EUBK Eurobancshares (MM)

SAN JUAN, Puerto Rico, July 19 /PRNewswire-FirstCall/ -- EuroBancshares, Inc. (NASDAQ:EUBK) (the "Company") today reported its results for the second quarter ended June 30, 2007. Net Income EuroBancshares reported net income of $2.6 million, or $0.12 per diluted share, for the second quarter of 2007, when compared with net income of $1.3 million, or $0.06 per diluted share, and net income of $3.3 million, or $0.16 per diluted share, for the quarters ended March 31, 2007 and June 30, 2006, respectively. Return on Average Assets (ROAA) for the second quarter of 2007 was 0.43%, compared to 0.21% and 0.54% for the quarters ended March 31, 2007 and June 30, 2006, respectively. Return on Average Common Equity (ROAE) for the second quarter of 2007 was 6.41%, compared to 3.27% and 8.71% for the quarters ended March 31, 2007 and June 30, 2006, respectively. Rafael Arrillaga-Torrens, Jr., Chairman of the Board, President and Chief Executive Officer said: "We are beginning to see improvements in our financial results. Beyond our uptick in earnings, we are most pleased with the improvements in asset quality. However, much remains to be done. While the economy of Puerto Rico still faces headwinds, the results EuroBancshares turned in for this quarter reflect the proactive actions we began to take in 2005. This quarter was driven by a reduction of charge-offs in our leasing business, an overall improvement in the performance of other loan portfolios, and commercial loan growth along with moderate margin improvement, when compared with the first quarter of 2007. We are all excited by the progress achieved as we believe it could enhance our future performance. "This quarter also demonstrated that we can show improvement while continuing to invest for our future. We are pursuing the opportunities that the current banking environment presents us to achieve permanent gains in the market share from our unique position and core strengths. We plan to continue building our banking platform. Rather than merely weathering a storm, we plan to emerge from the current market conditions and competitive situations with a more robust product mix, a more talented team and enhanced economies of scale." Net Interest Income The Company reported total interest income of $42.9 million for the second quarter of 2007, compared to $39.8 million for the second quarter of 2006. Total interest income for the six months ended June 30, 2007 was $85.3 million, compared to total interest income of $77.6 million for prior year same period. Increases were driven by the combination of a slight increase in average interest-earning assets and increased yields resulting from higher interest rates. Average second quarter and average year-to-date interest- earning assets increased to $2.337 billion and $2.347 billion at June 30, 2007, compared to $2.333 billion and $2.306 billion at June 30, 2006, respectively. Total interest expense was $25.5 million for the quarter ended June 30, 2007, compared to $22.8 million for the same quarter in 2006. Total interest expense for the six months ended June 30, 2007 was $50.8 million, compared to total interest expense of $43.1 million for prior year same period. These increases resulted also from the combination of a slight increase in average interest-bearing liabilities and increased costs of funds. Average second quarter and average year-to-date interest-bearing liabilities increased to $2.107 billion and $2.113 billion at June 30, 2007, compared to $2.101 billion and $2.069 billion at June 30, 2006, respectively. Net interest margin on a fully taxable equivalent basis decreased to 2.92% and 2.91% for the second quarter and six month period ended June 30, 2007, respectively, compared to 2.99% and 3.07% for the same periods of 2006. Likewise, net interest spread on a fully taxable equivalent basis decreased to 2.38% and 2.37% for the second quarter and six month period ended June 30, 2007, respectively, from 2.50% and 2.58% for prior year same periods. These decreases in net interest margins and spreads are basically caused by rising short-term interest rates and the flattening of the yield curve, which caused borrowing costs to increase at a faster rate than the yield on earning-assets, and to the fact that the increase in average deposits has been substantially in brokered deposits, a higher cost category. However, for the quarter ended June 30, 2007, net interest margin and spread on a fully taxable equivalent basis increased slightly to 2.92% and 2.38%, respectively, when compared with 2.89% and 2.35% for the quarter ended March 31, 2007. This increase was mainly driven by increased yields in the loan portfolios when comparing both periods. Provision for Loan Losses The provision for loan and lease losses for the second quarter and six months ended June 30, 2007 was $3.6 million and $8.9 million, or 104.60% and 121.58% of net charge-offs, compared to $3.4 million and $6.8 million, or 