EUBK Eurobancshares (MM)

SAN JUAN, Puerto Rico, May 1 /PRNewswire-FirstCall/ -- EuroBancshares, Inc. (NASDAQ:EUBK) (the "Company") today reported its results for its first quarter ended March 31, 2008. Net Income EuroBancshares reported a net loss of $1.0 million, or $(0.06) per diluted share, for the first quarter ended March 31, 2008, compared with a net income of $502,000, or $0.02 per diluted share, and $1.3 million, or $0.06 per diluted share, for the quarters ended December 31, 2007 and March 31, 2007, respectively. Return on Average Assets (ROAA) for the first quarter of 2008 was (0.15)%, compared to 0.08% and 0.21% for the quarters ended December 31, 2007 and March 31, 2007, respectively. Return on Average Common Equity (ROAE) for the first quarter of 2008 was (2.33)%, compared to 1.20% and 3.27% for the quarters ended December 31, 2007 and March 31, 2007, respectively. Rafael Arrillaga-Torrens, Jr., Chairman of the Board, President and Chief Executive Officer said, "While the Puerto Rico economy continues to present significant challenges, and the United States economy is facing similar issues, it is noteworthy that our nonperforming assets remained essentially flat on a linked quarter basis. "On the other hand, the dramatic reductions in interest rates mandated by the FED to stimulate the national economy impacted our interest income adversely. However, we ended the quarter on a positive note as our cost of funds commenced to reflect said interest reductions as we experienced lower funding costs in short-term borrowings and began to call our callable broker deposits. "These modest achievements reflect our efforts to navigate the uncharted waters in certainly the most difficult economic times for the financial industry that we can recall. Our philosophy during these times is to continue to work with our customers. We believe that both they and we will benefit from taking a long-term view, which will most surely take us to a safe harbor." Net Interest Income The Company reported total interest income of $42.6 million for the first quarter of 2008, compared to $44.3 million for the fourth quarter of 2007 and $42.3 million for the first quarter ended March 31, 2007. The decrease during the quarter ended March 31, 2008 when compared to the previous quarter was mainly driven by the net effect of decreased yields resulting from interest rate cuts of 200 basis points during the first quarter of 2008, partially offset by an increase in average interest-earning assets. The average interest yield on a fully taxable equivalent basis we received for interest-earning assets decreased to 7.09% during the quarter ended March 31, 2008, from 7.57% and 7.69% for the fourth quarter of 2007 and the quarter ended March 31, 2007, respectively. Average interest-earning assets increased to $2.633 billion for the quarter ended March 31, 2008, compared to $2.523 billion and $2.358 billion for the fourth quarter of 2007 and the first quarter ended March 31, 2007, respectively. Total interest expense was $27.4 million for the quarter ended March 31, 2008, compared to $28.1 million and $25.3 million for the fourth quarter of 2007 and the first quarter ended March 31, 2007, respectively. The decrease during the quarter ended March 31, 2008 when compared to the previous quarter resulted also from the net effect of a decrease in the cost of funds, as explained further below, partially offset by an increase in average interest-bearing liabilities. The average interest rate on a fully taxable equivalent basis we paid for interest-bearing liabilities decreased to 5.13% during the quarter ended March 31, 2008, from 5.47% and 5.34% for the fourth quarter of 2007 and the first quarter ended March 31, 2007, respectively. Average interest-bearing liabilities increased to $2.414 billion for the quarter ended March 31, 2008, compared to $2.302 billion and $2.120 billion for the fourth quarter of 2007 and the quarter ended March 31, 2007, respectively. Net interest margin and net interest spread on a fully taxable equivalent basis was 2.39% and 1.96% for the quarter ended March 31, 2008, respectively, compared to 2.58% and 2.10% for the fourth quarter of 2007, and 2.89% and 2.35% for the first quarter ended March 31, 2007. The decrease in net interest margin and net interest spread during the quarter ended March 31, 2008 when compared to the fourth quarter of 2007 and the first quarter ended March 31, 2007 was caused primarily by: (i) the reduction in interest rates by the Federal Reserve, which resulted in the reduction of the Prime Rate by 100 basis points during the last four months of 2007 and another 200 basis