<HTML>
<HEAD>
<TITLE>FORM S-1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>As filed with the
Securities and Exchange Commission on May&nbsp;14, 2004</B>



<HR size="4" noshade color="#000000" style="margin-top: -5px">
<HR size="1" noshade color="#000000" style="margin-top: -10px">






<DIV align="right" style="font-size: 10pt; margin-top: -4px"><B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>
<DIV align="center" style="font-size: 14pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>
<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt"><B>FORM S-1</B>
</DIV>
<DIV align="center" style="font-size: 12pt"><B>REGISTRATION STATEMENT</B></DIV>


<DIV align="center" style="font-size: 12pt"><B>Under</B></DIV>


<DIV align="center" style="font-size: 12pt"><B>The Securities Act of 1933</B></DIV>



<HR noshade width="10%" align="center" size="1">



<DIV align="center" style="font-size: 24pt"><B>EUROBANCSHARES, INC.</B>
</DIV>
<DIV align="center" style="font-size: 10pt"><I>(Exact name of registrant as specified in its charter)</I></DIV>



<HR noshade width="10%" align="center" size="1">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Commonwealth of Puerto Rico</B><BR>
<I>(State or other jurisdiction<BR>
of incorporation or organization)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>6712</B><BR>
<I>(Primary Standard Industrial<BR>
Classification Code Number)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>66-0608955</B><BR>
<I>(I.R.S. Employer<BR>
Identification No.)</I></TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>270 Mu&#241;oz Rivera Avenue<BR>
San Juan, Puerto Rico 00918<BR>
(787)&nbsp;751-7340</B>


<DIV align="center" style="font-size: 10pt"><I>(Address, including zip code, and telephone number, including area code, of registrant&#146;s principal executive offices)</I></DIV>



<DIV align="center" style="font-size: 10pt"><B>Rafael Arrillaga-Torr&#233;ns, Jr.<BR>
President And Chief Executive Officer<BR>
EuroBancshares, Inc.<BR>
270 Mu&#241;oz Rivera Avenue<BR>
San Juan, Puerto Rico 00918<BR>
(787)&nbsp;751-7340</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><I>(Name, address, including zip code, and telephone number, including area code, of agent for service)</I></DIV>



<DIV align="center" style="font-size: 10pt"><B><I>Copies to:</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom" style="font-size: 1px">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Peter G. Weinstock, Esq.<BR>
Ronald J. Frappier, Esq.<BR>
Jenkens &#038; Gilchrist, P.C.<BR>
1445 Ross Avenue, Suite&nbsp;3200<BR>
Dallas, Texas 75202<BR>
Telephone: (214)&nbsp;855-4500<BR>
Facsimile: (214)&nbsp;855-4300</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;<BR>
<B>Frank Ed Bayouth II, Esq.<BR>
Skadden, Arps, Slate, Meagher &#038; Flom LLP<BR>
1600 Smith Street, Suite&nbsp;4400<BR>
Houston, Texas 77002<BR>
Telephone: (713)&nbsp;655-5100<BR>
Facsimile: (713)&nbsp;655-5200</B></TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule&nbsp;415 under the Securities Act
of 1933, check the following box. <FONT face="Wingdings">&#111;</FONT>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. <FONT face="Wingdings">&#111;</FONT>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. <FONT face="Wingdings">&#111;</FONT>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. <FONT face="Wingdings">&#111;</FONT>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If delivery of the prospectus is expected to be made pursuant to Rule&nbsp;434,
please check the following box. <FONT face="Wingdings">&#111;</FONT>


<P align="center" style="font-size: 10pt"><B>CALCULATION OF REGISTRATION FEE</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom" style="font-size: 1px">
    <TD width="1%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="13" style="border-bottom: 3px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>Title of Each Class of Securities</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum Aggregate</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount of</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>to be Registered</B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Offering Price<SUP>(1)(2)</SUP></B></TD>
    <TD style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Registration Fee</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-top: 1px solid #000000">&nbsp;</TD>
                <TD style="border-top: 1px solid #000000"><DIV style="margin-left:10px; text-indent:-10px">Common Stock, $0.01 par value per share</DIV></TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">$</TD>
    <TD align="right" style="border-top: 1px solid #000000">65,000,000</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-right: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">$</TD>
    <TD align="right" style="border-top: 1px solid #000000">8,235.50</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="13" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(o) promulgated under the Securities Act of 1933,
as amended.</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Includes the offering price of shares that the underwriters have the
option to purchase to cover over-allotments, if any.</TD>
</TR>
</TABLE>

<p align="left" style="font-size: 10pt"><B>The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section&nbsp;8(a), may determine.</b>

<HR size="1" noshade color="#000000" style="margin-top: -2px">
<HR size="4" noshade color="#000000" style="margin-top: -10px">


</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt"><B>The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state or jurisdiction where
the offer or sale is not permitted.</B>



<P align="center" style="font-size: 10pt"><B>Subject to completion,
dated May 14, 2004</B>



<P align="left" style="font-size: 12pt"><B>PROSPECTUS</B>


<P align="center" style="font-size: 12pt"><U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U> <B>Shares</B>



<P align="center" style="font-size: 12pt"><IMG src="y96993y9699300.gif" alt="(EUROBANCSHARES LOGO)">