108.72% and 107.86% of net charge-offs, for the same periods in 2006, and $5.3 million, or 136.69% of net charge-offs, for the quarter ended March 31, 2007. The provision for loan and lease losses is a direct result of the periodic evaluation of the allowance for loan and lease losses, which considers the growth in the loan portfolio and the level of net-charge offs, delinquencies and related loss experience. Some of these factors are further discussed in the Loan and Asset Quality section of this document. Non-Interest Income The Company's non-interest income in the second quarter and six months ended June 30, 2007 was of $2.1 million and $4.1 million, compared to $2.5 million and $4.9 million for prior year same periods. These decreases were mainly due to the net effect of: (i) a $521,000 and $716,000 increase in service charges for the quarter and six months ended June 30, 2007, respectively, mainly due to an increase in non-sufficient fund charges on deposit accounts, other fees on loan accounts, and the reversal of approximately $166,000 related to expired recourse liabilities on lease financing contracts; and (ii) a $450,000 and $895,000 net loss on sale of repossessed assets for the quarter and six months ended June 30, 2007, respectively, compared to a gain of $453,000 and $712,000 for prior year same periods. The net loss on repossessed assets included a $394,000 and $840,000 loss on sale of repossessed vehicles for the quarter and six months ended June 30, 2007, when compared to a $1,000 loss and a $287,000 gain on sale for prior year same periods. The increase in the net loss on sale of repossessed assets was directly attributable to our strategy of being more aggressive in the sale of repossessed vehicles to expedite their disposition and avoid the build up of our repossessed vehicles inventory. This strategy resulted in an increase of approximately 51% in the number of repossessed vehicles sold during the second quarter of 2007, when compared to the same period in 2006. During the second quarter of 2007, we sold 437 repossessed vehicles, compared to 289 during the second quarter of 2006. More details on repossessed assets are discussed in the Loan and Asset Quality section below. Non-Interest Expense Non-interest expense for the second quarter and six months ended June 30, 2007 was $12.3 million and $24.4 million, compared to $10.5 million and $21.6 million for prior year same periods. Such increases were mainly due to the net effect of: (i) a $635,000 and $1.4 million increase in salaries for the quarter and six months period ended June 30, 2007, respectively, mainly from increases in personnel, primarily in our residential mortgage and trust operations, and normal salary increases and related employees' benefits; (ii) an increase of $378,000 and $747,000 in occupancy expenses for the quarter and six months period ended June 30, 2007, respectively, mainly related to an increase in rent, equipment maintenance, property tax expenses, and data and security services; (iii) a $215,000 and $470,000 increase in other real estate owned and repossessed assets expenses for the quarter and six months period ended June 30, 2007, respectively, resulting from an increase in the valuation allowance for subsequent declines in value, mainly related to repossessed vehicles in inventory over six months, and (iv) a $299,000 and $429,000 increase in insurance expense for the quarter and six months period ended June 30, 2007 respectively, mainly related to the FDIC's new insurance premium assessment. The efficiency ratio on a fully taxable equivalent basis for the quarter ended June 30, 2007 was 63.91%, compared to 52.47% for the quarter ended June 30, 2006, and 63.98% for the quarter ended March 31, 2007. Income Tax Expense Puerto Rico income tax law does not provide for the filing of a consolidated tax return; therefore, the income tax expense reflected in our consolidated income statement is the sum of our income tax expense and the income tax expenses of our individual subsidiaries. Our revenues are generally not subject to U.S. federal income tax. Income tax expense is the sum of two components: current tax expense and deferred tax expense (benefit). Current tax expense is calculated by applying the statutory tax rate to taxable income. The deferred tax expense (benefit) reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred income tax assets and liabilities represent the tax effects, based on current tax law, of future deductible or taxable amounts attributable to events that have been recognized in our financial statements. Income tax expense decreased to $1.1 million during the second quarter of 2007, compared to $2.4 million during the same period in 2006. Income tax expense for the six months ended June 30, 2007 also decreased to $1.3 million, compared to $4.4 million for the six months ended June 30, 2006. This decrease resulted from the net effect of a $5.3 million pre-tax income and a 