accordance with the voting specifications made on such proxies. Proxies
received by Bankshares on which no voting specification has been made by the
stockholder will be voted as described in this Proxy Statement. Stockholders who
execute and deliver proxies retain the right to revoke them by notice in writing
delivered to Bankshares' Secretary at any time before such proxies are voted.
Under applicable Maryland corporate law and the Articles of Incorporation and
Bylaws of Bankshares, proxies received by Bankshares specifying an abstention as
to a proposal will cause the shares so represented to be counted toward a
quorum, but not counted as voting for such proposal. To the extent holders or
brokers having the right to vote shares do not attend the meeting or return a
proxy, such shares will not count toward a quorum and, if a quorum is otherwise
achieved, will have no effect on the vote of the proposals considered at the
meeting.

STOCKHOLDER PROPOSALS -- 2001 ANNUAL MEETING

To be eligible under the Securities and Exchange Commission's shareholder
proposal rule (Rule 14a-8) for inclusion in Bankshares' proxy statement and form
of proxy card, and for presentation at Bankshares' 2001 Annual Meeting,
currently scheduled to be held on April 18, 2001, a proposal of a stockholder
must be received by Bankshares at 114 East Lexington Street, Baltimore, Maryland
21202 prior to November 7, 2000. For a shareholder proposal submitted outside of
the process provided by Rule 14a-8 to be eligible for presentation at
Bankshares' 2001 Annual Meeting, timely notice thereof must be received by
Bankshares by January 19, 2001 in the manner and form required by Bankshares'

<PAGE> 26

Bylaws. In order to curtail controversy as to compliance with these
requirements, stockholders are urged to submit proposals to the Secretary of
Bankshares by Certified Mail/Return Receipt Requested. If the date of the 2001
Annual Meeting shall change, such deadlines would also change.

ANNUAL REPORTS

Bankshares' 1999 Annual Report to Stockholders and Annual Report on Form
10-K accompany this Proxy Statement. Copies of the reports may be obtained upon
written request to the Secretary of Bankshares, 114 East Lexington Street,
Baltimore, Maryland 21202, and will be available at the Annual Meeting.

By Order of the Board of Directors

/s/ Peter M. Martin

PETER M. MARTIN
Chairman of the Board, President
and Chief Executive Officer

Baltimore, Maryland
March 6, 2000

<PAGE> 27

[DETACH HERE]

PROXY

PROVIDENT BANKSHARES CORPORATION

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, APRIL 19, 2000

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Dennis A. Starliper and Robert L. Davis, or
either of them, each with power of substitution, as proxies of the undersigned,
to attend the Annual Meeting of Stockholders of Provident Bankshares Corporation
to be held at Provident's Headquarters Building, Tenth Floor 114 E. Lexington
Street, Baltimore, Maryland 21202 on April 19, 2000 and any adjournment or
postponement thereof, and to vote the number of shares the undersigned would be
entitled to vote if personally present on the following matters set forth on the
reverse side.

SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE

<PAGE> 28

[DETACH HERE]

/ X / PLEASE MARK
VOTES AS IN
THIS EXAMPLE.

THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF CONTRARY
DIRECTIONS, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS
LISTED BELOW, FOR PROPOSAL 2 AND AGAINST PROPOSAL 3.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 & 2.

1. Election of Directors.
NOMINEES: Dr. Calvin W. Burnett; Pierce B. Dunn; Mark K. Joseph;
Peter M. Martin and Sheila K. Riggs

FOR WITHHELD
/___/ /___/

/___/ ______________________________________
For all nominees except as noted above

2. To ratify the selection of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as the
independent auditors of the Company /___/ /___/ /___/
for the fiscal year 2000.

3. YOUR BOARD OF DIRECTORS RECOMMENDS FOR AGAINST ABSTAIN
A VOTE AGAINST PROPOSAL 3. /___/ /___/ /___/
Stockholder Proposal to inform the
Board of Directors of the Stockholders
desire to achieve a sale, merger or
acquisition.

In their discretion, the proxies are authorized to vote with respect to
matters incident to the conduct of the meeting and upon such other
matters as may properly come before the meeting and all adjournments and
postponements thereof.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT /___/

Please sign exactly as your name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary
should sign and indicate his or her full title. When stock has been
issued in the name of two or more persons, all should sign.

Signature: _________________ Date: _______ Signature: ____________ Date: _______