<P align="center" style="font-size: 12pt"><B>Common Stock</B>



<P>
<HR noshade width="16%" align="center" size="1">
<P>




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EuroBancshares, Inc. is a Puerto Rico chartered financial holding company
headquartered in San Juan, Puerto Rico. We are offering to the public
&#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; shares of our common stock and three of our stockholders under the
heading &#147;<I>Selling Stockholders</I>&#148; are offering &#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; shares of our common
stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This is an initial public offering of our common stock. The initial
public offering price of our common stock is expected to be between $&#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093;
and $&#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; per share. We will not receive any proceeds from the sale of
common stock by the selling stockholders. We have applied for quotation of our
common stock on the Nasdaq National Market under the symbol &#147;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing in our common stock involves risks. For additional information,
see the section of this prospectus captioned &#147;</B><B><I>Risk Factors</I></B><B>,&#148; beginning on page
9.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Neither the Securities and Exchange Commission, the Office of the
Commissioner of Financial Institutions of Puerto Rico nor any state securities
commission or regulatory authority has approved or disapproved of these
securities or passed the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>These securities are not savings accounts, deposits or other obligations
of Eurobank or any of our non-banking subsidiaries, and are not insured by the
Federal Deposit Insurance Corporation or any other governmental agency and may
lose value.</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="84%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Share</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Initial public offering price of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Underwriting discounts and commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Proceeds before expenses to us</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Proceeds before expenses to the selling stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and the selling stockholders have also granted the underwriters a
30-day option to purchase up to an aggregate of an additional &#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; shares
to cover over-allotments, if any, at the public offering price per share less
the underwriting discounts and commissions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriters are offering the shares of our common stock as described
in the &#147;<I>Underwriting</I>&#148; section of this prospectus. The underwriters expect to
deliver the shares on or about <U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>, 2004.


<P>
<HR noshade width="16%" align="center" size="1">
<P>



<DIV align="center">
<TABLE style="font-size: 14pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top"><B>Keefe, Bruyette &#038; Woods</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top"><B>UBS Investment Bank</B></TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 14pt"><B>Brean Murray &#038; Co., Inc.</B>



<P align="center" style="font-size: 10pt">The date of this prospectus
is ____________, 2004.



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>&#091;Map of the island of Puerto Rico identifying locations of EuroBancshares&#146; branch office locations&#093;</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a prospective investor, you should rely only on the information
contained in this prospectus. Neither we nor any underwriter has authorized
anyone to provide prospective investors with information different from that
contained in this prospectus. If anyone provides you with additional,
different or inconsistent information, you should not rely on it. This
prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information included in this prospectus is accurate
as of any date other than the date of this prospectus. Our business, financial
condition, results of operations, cash flows and/or future prospects may have
changed since that date.


<P align="center" style="font-size: 10pt"><B>TABLE OF CONTENTS</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="94%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Page</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#401">Prospectus Summary</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#402">Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#403">Special Note Regarding Forward-Looking Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#404">Business</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#405">Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#406">Dividend Policy</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#407">Dilution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#408">Capitalization</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#409">Selected Consolidated Financial Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#410">Unaudited Pro Forma Condensed Combined Financial Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#411">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#412">Management</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#413">Certain Relationships and Related Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#414">Principal and Selling Stockholders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#415">Supervision and Regulation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#416">Description of EuroBancshares Capital Stock</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#417">Taxation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#418">Shares Eligible for Future Sale</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#419">Underwriting</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#420">Legal Matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#421">Experts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#422">Where You Can Find More Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><A href="#423">Index to Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv2.txt">AGREEMENT AND PLAN OF MERGER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv3w1.txt">CERTIFICATE OF INCORPORATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv3w2.txt">BYLAWS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv3w3.txt">CERTIFICATE OF DESIGNATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv4w2.txt">INDENTURE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv4w3.txt">DECLARATION OF TRUST</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv4w4.txt">GUARANTEE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv4w5.txt">INDENTURE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv4w6.txt">AMENDED AND RESTATED DECLARATION OF TRUST</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv4w7.txt">GUARANTEE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv10w1.txt">2002 STOCK OPTION PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv10w2.txt">INCENTIVE STOCK OPTION AWARD AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv10w3.txt">NON-QUALIFIED STOCK OPTION AWARD AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv10w4.txt">EXECUTIVE SEVERANCE COMPENSATION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv10w5.txt">RETIREMENT PLAN PROGRAM</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv10w6.txt">RESTRICTED STOCK PURCHASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv10w7.txt">AGREEMENT AND PLAN OF MERGER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv21.txt">SUBSIDIARIES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y96993exv23w1.txt">CONSENT OF KPMG LLP</A></FONT></TD></TR>
</TABLE>
</DIV>


<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;i&nbsp;