25.48% effective tax rate for the six months ended June 30, 2007, compared to a $11.0 million pre-tax income and a 40.32% effective tax rate for the same period in 2006. Our income tax provision is lower than a provision based on the statutory tax rate applicable to Eurobank, which is 39.0%, because of tax exempt interest income and expense. Exempt interest relates mostly to interest earned on securities held by our international banking entities. The decrease in the effective tax rate was mainly due to the combined effect of: (i) an increase in the exempt income as a percentage of total income during 2007; and (ii) the termination on December 31, 2006 of the additional temporary taxes of 4.5% imposed by the Puerto Rico Legislature in 2006. Balance Sheet Summary and Asset Quality Data Assets Total assets decreased to $2.459 billion as of June 30, 2007 from $2.501 billion as of December 31, 2006. The decrease was mainly due to the net effect of: (i) a $13.1 million decrease in interest bearing deposits; (ii) a $31.4 million decrease in securities purchased under agreements to resell; (iii) a $66.1 million decrease in the investment securities portfolio; (iv) a $56.7 million increase in net loans; and (v) a $13.5 million increase in premises and equipment, resulting mainly from the acquisition of a building to relocate the headquarters and administrative offices of the Corporation. The decrease in interest bearing deposits and securities purchased under agreements to resell was mainly related to the increase in the loan portfolio. Details on investment securities and loan portfolio variances are discussed further below. Investments During the first six months of 2007, the investment portfolio decreased by approximately $66.1 million to $511.8 million as of June 30, 2007, from $577.9 million as of December 31, 2006. The change from December 31, 2006 was primarily due to the net effect of: (i) prepayments of approximately $50.5 million on mortgage-backed securities and FHLB obligations; and (ii) the maturity of $21.0 million in US government agencies and PR government obligations. During the past few years, we positioned our investment portfolio for an increase in interest rates by purchasing mostly investments with maturities or estimated maturities between 11/2 to 4 years. During the first half of 2006, we saw higher interest in the short term of the curve and, in order to improve the average yield while maintaining a short estimated average life, we reinvested a portion of the cash flows generated by the investment portfolio at higher yields and for maturities or estimated maturities from 2 years to 7 years. In addition, during the fourth quarter of 2006, we sold approximately $50.1 million of FHLB and mortgage-backed securities available for sale with an average yield of 3.64%. For the quarter ended June 30, 2007, after the above-mentioned transactions, the estimated average maturity was approximately 3.0 years and the average yield was approximately 5.25%, compared to an estimated average maturity of 2.8 years and an average yield of 5.22% for the quarter ended March 31, 2007, and an estimated average maturity of 3.2 years and an average yield of 5.12% for the quarter ended December 31, 2006. Looking forward, approximately $7.5 million in agencies notes with an average yield of 3.38% will mature during the third quarter of 2007. We expect that the above-mentioned transactions shall continue to have a positive effect on the average yield of the portfolio during the upcoming quarters. Loans Total loans, net of unearned, increased by $58.2 million, or 6.65% on an annualized basis, to $1.809 billion as of June 30, 2007, from $1.751 billion as of December 31, 2006. This increase was mainly the net effect of: (i) a $29.1 million, or 5.63% annualized increase in commercial loans, from $1.034 billion as of December 31, 2006 to $1.063 billion as of June 30, 2007; (ii) a $38.8 million, or 61.52% annualized increase in construction loans, from $126.2 million as of December 31, 2006 to $165.1 million as of June 30, 2007; (iii) a $16.9 million, or 44.24% annualized increase in residential mortgages, from $76.3 million as of December 31, 2006 to $93.1 million as of June 30, 2007; and (iv) a $25.9 million, or 11.69% annualized decrease in lease financing contracts from $443.3 million as of December 31, 2006 to $417.4 million as of June 30, 2007. The $29.1 million increase in commercial loans was mainly concentrated in commercial loans secured by real estate, in which historical losses have been low. The $38.8 million increase in construction loans was mainly concentrated in residential developments that are private, but moderately priced or of the affordable type supported by government assisted programs. Asset Quality Non-performing assets decreased to $62.4 million as of June 30, 2007, from $71.2 million and $63.0 million as of March 31, 2007 and December 31, 2006, respectively. Non-performing loans amounted to $51.8 million as of June 30, 2007, compared to $59.3 million as of March 31, 2007 and $50.0 million as of December 31, 2006. The $7.5 million decrease in non-performing loans during the second quarter of 2007 when compared to the first quarter of 2007 was due to the net effect of a $8.4 million decrease in loans over 90 days past due still accruing interest and a $937,000 increase in nonaccrual loans. The $8.4 million decrease in loans over 90 days still accruing interest was mainly due to the net effect of a $9.9 million decrease in loans secured by real estate and a $930,000 increase in lease financing contracts. The $9.9 million decrease in the loans secured by real estate was mainly caused by one construction business relationship for $9.4 million, which became current during the second quarter of 2007. The $937,000 million increase in nonaccrual loans was mainly attributable to the net effect of: (i) a $1.7 million increase in commercial loans resulting mainly from the net effect of a $3.6 million increase related to commercial loans placed in nonaccrual status during the second quarter of 2007 and a $1.7 million decrease related to commercial loans removed from nonaccrual status during the same quarter; (ii) a decrease of $682,000 in lease financing contracts; and (iii) a $44,000 decrease in marine loans. The $3.6 million in commercial loans placed in nonaccrual status during the second quarter of 2007 was mainly comprised of five commercial business relationships amounting to $2.2 million secured by real estate. Repossessed assets decreased to $10.6 million as of June 30, 2007, compared to $11.9 million and $13.0 million as of March 31, 2007 and December 31, 2006, respectively. The decrease during the second quarter of 2007 when compared to the previous quarter was mainly attributable to the net effect of: (i) a decrease of $1.5 million in other repossessed assets, mainly comprised of a $1.2 million decrease in the inventory of repossessed vehicles and $342,000 in repossessed boats; and (ii) an increase of $149,000 in other real estate owned resulting from the net effect of the sale of one property and the foreclosure of two properties during the second quarter of 2007. The $1.5 million decrease in the inventory of repossessed vehicles was due to the fact that fewer vehicles were repossessed during the second quarter of 2007 when compared to the first quarter of 2007. Total repossessed and sold vehicles during the second quarter of 2007 were 385 and 437, respectively, compared to 446 and 532 in the first quarter of 2007. Our inventory of repossessed vehicles decreased to 391 units as of June 30, 2007, from 457 and 564 as of March 31, 2007 and December 31, 2006, respectively. This is the lowest level of repossessed vehicles since August 2005. We continue monitoring this inventory very closely and taking measures to expedite its disposition. Annualized net charge-offs as a percentage of average loans decreased to 0.82% as of June 30, 2007 when compared to 0.88% for the quarter ended March 31, 2007, and 1.10% and 0.97% for the fourth quarter and year ended December 31, 2006, respectively. Net charge offs for the quarter ended June 30, 2007 decreased to $3.4 million, from $3.9 million and $4.7 million for the quarters of March 2007 and December 2006, respectively. Net charge-offs for the quarter ended June 30, 2007 as compared to the quarters ended March 31, 2007 and December 31, 2006 were as follows: (i) $185,000 in net charge-offs on commercial loans secured by real estate for the quarter ended June 30, 2007, compared to $24,000 in net recoveries for the first quarter of 2007 and $109,000 in net charge-offs for the quarter ended December 31, 2006; (ii) $344,000 in net charge-offs on other commercial and industrial loans for the second quarter of 2007, compared to $373,000 and $624,000 for the quarters ended March 31, 2007 and December 31, 2006, respectively; (iii) $222,000 in net charge-offs on consumer loans for the second quarter of 2007, compared to $403,000 and $424,000 for the quarters ended March 31, 2007 and December 31, 2006, respectively; (iv) $2.7 million in net charge-offs on lease financing contracts for the second quarter of 2007, compared to $3.0 million, and $3.5 million for the quarters ended March 31, 2007 and December 31, 2006, respectively; and (v) $1,000 in net recoveries on other loans for the second quarter of 2007, compared to $134,000 and $47,000 in net charge-offs for the quarters ended March 31, 2007 and December 31, 2006. The decrease in net charge-offs in our leasing portfolio when comparing the second quarter of 2007 to the previous quarter was mainly attributable to the decrease in the volume of repossessed vehicles during the second quarter of 2007. This is the second quarter in a row in which we experienced a decrease in the net charge-offs of this portfolio, and the third consecutive quarter in which total net charge-offs for the bank decreased. Allowance for Loan