points during the first quarter of 2008; and (ii) the write-off of $463,000 in unamortized commissions related to $162.4 million in broker deposits that were called back during the first quarter of 2008. Although borrowing costs were influenced by the interest rate cuts, our broker deposits remained at higher levels, causing our borrowing costs to decrease at a lower pace. The fierce competition for core deposits on the Island and the fact that our broker deposits remained at higher levels made other short-term borrowings an attractive funding alternative. During the first quarter of 2008, the average interest rate on a fully taxable equivalent basis we paid for other borrowings decreased to 5.40%, from 6.57% and 7.00% for the fourth quarter of 2007 and the first quarter ended March 31, 2007, respectively. Average other borrowings increased to $559.9 million for the first quarter of 2008, compared to $438.5 million and $393.3 million for the fourth quarter of 2007 and the first quarter ended March 31, 2007, respectively. Without the effect of the above-mentioned write-off of $463,000 in unamortized commissions, net interest margin and spread on a fully taxable equivalent basis would have been 2.46% and 2.04%, respectively. Provision for Loan and Lease Losses The provision for loan and lease losses for the quarter ended March 31, 2008 was $7.8 million, or 82.09% of net charge-offs, compared to $5.3 million, or 136.69% of net charge-offs, for the same quarter in 2007, and $6.9 million, or 141.18% of net charge-offs, for the quarter ended December 31, 2007. The increase in our provision for loan and lease losses during the first quarter of 2008 when compared to the previous quarter was mainly caused by a deterioration in our commercial loans portfolio, which resulted in additional adjustments to the loss factors considered when determining the adequacy of our allowance for loan and lease losses. During the first quarter of 2008, the periodic evaluation of the allowance for loan and lease losses primarily considered the level of net charge-offs, delinquencies, related loss experience and overall economic conditions. Some of these factors are discussed further in the Loans and Asset Quality and Delinquency sections of this document. Non-Interest Income The Company's non-interest income for the quarter ended March 31, 2008 increased to $3.6 million, from $2.4 million for the fourth quarter of 2007. The increase during the first quarter of 2008 when compared to the previous quarter was mainly due to a $1.1 million increase in gain on sale of loans, resulting from a $1.2 million gain on sale of $37.7 million of lease financing contracts in March 2008. Non-interest income increased to $3.6 million for the quarter ended March 31, 2008, compared to $1.9 million for the same quarter in 2007. Such increase was mainly due to the combined effect of: (i) a $102,000 net loss on sale of repossessed vehicles during the first quarter of 2008, compared to a net loss of $446,000 for the same quarter in 2007; and (ii) a $1.2 million gain on sale of lease financing contracts in March 2008, as previously mentioned. Non-Interest Expense Non-interest expense for the quarter ended March 31, 2008 was $13.3 million, compared to $12.1 million for the same quarter in 2007. Such increase was mainly due to the combined effect of: (i) an increase of $345,000 in occupancy expenses for the quarter ended March 31, 2008 primarily related to a $209,000 increase in utilities, equipment maintenance, and data, communications, and security services, related to the expansion of our branch network, and $63,000 mainly related to the phasing-out of Telefonica Empresas ("TE") for the premises we previously occupied, as part of the information technology outsourcing agreement we entered with TE in August 2007 (of which, once TE relocates to its own facilities, $27,000 will be paid as part of TE outsourcing fees); (ii) a $374,000 increase in professional services for the quarter ended March 31, 2008, which include an increase of $270,000 related to TE outsourcing fees (note that there was a reduction of $154,000 in related salaries and employee benefits, a reduction of $21,000 in related SOX expenses, both experienced during the first quarter of 2008, and estimated quarterly savings of $104,000 in other operational costs transferred to TE), and a $40,000 increase in regulatory examination fees as a consequence of our asset growth; (iii) a $388,000 increase in other expenses for the quarter ended March 31, 2008 mainly associated with municipal and other taxes, commissions and service fees on credit and debit cards, and other miscellaneous