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="401"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PROSPECTUS SUMMARY</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This summary highlights only some of the information contained in this
prospectus and does not contain all of the information you should consider in
making your investment decision. You should read carefully the entire
prospectus, including the &#147;Risk Factors&#148; section and the financial statements
and notes to those financial statements appearing elsewhere in this prospectus,
before making an investment decision. When we refer in this prospectus to
&#147;EuroBancshares,&#148; &#147;we,&#148; &#147;our,&#148; and &#147;us,&#148; we are referring to EuroBancshares,
Inc. and its subsidiaries, unless the context indicates otherwise. When we
refer to &#147;Eurobank,&#148; &#147;our banking subsidiary,&#148; or the &#147;Bank,&#148; we are referring
to Eurobank unless the context indicates otherwise. When we refer to
&#147;BankTrust,&#148; we are referring to The Bank &#038; Trust of Puerto Rico. Unless the
context indicates otherwise, all information in this prospectus assumes no
exercise of the underwriters&#146; over-allotment option.</I>


<P align="center" style="font-size: 10pt"><B>EuroBancshares, Inc.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a diversified financial holding company headquartered in San Juan,
Puerto Rico, offering a broad array of financial services through our wholly
owned banking subsidiary, Eurobank, and our wholly owned insurance agency
subsidiary, EuroSeguros, Inc. As of December&nbsp;31, 2003, we had, on a
consolidated basis, total assets of $1.3&nbsp;billion, net loans and leases of
$890.0&nbsp;million, total deposits of $984.5&nbsp;million, and stockholders&#146; equity of
$65.1&nbsp;million. We currently operate through a network of 21 branch offices
located throughout Puerto Rico. On May&nbsp;3, 2004, we acquired all of the capital
stock of BankTrust, a commercial bank headquartered in San Juan, Puerto Rico
with $567.2&nbsp;million in assets as of December&nbsp;31, 2003. On a pro forma basis,
as of December&nbsp;31, 2003, giving effect to the acquisition and our recent
issuance of shares of our common stock in a private placement offering related
to that acquisition, we had total assets of $1.8&nbsp;billion, net loans and leases
of $1.2&nbsp;billion, total deposits of $1.4&nbsp;billion and stockholders&#146; equity of
$87.6&nbsp;million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary business objectives are to maintain strong asset growth,
enhance profitability, and to be the premier small and middle market commercial
bank in Puerto Rico. Our core customers are small and mid-sized businesses,
real estate development companies and the owners, executives and employees of
these businesses.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that Puerto Rico&#146;s small and mid-sized businesses prefer
locally owned and managed banking institutions that provide responsive,
personalized service, customized products and quick decision making. We
believe that this segment of the Puerto Rican market is underserved by the
larger local banks, continental United States-based banks and foreign banks
that continue to focus on larger commercial customers and on the mass retail
market.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We market our products and services through four business groups and two
operating subsidiaries:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Commercial Banking Group. </I>Our commercial banking group
focuses primarily on small and mid-sized businesses located in
Puerto Rico. Products offered by our commercial banking group
include commercial loans, residential construction loans and
consumer credit and personal secured loans, as well as a broad range
of deposit products and other non-deposit banking services,
including internet banking and cash management services tailored to
meet the needs of these businesses.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Leasing Group. </I>EuroLease, our leasing group, primarily
originates automobile leases through a network of sales
representatives located throughout Puerto Rico. We originate leases
to hold for investment and from time to time sell them to other
financial institutions. We retain the servicing rights on the
leases that we sell.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Mortgage Banking Group. </I>EuroMortgage, our mortgage banking
group, originates mortgage loans in Puerto Rico and sells the
majority of these mortgages to other financial institutions and in
the secondary market<I>.</I></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Trust and Wealth Management Group. </I>Our trust and wealth
management group offers retirement benefit plans, personal trust
services and wealth management services. This group is a relatively
new endeavor for us, having commenced operations in the third
quarter of 2002. The acquisition of BankTrust will significantly
add to our assets under management and our expertise in this area.
Eurofinancial, our brokerage unit, offers a full array of investment
products and services through our association with Financial
Networks, Inc., a registered broker-dealer.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Insurance Agency Subsidiary. </I>EuroSeguros, our general
insurance agency, primarily offers automobile, property and
casualty, and guaranteed auto protection insurance (which pays the
difference between the insured value of an automobile and the
outstanding loan or lease balance if the automobile is stolen or
totaled in an accident) to customers in our market area. While
EuroSeguros represents several insurance companies in Puerto Rico,
it primarily offers its insurance products through its association
with Marsh-Salda&#241;a, Inc., Puerto Rico&#146;s largest insurance brokerage
firm, and a subsidiary of Marsh &#038; McLennan, Inc. EuroSeguros is
licensed by the Office of the Commissioner of Insurance of Puerto
Rico.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>International Banking Entities. </I>Puerto Rico international
banking entities, or IBEs, are tax advantaged special purpose
entities that may be operated as a division of a bank or as a
separate operating subsidiary. Typically, we borrow funds in the
United States through repurchase obligations or brokered deposits
and invest those funds primarily in United States government
securities. These activities are considered foreign under the
International Banking Center Regulatory Act, or the IBE Act, and
accordingly the income earned from these activities is tax exempt.
We have an IBE that operates as a division of Eurobank under the
name Eurobank International, and are in the process of organizing a
new IBE that will operate as a subsidiary of Eurobank under the name
EBS Overseas. We intend to transfer substantially all of the assets
of Eurobank International to EBS Overseas. In connection with the
acquisition of BankTrust, we also acquired another IBE, BT
International, which we will continue to operate as a division of
Eurobank.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><B>Our Strategy</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We target the small to middle market business community and have developed