and Lease Losses The allowance for loan and lease losses increased to $20.5 million as of June 30, 2007, from $20.4 million as of March 31, 2007, and $18.9 million as of December 31, 2006. The allowance for loan and lease losses is affected by net charge-offs and also by the provision for loan and lease losses for each related period. Net charge-offs, loan portfolio growth, and other economic conditions are taken into consideration when evaluating the adequacy of the allowance for loan and lease losses. Net charge-offs for the quarter ended June 30, 2007 decreased to $ 3.4 million, from $3.8 million during the quarter ended March 31, 2007. Net charge-offs for the six months ended June 30, 2007 amounted to $7.3 million, or $14.6 million on an annualized basis, compared to $16.2 million for the year ended December 31, 2006. However, considering that the economy of the Island is still showing signs of weakness, we decided to make a provision for loan and lease losses that exceeded by $158,000 the net charge-offs during the current quarter. On the other hand, the growth experienced in the loan portfolios was basically concentrated in real estate secured loans, in which our historical losses have been low. We believe that the allowance for loan and lease losses is adequate and it represents 1.13% of total loans as of June 30, 2007. Deposits and Borrowings Total deposits as of June 30, 2007 amounted to $1.877 billion, compared to $1.905 billion as of December 31, 2006. This $28.6 million decrease was due to the net effect of: (i) a $9.5 million decrease in noninterest-bearing deposits; (ii) a $2.1 million increase in NOW and money market accounts; (iii) a $14.0 million decrease in savings accounts; (iv) a $5.8 million decrease in regular time deposits and IRA's; (v) a $906,000 increase in jumbo time deposits; and (vi) a $2.3 million decrease in brokered time deposits. The decrease in core deposits is mainly attributable to the fierce competition for core deposits on the Island due to a reduction of local funding sources. The decrease in brokered deposits resulted from our strategy of repositioning our investment portfolio in an effort to improve the net interest margin. Other borrowings decreased to $377.3 million as of June 30, 2007, compared to $395.0 million as of December 31, 2006. Stockholders' Equity The Company's stockholders' equity increased to $173.3 million as of June 30, 2007, from $169.9 million as of December 31, 2006, representing an increase of 4.07 % on an annualized basis. Besides earnings from operations, the Company's stockholders' equity was impacted by accumulated other comprehensive losses of $8.0 million and $7.6 million as of June 30, 2007 and December 31, 2006, respectively. In addition, the following items also impacted the Company's stockholders' equity: - the repurchase of 488,477 shares during 2006 in connection with a stock repurchase program approved by the Board of Directors in October 2005, which expired in October 2006; - the exercise of 150,000, 56,450, 7,000 and 250,862 stock options in February 2006, June 2006, September 2006 and February 2007, respectively; and - the repurchase of 105,138 shares during the quarter ended June 30, 2007 in connection with a stock repurchase program approved by the Board of Directors on May 31, 2007. About EuroBancshares, Inc. EuroBancshares, Inc. is a diversified financial holding company headquartered in San Juan, Puerto Rico, offering a broad array of financial services through its wholly-owned banking subsidiary, Eurobank; EBS Overseas, Inc., an international banking entity subsidiary of Eurobank; and its wholly- owned insurance agency, EuroSeguros. Forward-Looking Statements Statements concerning future performance, events, expectations for growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties that might cause actual results to differ materially from stated expectations. Specific factors include, but are not limited to, loan volumes, the ability to expand net interest margin, loan portfolio performance, the ability to continue to attract low-cost deposits, success of expansion efforts, competition in the marketplace and general economic conditions. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes included in EuroBancshares' most recent reports on Form 10-K and Form 10-Q, as filed with the Securities and Exchange Commission as they may be amended from time to time. Results of operations for the most recent quarter are not necessarily indicative of operating results for any future periods. Any projections in this release are based on limited information currently available to management, which is subject to change. Although any such projections and the factors influencing them will likely change, the bank will not necessarily update the information, since management will only provide guidance at certain points during the year. Such information speaks only as of the date of this release. Additional information on these