expenses; and (iv) a $194,000 increase in insurance expense mainly related to the FDIC's insurance premium assessment, which, during fiscal year 2007, was net of a one time assessment credit of $669,000. Non-interest expense increased to $13.3 million for the quarter ended March 31, 2008, compared to $11.5 million for the fourth quarter of 2007. Such increase was mainly due to the combined effect of: (i) a $1.5 million increase in salaries resulting mainly from a $1.0 million decrease in the bonus expense recorded during the fourth quarter of 2007, normal salary increases, and an increase in certain employees' benefits, which are generally accrued at the beginning of the year; and (ii) a $190,000 increase in insurance expense, mainly related to the FDIC's insurance premium assessment, as previously explained. The efficiency ratio on a fully taxable equivalent basis for the quarter ended March 31, 2008 was 68.62%, compared to 63.98% for the quarter ended March 31, 2007, and 61.31% for the quarter ended December 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. For the quarter ended March 31, 2008, we recorded an income tax benefit of $1.2 million, compared to an income tax expense of $260,000 and an income tax benefit of $218,000 for the quarters ended March 31, 2007 and December 31, 2007, respectively. Our income tax benefit for the quarter ended March 31, 2008 was mainly caused by a deferred tax benefit of $1.2 million, as explained further below. Our current income tax expense for the quarter ended March 31, 2008 decreased to $9,000, from $1.3 million for the same quarter in 2007, and $602,000 in the quarter ended December 31, 2007. These decreases in our current income tax expense were mainly due to a taxable loss in our banking subsidiary related to: (i) the recognition of charge-off on loans, for which specific allowances were previously determined; and (ii) a loss before income taxes of $2.2 million as of March 31, 2008, compared to income before taxes of $1.6 million and $284,000 for the quarters ended March 31, 2007 and December 31, 2007, respectively. Our deferred tax benefit for the quarter ended March 31, 2008 increased to $1.2 million, from $1.1 million for the same quarter in 2007, and $820,000 in the quarter ended December 31, 2007. These increases were mainly due to the net effect of: (i) a decrease in the deferred tax assets primarily from a decrease in our allowance for loan and lease losses upon the recognition of charge-off on loans, as mentioned above; (ii) an increase in the deferred tax asset related to the net operating loss carryforward from the taxable loss in our banking subsidiary; and (iii) an increase in the deferred tax liability related to the new servicing asset in connection with the $37.7 million sale of lease financing contracts in March 2008, as previously mentioned. As of March 31, 2008, we had net deferred tax assets of $12.1 million, compared to $10.9 million as of December 31, 2007. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities; projected future taxable income; our compliance with the Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes; and tax planning strategies in making this assessment. We believe it is more likely than not that the benefits of these deductible differences at March 31, 2008 will be realized. Balance Sheet Summary and Asset Quality Data Assets Total assets increased to $2.794 billion as of March 31, 2008 from $2.751 billion as of December 31, 2007. The increase was mainly due to the net effect of: (i) a $31.9 million decrease in interest bearing deposits; (ii) a $14.6 million increase in securities purchased under agreements to resell; (iii) a $86.1 million increase in the investment securities portfolio; and (iv) a $21.8 million decrease in net loans, net of the $37.7 million sale of lease financing contracts, as previously mentioned. The decrease in interest bearing deposits was mainly associated to the increase in our investment portfolio. Details on investment securities and loan portfolio variances are discussed further below. Investments During the first quarter of 2008, the investment portfolio increased by approximately $86.1 million to $837.4 million from $751.3 million as of December 31, 2007. This increase was primarily due to the net effect of: (i) the purchase of $227.5 million in mortgage-backed securities, FHLB obligations, Puerto Rico government agencies obligations, and a corporate note; (ii) $111.3 million in US government agencies that matured or were called-back during the quarter; and (iii) prepayments of approximately $32.6 million on mortgage-backed securities and FHLB obligations. Since 