a strategy that focuses on providing superior service through highly qualified
and relationship-oriented employees who are committed to their respective
communities. Through this strategy we intend to grow our business, expand our
customer base and improve profitability. We believe this strategy has already
proven successful as evidenced by our five year compounded growth in earnings
of 267.1% and earnings per share of 204.6%. The key elements of our strategy
are:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Focus on Our Targeted Customers</I>. We focus our time and
resources on the following targeted customer segments: small and
mid-sized businesses, real estate development companies and the
owners, executives and employees of these businesses. In this
regard, we seek to leverage our business banking relationships by
cross-selling to the personal financial needs of these business
owners, executives and employees.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Provide Superior and Convenient Service to Our Customers. </I>We
strive to provide superior customer service through convenient
access to our branches and personalized relationship banking. We
have 21 branch offices strategically located throughout Puerto Rico.
We intend to open six additional branches by the end of 2007.
After the addition of these new branch offices, we will have a
branch office located within a 10-minute drive of approximately 80%
of the Island&#146;s population. Under our business model we provide
each commercial customer with its own relationship manager for all
its banking needs. These relationship managers and our executive
management team regularly visit customers at their places of
business.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Hire and Retain Well-Trained and Qualified Employees. </I>We are
continuing to grow our franchise by providing superior customer
service through committed, qualified and relationship-oriented
employees. We seek to hire experienced and qualified employees that
prefer our relationship banking approach. These employees are
specifically incented through our compensation program to leverage
our commercial relationships by cross-selling our products and
services to the owners, executives and employees of our business
customers.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Use the Lease Financing Business to Mitigate Interest Rate
Risk. </I>We use our lease financing business to mitigate our interest
rate risk by offsetting the variable rate nature of our commercial
portfolio with a short to medium-term fixed rate product. We plan
to maintain the approximate size of the lease portfolio relative to
the size of the total loan portfolio, while increasing the volume of
leases originated for resale to other financial institutions.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>De Novo Branching and Acquisitions</I>. We seek to increase our
presence throughout the Island through selective acquisitions and
the opening of de novo branches in attractive locations. Our de
novo</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>expansion outside of the San Juan metropolitan market has followed
Puerto Rico&#146;s primary traffic arteries to areas that have been growing.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Maximize Growth of our International Banking Entity</I>. Because
EBS Overseas, as our subsidiary IBE, will generally not be subject
to federal or Puerto Rico income tax, we will seek to maximize the
growth of this IBE as interest rates and applicable law permit.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><B>Recent Events</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Acquisition of BankTrust</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;3, 2004, we acquired all of the capital stock of BankTrust, a
Puerto Rico chartered commercial bank, through the merger of BankTrust with and
into Eurobank. The aggregate purchase price was $23.5&nbsp;million, and consisted
of the issuance of 357,747 shares of our common stock, 429,507 shares of our
Noncumulative Preferred Stock, Series&nbsp;A, which we refer to throughout this
prospectus as our Series&nbsp;A Preferred Stock, and $6.7&nbsp;million in cash. The
BankTrust acquisition is consistent with our growth strategy. BankTrust&#146;s
product offering and customer mix complement our existing product offering and
customer mix. In addition, the acquisition of BankTrust provides us with a
significant trust and wealth management group that enhances our own efforts in
this area. For additional information regarding the acquisition, see the
section of this prospectus captioned <I>&#147;Business &#150; Our De Novo Branch and
Acquisition Strategy &#151; Mergers and Acquisitions.&#148;</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to the acquisition, BankTrust operated five branch offices, two were
located in San Juan, with the other three located in Guaynabo, Mayag&#252;ez and
Ponce, respectively. BankTrust also had one loan production office in San Juan
and operated an IBE under the name &#147;BT International.&#148; We are in the process
of closing four of the five BankTrust branches, as well as the loan production
office, and consolidating these operations into our existing branch network.
Eurobank will continue to operate BT International as a division of Eurobank
and the Guaynabo branch office as a branch of Eurobank.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, BankTrust had total assets of $567.2&nbsp;million,
total deposits of $429.6&nbsp;million, and stockholders&#146; equity of $29.4&nbsp;million.
BankTrust also had approximately $334&nbsp;million in assets under management in its
asset management and trust division.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Private Placement</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;12, 2004, we completed a private placement of our common stock
pursuant to which we issued 369,231 shares of our common stock at a price of
$16.25 to our common stockholders and to holders of options to purchase our
common stock who were not otherwise stockholders. Under the terms of the
private placement, each of our existing stockholders had the right to subscribe
to purchase one share of our common stock, at a price of $16.25 per share, for
every 11.95 shares of our common stock that he or she owned. In addition, each
holder of options to purchase our common stock who did not already own shares
of our common stock was granted the right to purchase, at a price of $16.25 per
share, one share of our common stock for every four shares of our common stock
into which the optionholder&#146;s options would be exercisable. Each of the common
stockholders and optionholders also had the right to subscribe for additional
shares of common stock that were not subscribed for by other current
stockholders and optionholders pursuant to their basic subscription right. The
offering was made in reliance upon the exemption from compliance with the
registration requirements contained in Section&nbsp;3(a)(11) of the Securities Act
of 1933, or the Securities Act, and Section&nbsp;882(b)(11) of the Puerto Rico
Securities Act. This offering was oversubscribed; however, we only accepted
subscriptions for the minimum amount we needed to fund the cash portion of the
BankTrust purchase price. The net proceeds received from the private placement
of our common stock were $6.0&nbsp;million.