and other factors that could affect our financial results are included in filings by EuroBancshares with the Securities and Exchange Commission. EUROBANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited) For the three month periods ended June 30, 2007 and 2006 and March 31, 2007, and six month periods ended June 30, 2007 and 2006 Three Months Ended June 30, June 30, March 31, 2007 2006 2007 Interest income: Loans, including fees $36,040,114 $31,794,193 $34,939,490 Investment securities: Taxable 2,932 26,333 3,749 Exempt 6,185,256 7,523,260 6,644,134 Interest bearing deposits, securities purchased under agreements to resell, and other 721,301 423,355 726,369 Total interest income 42,949,603 39,767,141 42,313,742 Interest expense: Deposits 20,380,548 16,311,119 20,056,619 Securities sold under agreements to repurchase, notes payable, and other 5,126,660 6,439,718 5,197,125 Total interest expense 25,507,208 22,750,837 25,253,744 Net interest income 17,442,395 17,016,304 17,059,998 Provision for loan and lease losses 3,594,000 3,390,000 5,279,000 Net interest income after provision for loan and lease losses 13,848,395 13,626,304 11,780,998 Noninterest income: Service charges - fees and other 2,533,170 2,011,717 2,254,720 Net (loss) gain on sale of repossessed assets and on disposition of other assets (450,321) 453,093 (444,768) Gain on sale of loans 49,826 82,012 112,758 Total noninterest income 2,132,675 2,546,822 1,922,710 Noninterest expense: Salaries and employee benefits 5,163,004 4,527,928 5,735,170 Occupancy, furniture and equipment 2,631,039 2,252,984 2,597,434 Professional services 1,007,732 999,190 866,860 Insurance 477,602 179,311 452,268 Promotional 373,950 274,698 377,021 Other 2,611,727 2,272,709 2,101,070 Total noninterest expense 12,265,054 10,506,820 12,129,823 Income before income taxes 3,716,016 5,666,306 1,573,885 Provision for income taxes 1,088,265 2,386,467 259,848 Net income $2,627,751 $3,279,839 $1,314,037 Basic earnings per share $0.13 $0.16 $0.06 Diluted earnings per share $0.12 $0.16 $0.06 Six Months Ended June 30, 2007 2006 Interest income: Loans, including fees $70,979,604 $61,874,386 Investment securities: Taxable 6,681 52,650 Exempt 12,829,389 14,720,679 Interest bearing deposits, securities purchased under agreements to resell, and other 1,447,671 902,400 Total interest income 85,263,345 77,550,115 Interest expense: Deposits 40,437,167 31,282,519 Securities sold under agreements to repurchase, notes payable, and other 10,323,785 11,867,096 Total interest expense 50,760,952 43,149,615 Net interest income 34,502,393 34,400,500 Provision for loan and lease losses 8,873,000 6,780,000 Net interest income after provision for loan and lease losses 25,629,393 27,620,500 Noninterest income: Service charges - fees and other 4,787,890 4,072,085 Net (loss) gain on sale of repossessed assets and on disposition of other assets (895,089) 711,747 Gain on sale of loans 162,584 129,039 Total noninterest income 4,055,385 4,912,871 Noninterest expense: Salaries and employee benefits 10,898,174 9,476,252 Occupancy, furniture and equipment 5,228,473 4,480,857 Professional services 1,874,592 2,188,020 Insurance 929,870 501,078 Promotional 750,972 517,055 Other 4,712,797 4,402,131 Total noninterest expense 24,394,878 21,565,393 Income before income taxes 5,289,900 10,967,978 Provision for income taxes 1,348,113 4,421,953 Net income $3,941,787 $6,546,025 Basic earnings per share $0.19 $0.32 Diluted earnings per share $0.18 $0.31 Note: Certain adjustments resulting from the initial adoption of SAB 108 as of December 31, 2006 were made to comparable periods in 2006. EUROBANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) June 30, 2007 and December 31, 2006 June 30, December 31, Assets 2007 2006 Cash and due from banks $23,429,289 $25,527,489 Interest bearing deposits 35,962,939 49,050,368 Securities purchased under agreements to resell 19,809,166 51,191,323 Investment securities available for sale 471,361,419 535,159,009 Investment securities held to maturity 35,160,209 38,432,820 Other investments 5,260,350 4,329,200 Loans held for sale 1,310,262 879,000 Loans, net of allowance for loan and lease losses of $20,511,597 in 2007 and $18,936,841 in 2006 1,787,243,680 1,731,022,290 Accrued interest receivable 16,113,716 15,760,852 Customers' liability on acceptances 467,441 1,561,736 Premises and equipment, net 28,414,142 14,889,456 Other assets 34,408,711 33,116,690 Total assets $2,458,941,324 $2,500,920,233 Liabilities and Stockholders' Equity Deposits: Noninterest bearing $130,790,462 $140,321,373 Interest bearing 1,745,949,158 1,765,034,834 Total deposits 1,876,739,620 1,905,356,207 Securities sold under agreements to repurchase 356,239,250 365,664,250 Acceptances outstanding 467,441 1,561,736 Advances from Federal Home Loan Bank 480,965 8,707,420 Notes payable to Statutory Trust 20,619,000 20,619,000 Accrued interest payable 16,498,723 18,047,074 Accrued expenses and other liabilities 