2007, we have been analyzing different market opportunities in an attempt to improve our investment portfolio's average yield and to maintain an adequate average life. Similar to the second half of 2007, during the first quarter of 2008, the market continued to present some good investment opportunities as a result of the liquidity crises faced by financial institutions in the mainland, which has forced them to reduce their total assets by selling part of their investment securities portfolios at wider spreads. During the quarter ended March 31, 2008, we were able to purchase approximately $227.5 million in mortgage-backed securities, FHLB obligations, Puerto Rico government agencies obligations, and a corporate note, all with an estimated average life of approximately 4.5 years and an estimated average yield of 5.08%. Purchased mortgage-backed securities totaled $172.9 million and included approximately $101.4 million in mortgage back securities issued by US government sponsored enterprises, $1.5 million in collateralized mortgage obligations guaranteed by US government sponsored enterprises and $70.1 million in private label collateral mortgage obligations with FICO scores and loan-to-values similar to FNMA and FHLMC underwriting standards and characteristics. As of March 31, 2008, after the above-mentioned transactions, the estimated average maturity of the investment portfolio was approximately 5.1 years and the average yield was approximately 5.12%, compared to an estimated average maturity of 4.8 years and an average yield of 5.06% for the year ended December 31, 2007. Loans Total loans, net of unearned, decreased by $23.5 million, or 5.07% on an annualized basis, to $1.835 billion as of March 31, 2008, from $1.859 billion as of December 31, 2007. This decrease was mainly the net effect of: (i) a $56.2 million, or 58.35% annualized decrease in lease financing contracts from $385.4 million as of December 31, 2007 to $329.2 million as of March 31, 2008; (ii) a $12.8 million, or 4.67% annualized increase in commercial loans, from $1.095 billion as of December 31, 2007 to $1.108 billion as of March 31, 2008; (iii) a $11.5 million, or 22.54% annualized increase in construction loans, from $203.3 million as of December 31, 2007 to $214.8 million as of March 31, 2008; and (iv) a $10.9 million, or 40.22% annualized increase in residential mortgages, from $108.3 million as of December 31, 2007 to $119.2 million as of March 31, 2008. The $56.2 million decrease in lease financing contracts includes the sale of $37.7 million in March 2008, as previously mentioned. From time to time, we sell lease financing contracts on a limited recourse basis to other financial institutions and, typically, we retain the right to service the leases we sell. In this sale, we retained the right to service the leases sold, surrendered control of the lease financing receivables, and accounted for the transaction as sale, recognizing a net gain of approximately $1.2 million. The $12.8 million increase in commercial loans resulted from the net effect of an $18.3 million increase in commercial loans secured by real estate and a $5.5 million decrease in other commercial loans. As of March 31, 2008, commercial loans secured by real estate equaled $810.6 million, or 73.19% of total commercial loans. Out of the $810.6 million in commercial loans secured by real estate, $465.9 million have loan-to-values equal or lesser than 80%. The $11.5 million increase in construction loans secured by real estate resulted from disbursements on loan commitments we made during or before last fiscal year, which were primarily related to loans for the construction of residential multi-family projects that, although private, are moderately priced or of the affordable type supported by government assisted programs, and other loans for land development and the construction of commercial real estate property. We did not grant any new construction loans during the first quarter of 2008. Asset Quality and Delinquency Non-performing assets consist of loans 90 days or more past due and still accruing interest, loans and leases on nonaccrual status, other real estate owned ("OREO"), and other repossessed assets. Non-performing assets remained at $111.6 million as of March 31, 2008 when compared to the fourth quarter of 2007. Non-performing assets as of March 31, 2007 amounted to $71.2 million. Non-performing loans, which are comprised of loans 90 days or more past due and still accruing interest, and loans and leases on nonaccrual status, amounted to $98.3 million as of March 31, 2008, compared to $98.1 million as of December 31, 2007 