<P align="center" style="font-size: 10pt"><B>Other Information</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eurobank, our principal subsidiary, is a full-service Puerto Rico
commercial bank headquartered in San Juan, Puerto Rico. It was originally
chartered as a trust company under the laws of the Commonwealth of Puerto Rico
in 1979, and commenced operations under the name &#147;Espa&#241;ola de Finanzas Trust
Company.&#148; Subsequently, Eurobank obtained authority to conduct banking
activities and in December&nbsp;1988 obtained FDIC insurance for its deposits and


<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">changed its name to &#147;First Community Trust Company.&#148; In 1992, Eurobank
amended its charter in order to become a commercial bank regulated by the
banking laws of Puerto Rico and its name was changed to Eurobank. Eurobank is
regulated by the Commissioner of Financial Institutions of Puerto Rico and the
FDIC.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive office is located at 270 Mu&#241;oz Rivera Avenue, San
Juan, Puerto Rico 00918, and our telephone number is (787)&nbsp;751-7340. Our
website address is www.eurobankpr.com. Information contained on our website is
not incorporated by reference into this prospectus and you should not consider
information contained on our website as part of this prospectus.


<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>The Offering</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock offered by us.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; shares</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock offered by the selling
stockholders.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; shares</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock to be outstanding
immediately after this offering.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; shares</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Use of proceeds.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The estimated net proceeds
from this offering
(approximately $&#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093;
million) will be used for
general corporate purposes, de
novo branching and future
acquisitions. We will not
receive any proceeds from the
sale of shares of common stock
by the selling stockholders.
For additional information,
see the section of this
prospectus captioned &#147;<I>Use of
Proceeds</I>.&#148;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dividend policy.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We have not paid cash
dividends historically, nor do
we anticipate paying any cash
dividends in the foreseeable
future. Instead, we
anticipate that all of our
earnings, if any, in the
foreseeable future will be
used for working capital, to
support our operations and to
finance the growth and
development of our business.
Any future determination
relating to dividend policy
will be made at the discretion
of our Board of Directors and
will depend on a number of
factors, including our future
earnings, capital
requirements, financial
condition, future prospects
and other factors that our
Board of Directors may deem
relevant. For additional
information , see the section
of this prospectus captioned
"<I>Dividend Policy</I>.&#148;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Proposed Nasdaq National Market
symbol.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">"<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#148;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Risk factors.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">For a discussion of risks
relating to our business and
an investment in our common
stock, see the section of this
prospectus captioned <I>&#147;Risk
Factors.&#148;</I></TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of shares to be offered by us and the selling stockholders
excludes the issuance of &#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; additional shares of common stock that we may
issue if the underwriters exercise, in full, the over-allotment option that we
and the selling stockholders have granted them. The number of shares of our
common stock outstanding immediately after this offering is based on the number
of shares outstanding as of &#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093;, 2004. This number does not take
into account (1) &#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; shares of common stock reserved for issuance upon the
exercise of outstanding options at a weighted average exercise price of $&#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093;
per share, and (2) &#091;<U>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</U>&#093; shares of common stock reserved for issuance
pursuant to future grants under our 2002 Stock Option Plan.