14,561,631 11,086,705 2,285,606,630 2,331,042,392 Stockholders' equity: Preferred stock: Preferred stock Series A, $0.01 par value. Authorized 20,000,000 shares; issued and outstanding 430,537 in 2007 and 2006 4,305 4,305 Capital paid in excess of par value 10,759,120 10,759,120 Common stock: Common stock, $0.01 par value. Authorized 150,000,000 shares; issued: 20,028,398 shares in 2007 and 19,777,536 shares in 2006; outstanding: 19,269,545 shares in 2007 and 19,123,821 shares in 2006 200,284 197,775 Capital paid in excess of par value 107,772,561 106,539,383 Retained earnings: Reserve fund 8,021,828 7,553,381 Undivided profits 62,904,493 59,800,495 Treasury stock, 758,853 shares at cost in 2007 and 653,715 at cost in 2006 (8,363,261) (7,410,711) Accumulated other comprehensive loss (7,964,636) (7,565,907) Total stockholders' equity 173,334,694 169,877,841 Total liabilities and stockholders' equity $2,458,941,324 $2,500,920,233 EUROBANCSHARES, INC. AND SUBSIDIARIES OPERATING RATIOS AND OTHER SELECTED DATA (Dollars in thousands, except share data) Unaudited Quarter Ended June 30, March 31, 2007 2006 2007 Average shares outstanding - basic 19,371,991 19,215,736 19,226,953 Average shares outstanding - assuming dilution 19,585,806 19,651,760 19,499,692 Number of shares outstanding at end of period 19,269,545 19,116,821 19,374,683 Book value per common share $8.44 $7.76 $8.46 Average Balances Total assets 2,435,355 2,413,804 2,451,225 Loans and leases, net of unearned 1,779,829 1,639,435 1,759,147 Interest-earning assets (1) 2,336,812 2,333,712 2,357,974 Interest-bearing deposits 1,722,865 1,593,813 1,726,318 Other borrowings 383,981 506,820 393,274 Preferred stock 10,763 10,763 10,763 Shareholders' equity 174,681 161,391 171,681 Loan Mix Loans secured by real estate Commercial and industrial 764,038 683,608 739,981 Construction 165,075 90,306 142,191 Residential mortgage 93,150 60,420 85,258 Consumer 744 931 740 1,023,007 835,265 968,170 Commercial and industrial 299,152 284,400 293,139 Consumer 59,965 62,330 60,523 Lease financing contracts 417,400 473,863 429,142 Overdrafts 6,270 8,023 6,666 Total 1,805,794 1,663,881 1,757,640 Deposit Mix Noninterest-bearing deposits 130,791 141,875 132,375 Now and money market 64,793 74,509 62,239 Savings 142,056 179,389 151,992 Broker deposits 1,223,847 1,029,726 1,163,020 Regular CD's & IRAS 89,606 110,770 90,792 Jumbo CD's 225,647 206,589 224,145 Total 1,876,740 1,742,858 1,824,563 Financial Data Total assets 2,458,941 2,443,504 2,432,777 Loans and leases, net of unearned 1,809,066 1,670,294 1,761,488 Allowance for loan and lease losses 20,512 18,682 20,354 Total deposits 1,876,740 1,742,859 1,824,563 Other borrowings 377,339 515,315 395,743 Preferred stock 10,763 10,763 10,763 Dividends on preferred stock 186 186 184 Shareholders' equity 173,335 159,165 174,771 Total interest income 42,949 39,767 42,314 Total interest expense 25,507 22,751 25,254 Provision for loan and lease losses 3,594 3,390 5,279 Services charges - fees and other 2,533 2,012 2,255 Net (loss) gain on sale of loans and other assets (400) 535 (332) Non-interest expense 12,265 10,507 12,130 Income taxes 1,088 2,386 260 Net income 2,628 3,280 1,314 Nonperforming assets 62,374 53,756 71,192 Nonperforming loans 51,753 40,659 59,261 Net charge-offs 3,436 3,118 3,862 Performance Ratios Return on average assets (2) 0.43 % 0.54 % 0.21 Return on average common equity (3) 6.41 8.71 3.27 Net interest spread (4) 2.38 2.50 2.35 Net interest margin (5) 2.92 2.99 2.89 Efficiency ratio (6) 63.91 52.47 63.98 Earnings per common share - basic $0.13 $0.16 $0.06 Earnings per common share - diluted 0.12 0.16 0.06 Asset Quality Ratios Nonperforming assets to total assets 2.54 % 2.20 % 2.93 Nonperforming loans to total loans 2.86 2.43 3.36 Allowance for loan and lease losses to total loans 1.13 1.12 1.16 Net loan and lease charge-offs to average loans 0.77 0.76 0.88 Provision for loan and lease losses to net loan and lease charge-offs 104.60 108.72 136.69 Six Months Ended June 30, 2007 2006 Average shares outstanding - basic 19,299,873 19,314,945 Average shares outstanding - assuming dilution 19,543,551 19,844,836 Number of shares outstanding at end of period 19,269,545 19,116,821 Book value per common share $8.44 $7.76 Average Balances Total assets 2,443,232 2,383,789 Loans and leases, net of unearned 1,769,545 1,617,683 Interest-earning assets (1) 2,347,335 2,306,911 Interest-bearing deposits 1,724,582 1,585,579 Other borrowings 388,602 483,914 Preferred stock 10,763 10,763 Shareholders' equity 173,189 163,299 Loan Mix Loans secured by real estate Commercial and industrial 764,038 683,608 Construction 165,075 90,306 Residential mortgage 93,150 60,420 Consumer 744 931 1,023,007 835,265 Commercial and industrial 299,152 284,400 Consumer 59,965 62,330 Lease financing contracts 417,400 473,863 Overdrafts 6,270 8,023 Total 1,805,794 1,663,881 Deposit Mix Noninterest-bearing deposits 130,791 141,875 Now and money market 