and $59.3 million as of March 31, 2007. While non-performing loans remained stable during the first quarter of 2008 when compared to the fourth quarter of 2007, significant changes during the quarter included a $2.0 million increase in loans over 90 days past due still accruing interest and a $1.8 million decrease in nonaccrual loans. The $2.0 million increase in loans over 90 days still accruing interest was mainly due to the net effect of a $748,000 increase in other commercial and industrial loans; a $1.1 million decrease in lease financing contracts; and a $2.4 million increase in overdrafts, of which approximately $1.3 million was covered as of April 24, 2008. The $1.8 million decrease in nonaccrual loans was mainly attributable to a $1.4 million decrease in commercial loans. Repossessed assets decreased to $13.3 million as of March 31, 2008, compared to $13.5 million as of December 31, 2007. Repossessed assets as of March 31, 2007 amounted to $11.9 million. The decrease during the quarter ended March 31, 2008 when compared to the previous quarter was mainly attributable to the net effect of: (i) a decrease of $884,000 in OREO resulting from the net effect of the sale of three properties and the foreclosure of three properties, including the sale of 18 land lots in the amount of $1.1 million, which had been repossessed to a commercial customer during the fourth quarter of 2007; and (ii) an increase of $685,000 in other repossessed assets, mainly in the inventory of repossessed boats. Annualized net charge-offs as a percentage of average loans was 2.05% for the quarter ended March 31, 2008, compared to 1.05% for the fourth quarter of 2007, and 0.88% for the quarter ended March 31, 2007. Net charge-offs during the first quarter of 2008 included a $3.1 million partial charge-off to a commercial business relationship in the food retailing industry, for which a specific allowance had been previously determined. Net charge-offs for the quarter ended March 31, 2008 were $9.5 million, compared to $4.9 million and $3.9 million for the quarters of December 2007 and March 2007, respectively. Net charge-offs for the quarter ended March 31, 2008, compared to the quarters ended December 31, 2007 and March 31, 2007 were as follows: (i) $3.5 in net charge-offs on commercial loans secured by real estate for the quarter ended March 31, 2008, which included the above-mentioned partial charge-off, compared to a net charge-off of $159,000 and a net recovery of $24,000 for the quarters ended December 31, 2007 and March 31, 2007; (ii) $2.8 million in net charge-offs on other commercial and industrial loans for the first quarter of 2008, compared to $1.4 million and $373,000 for the quarters ended December 31, 2007 and March 31, 2007, respectively; (iii) $585,000 in net charge-offs on consumer loans for the first quarter of 2008, compared to $385,000 and $403,000 for the quarters ended December 31, 2007 and March 31, 2007, respectively; (iv) $2.5 million in net charge-offs on lease financing contracts for the first quarter of 2008, compared to $2.8 for the fourth quarter of 2007 and $3.0 million for the quarter ended March 31, 2007; and (v) $162,000 in net charge-offs on other loans for the first quarter of 2008, compared to $48,000 and $134,000 in net charge-offs for the quarters ended December 31, 2007 and March 31, 2007, respectively. Loans between 30 and 89 days past due and still accruing interest amounted to $128.5 million, $92.0 million, and $57.1 million for the quarters ended March 31, 2008, December 31, 2007 and March 31, 2007, respectively. The increase in loans between 30 and 89 days past due and still accruing interest during the first quarter of 2008 when compared to the previous quarter was mainly due to the combined effect of an increase of $29.1 million in loans secured by real estate, a $4.9 million increase in other commercial and industrial loans, and a $2.3 million increase in lease financing contracts. The $29.1 million increase in the loans secured by real estate was mainly caused by three commercial business relationships with loan-to-values lesser than 80%, of which one was in the warehousing industry amounting to $14.6 million; another was in the construction industry amounting to $9.4 million; and the other was in the real estate industry amounting to $5.2 million. Two of these commercial business relationships amounting to $24.0 million became current as of April 24, 2008. Allowance for Loan and Lease Losses The allowance for loan and lease losses was $26.4 million as of March 31, 2008, compared to $28.1 million as of December 31, 2007, and $20.4 million as of March 31, 