<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>SUMMARY CONSOLIDATED FINANCIAL DATA</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The summary consolidated financial data shown below for the five-year
period ended December&nbsp;31, 2003 has been derived from our audited financial
statements. EuroBancshares was incorporated on November&nbsp;21, 2001 and became
the parent bank holding company for Eurobank on July&nbsp;1, 2002. As a result, the
financial information below for the years 2003 and 2002 includes consolidated
information for both EuroBancshares and Eurobank. Financial data shown for the
years 2001, 2000, and 1999 includes the financial information for Eurobank
only.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should read this information in conjunction with &#147;<I>Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations</I>&#148; and
our consolidated financial statements and the related notes included elsewhere
in this prospectus. Results from past periods are not necessarily indicative
of results that may be expected for any future period. Average balances have
been computed using daily averages.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>As of or for the year ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(dollars in thousands, except per share data)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Summary Income Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">71,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">54,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">44,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,729</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,391</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,338</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total noninterest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,783</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,064</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,954</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,170</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Extraordinary gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,784</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Common Share Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per common share &#150; basic:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per common share &#150; diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Book value per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.81</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Common shares outstanding at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,973,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,939,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,778,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,027,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,027,002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average diluted shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,117,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,862,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,213,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,063,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,021,702</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Selected Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,320,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,035,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">607,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">452,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">305,712</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Securities available-for-sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,047</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment securities held to maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gross loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">899,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">767,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">458,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">312,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,991</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">984,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">843,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">485,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,805</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,160</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Performance Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Return on average common stockholders&#146; equity<SUP>(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16.50</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">13.56</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.34</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.39</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.48</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Return on average assets<SUP>(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.65</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net interest margin<SUP>(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.06</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Efficiency ratio<SUP>(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.43</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>As of or for the year ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(dollars in thousands, except per share data)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Asset Quality Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nonperforming assets to total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.51</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.87</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.18</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.05</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.26</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nonperforming loans to total loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for loan and lease losses to
nonperforming loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.03</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for loan and lease losses to total loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net charge-offs to average loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Capital Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Leverage ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.76</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.93</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.27</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.15</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.43</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tier 1 risk-based capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.64</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total risk-based capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tangible common equity to tangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.90</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Return on average common equity is determined by dividing net income
by average common equity.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Return on average assets is determined by dividing net income by
average assets.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Net interest margin is determined by dividing net interest income
(fully taxable equivalent) by average interest-earning assets.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(4)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The efficiency ratio is determined by dividing total noninterest
expense by an amount equal to net interest income (fully taxable
equivalent) plus noninterest income.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>SUMMARY PRO FORMA FINANCIAL INFORMATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The summary pro forma financial information set forth below gives effect
to the following transactions as if they had occurred on January&nbsp;1, 2003, in
the case of statements of operations data, and December&nbsp;31, 2003, in the case
of balance sheet data:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the sale of 369,231 shares of common stock in the private
placement on May&nbsp;12, 2004 and the application of $6.0&nbsp;million of net
proceeds from such sale; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our acquisition of BankTrust on May&nbsp;3, 2004.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The pro forma financial information does not purport to be indicative of
the operating results or financial position that would have actually occurred
or existed if the transactions had occurred on the dates indicated, nor is it
indicative of our future operating results or our financial position. The pro
forma adjustments are based on the information and assumptions available at the
date of this prospectus. This summary information should be read in
conjunction with the unaudited pro forma combined condensed financial
information contained elsewhere in this prospectus. This pro forma information
does not include any cost savings or revenue enhancements that may be achieved
or realized as a result of the BankTrust acquisition.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="70%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="87%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>For the Year Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(in thousands, except</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>per share data)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Consolidated Statements of Income Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">110,066</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,171</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net interest income before provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,895</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,906</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Noninterest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,025</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Noninterest expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,186</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income before unusual recovery and income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unusual recovery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,304</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,350</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,782</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Earnings per common share &#150; basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Earnings per common share &#150; diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="70%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="78%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B>(in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Consolidated Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans and leases, net of unearned interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,287,426</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">458,437</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,879,738</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,418,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,625</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="402"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>RISK FACTORS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>An investment in our common stock involves a number of risks. You should
read carefully and consider the following risks as well as the other
information contained in this prospectus, including the financial statements
and the notes to those financial statements, before making an investment
decision. The realization of any of the risks described below could have a
material adverse affect on our business, financial condition, results of
operations, cash flows and/or future prospects. The trading price of our
common stock could decline due to any of these risks, and you could lose part
or all of your investment.</I>


<P align="left" style="font-size: 10pt"><B>Risks Relating to Our Business</B>

<P align="left" style="font-size: 10pt"><B><I>Our decisions regarding credit risk could be inaccurate and our allowance for
loan and lease losses may be inadequate, which could materially and adversely
affect our business, financial condition, results of operations, cash flows
and/or future prospects.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our loan and lease portfolio and investments in marketable securities
subject us to credit risk. Inherent risks in lending also include fluctuations
in collateral values and economic downturns. Making loans and leases is an
essential element of our business, and there is a risk that our loans and
leases will not be repaid. The risk of nonpayment is affected by a number of
factors, including:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the duration of the loan or the lease;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>credit risks of a particular borrower or lessee;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in economic or industry conditions; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of collateralized loans and leases, risks
resulting from uncertainties about the future value of the
collateral.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We attempt to maintain an appropriate allowance for loan and lease losses
to provide for losses inherent in our loan and lease portfolio. In 2003, we
recorded a provision for loan and lease losses of $6.5&nbsp;million based on our
overall evaluation of the risks of our loan portfolio. As of December&nbsp;31,
2003, our allowance for loan and lease losses totaled $9.4&nbsp;million, which
represents approximately 1.0% of our total loans and leases. There is no
precise method of predicting loan and lease losses, and therefore, we always
face the risk that charge-offs in future periods will exceed our allowance for
loan and lease losses and that we would need to make additional provisions to
our allowance for loan and lease losses. In addition, the FDIC as well as the
Commissioner of Financial Institutions of Puerto Rico may require us to
establish additional reserves. Additions to the allowance for loan and lease
losses will result in a decrease in our net earnings and capital and could
hinder our ability to grow our assets.