64,793 74,509 Savings 142,056 179,389 Broker deposits 1,223,847 1,029,726 Regular CD's & IRAS 89,606 110,770 Jumbo CD's 225,647 206,589 Total 1,876,740 1,742,858 Financial Data Total assets 2,458,941 2,443,504 Loans and leases, net of unearned 1,809,066 1,670,294 Allowance for loan and lease losses 20,512 18,682 Total deposits 1,876,740 1,742,859 Other borrowings 377,339 515,315 Preferred stock 10,763 10,763 Dividends on preferred stock 369 186 Shareholders' equity 173,335 159,165 Total interest income 85,263 77,550 Total interest expense 50,761 43,150 Provision for loan and lease losses 8,873 6,780 Services charges - fees and other 4,788 4,072 Net (loss) gain on sale of loans and other assets (732) 841 Non-interest expense 24,395 21,565 Income taxes 1,348 4,422 Net income 3,942 6,546 Nonperforming assets 62,374 53,756 Nonperforming loans 51,753 40,659 Net charge-offs 7,298 6,286 Performance Ratios Return on average assets (2) 0.32 % 0.55 Return on average common equity (3) 4.85 8.58 Net interest spread (4) 2.37 2.58 Net interest margin (5) 2.91 3.07 Efficiency ratio (6) 63.95 53.46 Earnings per common share - basic $0.19 $0.32 Earnings per common share - diluted 0.18 0.31 Asset Quality Ratios Nonperforming assets to total assets 2.54 % 2.20 Nonperforming loans to total loans 2.86 2.43 Allowance for loan and lease losses to total loans 1.13 1.12 Net loan and lease charge-offs to average loans 0.82 0.78 Provision for loan and lease losses to net loan and lease charge-offs 121.58 107.86 (1) Includes nonaccrual loans, which balance as of the periods ended June 30, 2007 and 2006 was $41.4 million, $31.9 million, respectively. (2) Return on average assets (ROAA) is determined by dividing net income by average assets. (3) Return on average common equity (ROAE) is determined by dividing net income by average common equity. (4) Represents the average rate earned on interest-earning assets less the average rate paid on interest-bearing liabilities. (5) Represents net interest income on fully taxable equivalent basis as a percentage of average interest-earning assets. The efficiency ratio is determined by dividing total noninterest (6) expense by an amount equal to net interest income (fully taxable equivalent) plus noninterest income. Note: Certain adjustments resulting from the initial adoption of SAB 108 as of December 31, 2006 were made to comparable periods in 2006. EUROBANCSHARES, INC. AND SUBSIDIARIES NONPERFORMING ASSETS (Dollars in thousands) Unaudited For the periods ended June 30, March 31, December 31, June 30, 2007 2007 2006 2006 Loans contractually past due 90 days or more but still accruing interest: $10,382 $18,827 $12,723 $8,757 Nonaccrual loans: 41,371 40,434 37,255 31,902 Total nonperforming loans 51,753 59,261 49,978 40,659 Repossessed property: Other real estate 4,344 4,195 3,629 2,666 Other repossesed assets 6,277 7,736 9,419 10,431 Total repossessed property 10,621 11,931 13,048 13,097 Total nonperforming assets $62,374 $71,192 $63,026 $53,756 Nonperforming loans to total loans 2.86 % 3.36 % 2.85 % 2.43 % Nonperforming assets to total loans plus repossessed property 3.43 4.01 3.57 3.19 Nonperforming assets to total assets 2.54 2.93 2.52 2.20 EUROBANCSHARES, INC. AND SUBSIDIARIES NET CHARGE-OFFS (Dollars in thousands) Unaudited Year Quarter Ended Ended June March Dec. Sept. June Dec. 30, 31, 31, 30, 30, 31, 2007 2007 2006 2006 2006 2006 Charge-offs: Real estate secured $198 $11 $109 $551 $2 $685 Commercial and industrial 491 456 657 1,179 462 3,050 Consumer 310 460 571 423 619 1,978 Leases financing contracts 3,027 3,388 3,827 3,610 2,587 12,927 Other 5 139 52 5 65 149 Total charge-offs 4,031 4,454 5,216 5,768 3,735 18,789 Recoveries: Real estate secured $13 $35 $- $11 $- $11 Commercial and industrial 147 83 33 92 184 534 Consumer 88 57 147 97 156 465 Leases financing contracts 341 412 294 434 276 1,604 Other 6 5 5 3 1 21 Total recoveries 595 592 479 637 617 2,635 Net charge-offs: Real estate secured $185 $(24) $109 $540 $2 $674 Commercial and industrial 344 373 624 1,087 278 2,516 Consumer 222 403 424 326 463 1,513 Leases financing contracts 2,686 2,976 3,533 3,176 2,311 11,323 Other (1) 134 47 2 64 128 Total net charge-offs $3,436 $3,862 $4,737 $5,131 $3,118 $16,154 Net charge-offs to average loans: Real estate secured 0.07 % (0.01)% 0.05 % 0.25 % 0.00 % 0.08 % Commercial and industrial 0.47 0.51 0.82 1.50 0.40 0.88 Consumer 1.47 2.67 2.77 2.12 2.92 2.42 Leases financing contracts 2.54 2.73 3.14 2.72 1.93 2.40 Other (0.05) 6.20 2.09 0.10 2.81 1.52 Total net charge-offs to average loans 0.77 % 0.88 % 1.10 % 1.22 % 0.76 % 0.97 % DATASOURCE: EuroBancshares, Inc. CONTACT: Rafael Arrillaga-Torrens, Jr., Chairman, President and CEO, or Yadira R. Mercado, Executive Vice-President, CFO, +1-787-751-7340; or Julie Tu - Investor Inquiries, +1-212-445-8456, or Marilynn Meek, General Inquiries, +1-212-827-3773, both of Financial Relations Board

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