2007. The allowance for loan and lease losses is affected by net charge-offs, loan portfolio growth, and also by the provision for loan and lease losses for each related period, which was certainly impacted by the overall economic condition on the Island. Net charge-offs for the quarter ended March 31, 2008 increased to $9.5 million, from $4.9 million during the quarter ended December 31, 2007. Net charge-offs during the first quarter of 2008 included a $3.1 million partial charge-off to a commercial business relationship, for which, as mentioned before, a specific allowance had been previously determined. We believe that the allowance for loan and lease losses is adequate and it represents 1.44% of total loans as of March 31, 2008. Deposits and Borrowings Total deposits as of March 31, 2008 amounted to $1.967 billion, compared to $1.993 billion as of December 31, 2007. This $26.5 million decrease was mainly due to the net effect of: (i) a $56.7 million decrease in broker deposits; and (ii) a $24.9 million increase in jumbo time deposits. The fierce competition for core deposits on the Island continued during the first quarter of 2008. Because of this fierce competition for local deposits, and the fact that rates on broker deposits have remained at higher levels, other short-term borrowings result in an attractive funding alternative, lowering funding costs when compared to broker deposits and the unusually higher rates offered locally for time deposits. We decided to pursue the use of the other short-term borrowing alternatives in an attempt to control increases in our funding cost. As a result, other borrowings increased to $611.8 million as of March 31, 2008, from $547.5 million as of December 31, 2007. Stockholders' Equity The Company's stockholders' equity increased to $182.2 million as of March 31, 2008, from $179.9 million as of December 31, 2007, representing an annualized increase of 5.07%. Besides earnings and losses from operations, the Company's stockholders' equity was impacted by an accumulated other comprehensive gain of $2.5 million and $1.1 million as of March 31, 2008 and December 31, 2007, respectively. In addition, the following items also impacted the Company's stockholders' equity: -- the exercise of 250,862, 4,000, 50,000 and 357,000 stock options in February 2007, July 2007, January 2008 and March 2008, respectively, for a total of $3.2 million; and -- the repurchase of 285,368 shares for $2.5 million during the second and third quarters of 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. -Financial Tables Follow- EUROBANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited) For the three months March 31, 2008 and 2007, and the three months and year ended December 31, 2007 Three Months Ended Year Ended March 31, December 31, March 31, December 31, 2008 2007 2007 2007 Interest income: Loans, including fees $32,757,773 $35,703,774 $34,939,490 $143,360,450 Investment securities: Taxable 2,643 2,694 3,749 12,152 Exempt 9,491,802 7,865,189 6,644,134 26,946,714 Interest bearing deposits, securities purchased under agreements to resell, and other 386,987 755,537 726,369 3,005,875 Total interest income 42,639,205 44,327,194 42,313,742 173,325,191 Interest expense: Deposits 21,773,166 22,685,755 20,056,619 84,675,999 Securities sold under under agreements to repurchase, notes payable, and other 5,632,698 5,398,934 5,197,125 20,794,338 Total interest expense 27,405,864 28,084,689 25,253,744 105,470,337 Net interest income 15,233,341 16,242,505 17,059,998 67,854,854 Provision for loan and lease losses 7,833,000 6,881,000 5,279,000 25,348,000 Net interest income after provision for loan and lease losses 7,400,341 9,361,505 11,780,998 42,506,854 Noninterest income: Service charges - fees and other 2,423,374 2,401,774 2,254,720 9,584,533 Net loss on sale of repossessed assets and on disposition of other assets (33,759) (131,980) (444,768) (1,285,958) Gain on sale of loans 1,235,195 140,478 112,758 379,622 Total noninterest income 3,624,810 2,410,272 1,922,710 8,678,197 Noninterest expense: Salaries and employee benefits 5,578,914 4,041,718 5,735,170 19,890,373 Occupancy, furniture and equipment 2,942,768 2,858,220 2,597,434 10,898,988 Professional services 1,241,218 1,177,205 866,860 4,496,283 Insurance 646,591 456,264 452,268 1,865,353 Promotional 367,018 366,469 377,021 1,492,240 Other 2,489,195 2,588,351 2,101,070 9,581,605 Total noninterest expense 13,265,704 11,488,227 12,129,823 48,224,842 (Loss) Income before income taxes (2,240,553) 283,550 1,573,885 2,960,209 (Benefit) provision for income taxes (1,237,228) (218,428) 259,848 (248,874) Net (loss) income $(1,003,325) $501,978 $1,314,037 $3,209,083 Basic (loss) earnings per share $(0.06) $0.02 $0.06 $0.13 Diluted (loss) earnings per share $(0.06) $0.02 $0.06 $0.13 EUROBANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) March 31, 2008 and December 31, 2007 Assets 2008 2007 Cash and due from banks $16,465,733 $15,866,221 Interest bearing deposits 400,000 32,306,909 Securities purchased under agreements to resell 34,494,833 19,879,008 Investment securities available for sale 793,244,021 707,103,432 Investment securities held to maturity 28,315,368 30,845,218 Other investments 15,819,700 13,354,300 Loans held for sale 3,424,816 1,359,494 Loans, net of allowance for loan and lease losses of $26,427,858 in 2008 and $28,137,104 in 2007 1,805,177,583 1,829,082,008 Accrued interest receivable 17,169,486 18,136,489 Customers' liability on acceptances 143,243 430,767 Premises and equipment, net 33,364,986 33,083,169 Other assets 45,763,318 49,951,898 Total assets $2,793,783,087 $2,751,398,913 Liabilities and Stockholders' Equity Deposits: Noninterest bearing $123,280,473 $120,082,912 Interest bearing 1,843,222,836 1,872,963,402 Total deposits 1,966,503,309 1,993,046,314 Securities sold under agreements to repurchase 565,723,000 496,419,250 Acceptances outstanding 143,243 430,767 Advances from Federal Home Loan Bank 25,440,183 30,453,926 Note payable to Statutory Trust 20,619,000 20,619,000 Accrued interest payable 19,095,768 17,371,698 Accrued expenses and other liabilities 14,059,032 13,139,809 2,611,583,535 2,571,480,764 Stockholders' equity: Preferred stock: Preferred stock Series A, $0.01 par value. Authorized 20,000,000 shares; issued and outstanding 430,537 in 2008 and 2007 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: 20,439,398 shares in 2008 and 20,032,398 shares in 2007; outstanding: 19,500,315 shares in 2008 and 19,093,315 shares in 2007 204,394 200,324 Capital paid in excess of par value 109,999,191 107,936,531 Retained earnings: Reserve fund 8,029,106 8,029,106 Undivided profits 60,600,032 61,789,048 Treasury stock, 939,083 shares at cost in 2008 and 2007 (9,910,458) (9,910,458) Accumulated other comprehensive gain 2,513,862 1,110,173 Total stockholders' equity 182,199,552 179,918,149 Total liabilities and stockholders' equity $2,793,783,087 $2,751,398,913 EUROBANCSHARES, INC. AND SUBSIDIARIES OPERATING RATIOS AND OTHER SELECTED DATA (Dollars in thousands, except share data) Unaudited Quarter Ended March 31, December 31, 2008 2007 2007 Average shares outstanding - basic 19,172,524 19,226,953 19,093,315 Average shares outstanding - assuming dilution 19,230,376 19,499,692 19,127,598 Number of shares outstanding at end of period 19,500,315 19,374,683 19,093,315 Book value per common share $8.79 $8.46 $8.86 Average Balances Total assets 2,743,069 2,451,223 2,632,453 Loans and leases, net of unearned 1,865,993 1,759,147 1,850,847 Interest-earning assets (1) 2,632,947 2,357,974 2,523,453 Interest-bearing deposits 1,853,624 1,726,318 1,863,419 Other borrowings 559,888 393,274 438,474 Preferred stock 10,763 10,763 10,763 Shareholders' equity 183,211 171,681 178,199 Loan Mix Loans secured by real estate Commercial and industrial 810,618 739,981 792,309 Construction 214,805 142,191 203,344 Residential mortgage 115,772 85,258 106,947 Consumer 2,102 740 780 1,143,297 968,170 1,103,380 Commercial and industrial 297,004 293,139 302,530 Consumer 54,806 60,523 57,745 Lease financing contracts 329,175 429,142 385,390 Overdrafts 6,637 6,666 6,850 Total 1,830,919 1,757,640 1,855,895 Deposit Mix Noninterest-bearing deposits 123,280 132,375 120,083 Now and money market 61,556 62,239 60,893 Savings 129,997 151,992 131,604 Broker deposits 1,279,883 1,163,020 1,336,560 Regular CD's & IRAS 95,556 90,792 92,545 Jumbo CD's 276,231 224,145 251,361 Total 1,966,503 1,824,563 1,993,046 Financial Data Total assets 2,793,783 2,432,777 2,751,399 Total investments 837,379 551,417 751,303 Loans and leases, net of unearned 1,835,030 1,761,488 1,858,579 Allowance for loan and lease losses 26,428 20,354 28,137 Total deposits 1,966,503 1,824,563 1,993,046 Other borrowings 611,782 395,743 547,492 Preferred stock 10,763 10,763 10,763 Shareholders' equity 182,200 174,771 179,918 EUROBANCSHARES, INC. AND SUBSIDIARIES OPERATING RATIOS AND OTHER SELECTED DATA (Dollars in thousands, except share data) Unaudited (Continued) Quarter Ended Year Ended March 31, December 31, December 31, 2008 2007 2007 2007 Dividends on preferred stock 186 184 188 745 Total interest income 42,639 42,314 44,327 173,325 Total interest expense 27,406 25,254 28,085 105,470 Provision for loan and lease losses 7,833 5,279 6,881 25,348 Services charges - fees and other 2,424 2,255 2,402 9,584 Net gain (loss) on sale of loans and other assets 1,201 (332) 8 (906) Non-interest expense 13,266 12,130 11,488 48,225 (Tax benefit) income tax (1,238) 260 (218) (249) Net (loss) income (1,003) 1,314 501 3,209 Nonperforming assets 111,602 71,192 111,599 111,599 Nonperforming loans 98,267 59,261 98,065 98,065 Net charge-offs 9,542 3,862 4,874 16,148 Performance Ratios Return on average assets (2) (0.15)% 0.21% 0.08% 0.13% Return on average common equity (3) (2.33) 3.27 1.20 1.96 Net interest spread (4) 1.96 2.35 2.10 2.29 Net interest margin (5) 2.39 2.89 2.58 2.80 Efficiency ratio (6) 68.62 63.98 61.31 63.48 (Loss) earnings per common share - basic $(0.06) $0.06 $0.02 $0.13 (Loss) earnings per common share - diluted (0.06) 0.06 0.02 0.13 Asset Quality Ratios Nonperforming assets to total assets 3.99% 2.93% 4.06% 4.06% Nonperforming loans to total loans 5.36 3.36 5.28 5.28 Allowance for loan and lease losses to total loans 1.44 1.16 1.51 1.51 Net loan and lease charge-offs to average loans 2.05 0.88 1.05 0.90 Provision for loan and lease losses to net loan and lease charge-offs 82.09 136.69 141.18 156.97 (1) Includes nonaccrual loans, which balance as of the periods ended March 31, 2008 and 2007, and December 31, 2007 was $67.2 million, $40.4 million, and $69.0 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. (6) The efficiency ratio is determined by dividing total noninterest expense by an amount equal to net interest income (fully taxable equivalent) plus noninterest income. EUROBANCSHARES, INC. AND SUBSIDIARIES NONPERFORMING ASSETS (Dollars in thousands) Unaudited For the periods ended March 31, December 31, March 31, 2008 2007 2007 Loans contractually past due 90 days or more but still accruing interest: $31,071 $29,075 $18,827 Nonaccrual loans: 67,196 68,990 40,434 Total nonperforming loans 98,267 98,065 59,261 Repossessed property: Other real estate 7,241 8,125 4,195 Other repossessed assets 6,094 5,409 7,736 Total repossessed property 13,335 13,534 11,931 Total nonperforming assets $111,602 $111,599 $71,192 Nonperforming loans to total loans 5.36% 5.28% 3.36% Nonperforming assets to total loans plus repossessed property 6.04 5.96 4.01 Nonperforming assets to total assets 3.99 4.06 2.93 EUROBANCSHARES, INC. AND SUBSIDIARIES NET CHARGE-OFFS (Dollars in thousands) Unaudited Quarter Ended March 31, December 31, September 30, 2008 2007 2007 Charge-offs: Real estate secured $3,515 $163 $- Other commercial and industrial 2,929 1,508 667 Consumer 649 494 435 Leases financing contracts 2,817 3,151 3,113 Other 164 60 194 Total charge-offs 10,074 5,376 4,409 Recoveries: Real estate secured $15 $4 $- Other commercial and industrial 142 62 27 Consumer 64 109 65 Leases financing contracts 309 315 342 Other 2 12 - Total recoveries 532 502 434 Net charge-offs: Real estate secured $3,500 $159 $- Other commercial and industrial 2,787 1,446 640 Consumer 585 385 370 Leases financing contracts 2,508 2,836 2,771 Other 162 48 194 Total net charge-offs $9,542 $4,874 $3,975 Net charge-offs to average loans: Real estate secured 1.25% 0.06% -% Other commercial and industrial 3.64 1.90 0.85 Consumer 4.14 2.63 2.47 Leases financing contracts 2.69 2.88 2.71 Other 8.92 2.53 9.87 Total net charge-offs to average loans 2.05% 1.05% 0.87% Quarter Ended Year Ended June 30, March 31, December 31, 2007 2007 2007 Charge-offs: Real estate secured $198 $11 $372 Other commercial and industrial 491 456 3,122 Consumer 310 460 1,699 Leases financing contracts 3,027 3,388 12,680 Other 5 139 398 Total charge-offs 4,031 4,454 18,271 Recoveries: Real estate secured $13 $35 $52 Other commercial and industrial 147 83 319 Consumer 88 57 319 Leases financing contracts 341 412 1,410 Other 6 5 23 Total recoveries 595 592 2,123 Net charge-offs: Real estate secured $185 $(24) $320 Other commercial and industrial 344 373 2,803 Consumer 222 403 1,380 Leases financing contracts 2,686 2,976 11,270 Other (1) 134 375 Total net charge-offs $3,436 $3,862 $16,148 Net charge-offs to average loans: Real estate secured 0.07% (0.01)% 0.03% Other commercial and industrial 0.47 0.51 0.94 Consumer 1.47 2.67 2.31 Leases financing contracts 2.54 2.73 2.71 Other (0.05) 6.20 4.73 Total net charge-offs to average loans 0.77% 0.88% 0.90% DATASOURCE: EuroBancshares, Inc. CONTACT: At The Company, Rafael Arrillaga-Torrens, Jr., Chairman, President and CEO, Yadira R. Mercado, Executive Vice-President, CFO, both of EuroBancshares, Inc., +1-787-751-7340; or Marilynn Meek, General Inquiries of Financial Relations Board for EuroBancshares, Inc., +1-212-827-3773

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