<P align="left" style="font-size: 10pt"><B><I>We have a concentration of exposure to a number of individual borrowers and
certain forms of collateral.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under applicable law, there are quantitative limitations on the amount of
loans we can make to one borrower or a group of related borrowers. As of
December&nbsp;31, 2003, our legal lending limit was approximately $10.2&nbsp;million in
the unsecured category, and approximately $22.4&nbsp;million in the secured
category. As of December&nbsp;31, 2003, we had two loans to individual borrowers
with a principal balance of more than $10.0&nbsp;million per borrower and 12 loans
to individual borrowers with a principal balance of more than $5.0&nbsp;million per
borrower. Given the size of these current outstanding loans relative to our
capital levels and earnings, a significant loss on any one of these credits
could materially and adversely affect our business, financial condition,
results of operations, cash flows and/or future prospects.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our leases are secured by automobiles. As of
December&nbsp;31, 2003, the total amount of automobile leases was $302.1&nbsp;million or
22.9% of our total assets. We sometimes sell our leases to other financial
institutions in order to manage our lease financing concentration. The loss of
purchasers of our leases could cause us to reduce our lease originations,
reducing our net income. Alternatively, we may increase the portion of the
leases that we retain for our portfolio with the result that our exposure to
automobile leases will increase. In addition, a downturn in automobile
purchases could have a material adverse effect on our business, financial
condition, results of operations, cash flows and/or future prospects.


<P align="center" style="font-size: 10pt">9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt"><B><I>Our profitability is vulnerable to interest rate fluctuations.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our profitability, like that of most financial institutions, is dependent
to a large extent on our net interest income, which is the difference between
our interest income on interest-earning assets, such as loans, leases and
investment securities, and our interest expense on interest-bearing
liabilities, such as deposits and borrowings. When interest-bearing
liabilities mature or reprice more quickly than interest-earning assets in a
given period, a significant increase in market rates of interest could
adversely affect our net interest income. Conversely, when interest-earning
assets mature or reprice more quickly than interest-bearing liabilities,
falling interest rates could result in a decrease in net interest income.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In periods of increasing interest rates, loan originations may decline,
depending on the performance of the overall economy, which may adversely affect
income from these lending activities. Also, increases in interest rates could
adversely affect the market value of our fixed income assets.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot predict fluctuations of market interest rates, which are
affected by, among other factors, changes in inflation rates, levels of
business activity, unemployment levels, monetary and fiscal policies of the
United States and its agencies, particularly the Board of Governors of the
Federal Reserve System, money supply and domestic and foreign financial
markets.

<P align="left" style="font-size: 10pt"><B><I>We rely heavily on short-term funding, which can be adversely affected by local
and general economic conditions.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on our experience, we believe that our savings, transaction and
noninterest bearing accounts are relatively stable sources of funds.
Historically, a majority of non-brokered certificates of deposit are renewed
upon maturity as long as we pay competitive interest rates. These customers
are, however, interest-rate conscious and may be willing to move funds into
higher-yielding investment alternatives. Our ability to attract and maintain
deposits, as well as our cost of funds, has been, and will continue to be
significantly affected by money market and general economic conditions. In the
event that we increase interest rates paid to retain deposits, our earnings may
be adversely affected.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we have frequently utilized as a source of funds certificates
of deposit obtained through deposit brokers that solicit funds from their
customers for deposit with us, or brokered deposits. Brokered deposits
amounted to $228.2&nbsp;million, or approximately 23.2% of our total deposits, as of
December&nbsp;31, 2003. Approximately $64.8&nbsp;million of these brokered deposits, or
approximately 6.6% of our total deposits, mature within one year. In addition,
we assumed additional brokered deposits as a result of our acquisition of
BankTrust, which relied heavily on these funding sources. Consequently, on a
pro forma basis giving effect to the brokered deposits assumed in the BankTrust
acquisition as of December&nbsp;31, 2003, our balance of brokered deposits amounted
to $498.5&nbsp;million, or approximately 36.1% of our total deposits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brokered deposits, when compared to retail deposits attracted through a
branch network, are generally more sensitive to changes in interest rates and
volatility in the capital markets. In addition, these funding sources may be
more sensitive to significant changes in our financial condition. Our ability
to continue to acquire brokered deposits is subject to our ability to price
these deposits at competitive levels, which may substantially increase our
funding costs. In addition, if our capital levels were to fall below
&#147;well-capitalized&#148; under the Prompt Corrective Action standards of the FDIC,
our ability to accept, renew or roll over these deposits would be subject to
our receiving a waiver from the FDIC. Furthermore, we would be limited on the
rate that we could pay for these deposits to 75 basis points over the effective
yield on deposits that we offer in our normal market area or the national rate
for deposits of comparable maturity. Failure to receive a waiver from the FDIC
would have a material adverse impact on our business, financial condition,
results of operations, cash flows and/or future prospects. While currently
these regulatory limitations are not applicable to us, we cannot assure you
that they will not become applicable to us in the future.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also have borrowings in the form of repurchase obligations with the
Federal Home Loan Bank, or the FHLB, and other broker-dealers. These
agreements are collateralized by some of our investment securities. As of
December&nbsp;31, 2003, our repurchase obligations totaled $207.5&nbsp;million, of which
$181.9&nbsp;million, or approximately 87.7% of the total repurchase obligations,
mature within one year.


<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also rely on advances from the FHLB. As of December&nbsp;31, 2003, we had
$10.7&nbsp;million in FHLB advances outstanding with 23.4% maturing in less than one
year. FHLB advances are limited by specific thresholds established by the FHLB
and/or the amount of eligible collateral available to be pledged. The FHLB&#146;s
obligation to release funds on advance commitments is subject to the continued
eligibility of the member bank for advances in accordance with the FHLB&#146;s
underwriting guidelines. If we are unable to attract and maintain deposits, or
to have access to FHLB advances, we may be required to seek higher cost funding
sources, which could materially and adversely effect our net interest income.

