Provident Bankshares Corporation is a bank holding company for Provident Bank (Provident or the Bank), a Maryland-chartered stock commercial bank. Provident is a regional bank serving Maryland and Virginia, with emphasis on the urban centers within these states, including the Baltimore, Washington and Richmond metropolitan areas. Of the 152 banking offices, at December 31, 2005, 43% were located in the Baltimore metropolitan region and 57% were located in the metro Washington and Virginia regions. Provident's principal business is to acquire deposits from individuals and businesses, and to use these deposits to fund loans to individuals and businesses. Provident also offers related financial services through wholly owned subsidiaries. Securities brokerage, investment management and related insurance services are available through Provident Investment Company (PIC) and leases through Court Square Leasing and Provident Lease Corporation. Lending activities Provident offers a diversified mix of residential and commercial real estate, business and consumer loans, and leases. A range of loans, including installment loans secured by real estate, boats or automobiles, home equity lines and unsecured personal lines of credit are available to consumers. At December 31, 2005, consumer loans represented 49% of the total loan portfolio. Of these loans, 75% are secured by residential real estate, 23% by boats or automobiles and 2% are unsecured. Provident's commercial real estate lending focus has been on financing commercial and residential construction, as well as on intermediate-term commercial mortgages. Properties securing these loans include office buildings, shopping centers, apartment complexes, warehouses, hotels and tract developments. These portfolios totaled $1.2 billion, at December 31, 2005, or 33%, of total loans. The Company makes business loans primarily to small and medium-sized businesses in the Baltimore, Maryland and Washington, D.C. metropolitan areas. Commercial business loans represent 19% of the Bank's total loans, and consist of term loans, equipment leases and revolving lines of credit for the purpose of current asset financing, equipment purchases, owner-occupied real estate financing and business expansion. At December 31, 2005, the Bank had $50.9 million of loans syndicated by other financial institutions, which qualified as a shared national credit, of which $30.0 million was included in commercial business loans and $20.9 million was included in commercial real estate loans. Deposit activities Average deposits obtained from customers (rather than brokers) represented over 90%, of Provident's deposit funding, during the year ended December 31, 2005. Customer deposits are generated by cross sales and calling efforts of the banking office and commercial cash management sales force. At December 31, 2005, deposits were $4.1 billion. At December 31, 2005, deposits were relatively balanced between transaction accounts, savings accounts and time deposits. As a result of the banking office expansion efforts, including the Southern Financial merger, approximately 40% of customer deposit balances at year-end 2005, were from Virginia and the Washington metropolitan area. Further, the percentage of commercial deposits continued to increase, with commercial deposit balances representing 25% of customer deposits at year-end 2005. The Treasury Division manages the wholesale segments of the balance sheet, including investments, purchased funds, long-term debt and derivatives. Investments At December 31, 2005, the investment securities portfolio was $1.9 billion, or 30%, of total assets. The portfolio objective is to obtain the maximum sustainable interest margin over match-funded borrowings, subject to liquidity, credit and interest rate risk, as well as capital, regulatory and economic considerations. Typically, the Company classifies securities as available for sale to maximize management flexibility, although securities may be purchased with the intention of holding-to-maturity. Provident

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