<P align="left" style="font-size: 10pt"><B><I>We have experienced rapid growth in recent quarters and we may be unable to
successfully continue to implement our growth strategy, which may adversely
affect our business, financial condition, results of operations, cash flows
and/or future prospects.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our assets have grown rapidly in recent quarters. With the ultimate goal
of increasing net income, we have grown our assets from $607.7&nbsp;million as of
December&nbsp;31, 2001 to $1.3&nbsp;billion as of December&nbsp;31, 2003 ($1.9&nbsp;million on a
pro forma basis giving effect to the BankTrust acquisition). The types of
assets on our balance sheet that have experienced the largest categorical
increases are commercial loans and lease financings. We have funded this
growth, in part, with brokered deposits, FHLB advances, and other borrowings.
These types of funds are generally more costly and volatile than traditional
retail deposits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not be able to sustain our current growth rate. Throughout our
recent expansion, we have been successful in attracting new customers,
expanding new services to existing customers, adding new business lines,
engaging in acquisitions and increasing our deposit base. We cannot assure you
that we will be able to continue this trend, and it will become more difficult
to maintain sustained growth as we increase in size. Our ability to implement
our strategy for continued growth depends on our ability to attract and retain
customers in a highly competitive market, on the growth of those customers&#146;
businesses, on entering and expanding in lines of business in which we do not
have significant past experience or for which we have only recently added
personnel with the requisite experience, on our ability to continue to identify
new acquisition targets and on our ability to increase our deposit base. Many
of these growth prerequisites may be affected by circumstances that are beyond
our control. Our inability to meet any of these growth prerequisites could
have a material adverse effect on our business, financial condition, results of
operations, cash flows and/or future prospects.

<P align="left" style="font-size: 10pt"><B><I>Taxation of our international banking entities may reduce our earnings.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Puerto Rico IBEs are generally exempt from taxation under federal and
Puerto Rico law. Recently, the Legislature of Puerto Rico and the Governor of
Puerto Rico approved a law amending the IBE Act. This law imposes income taxes
at normal statutory rates on each IBE that operates as a unit of a bank, if the
IBE&#146;s net income generated after December&nbsp;31, 2003 exceeds 40.0% of the bank&#146;s
net income in the taxable year commenced on July&nbsp;1, 2003, 30.0% of the bank&#146;s
net income in the taxable year commencing on July&nbsp;1, 2004, and 20.0% of the
bank&#146;s net income in the taxable year commencing on July&nbsp;1, 2005, and
thereafter. It does not impose income taxation on an IBE that operates as a
subsidiary of a bank.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are in the process of organizing a new IBE subsidiary, EBS Overseas,
and will transfer all of the assets and liabilities of our existing IBE,
Eurobank International, to EBS Overseas. Although this transfer of IBE assets
will allow us to continue enjoying tax benefits, we cannot give you any
assurance that the IBE Act will not be modified in the future in a manner to
reduce the tax benefits available to our new IBE subsidiary. A reduction of
such tax benefits may reduce our earnings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also acquired another IBE, BT International, in connection with the
acquisition of BankTrust. We have continued to operate the acquired IBE as a
division rather than a subsidiary of Eurobank and will not immediately transfer
its assets to EBS Overseas. As a result of the recent amendment to the IBE
Act, we may incur income tax on the operations of BT International.



<P align="center" style="font-size: 10pt">11
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt"><B><I>We have geographic risks in that an economic downturn or a natural disaster,
especially one affecting our market area, could adversely affect our business,
financial condition, results of operations, cash flows and/or future prospects.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the securities investment activities of our IBEs, all of our
business and lending activities are conducted in Puerto Rico. Accordingly, we
are at risk from adverse economic, political or business developments,
including a downturn in real estate values, and natural hazards such as
tropical storms and hurricanes that affect Puerto Rico. If Puerto Rico&#146;s
economy experiences an overall decline as a result of these adverse
developments or natural hazards, the rates of delinquencies, foreclosures,
bankruptcies and losses on loan and lease portfolios would probably increase
substantially. Moreover, the value of real estate or other collateral that
secures the loans and leases could be adversely affected by an economic
downturn or a natural disaster. An economic downturn or a natural disaster
could, therefore, result in losses that may materially and adversely affect our
business, financial condition, results of operations, cash flows and/or future
prospects.

<P align="left" style="font-size: 10pt"><B><I>We rely heavily on our management team and the unexpected loss of key officers
could adversely affect our business, financial condition, results of
operations, cash flows and/or future prospects.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success has been and will continue to be greatly influenced by our
ability to retain the services of existing senior management and, as we expand,
to attract and retain qualified additional senior and middle management.
Rafael Arrillaga-Torr&#233;ns, Jr., our President and Chief Executive Officer, has
been instrumental in managing our business affairs. Our other senior executive
officers have had, and will continue to have, a significant role in the
development and management of our business. The loss of the services of Mr.
Arrillaga or any of our other senior executive officers could have an adverse
effect on our business, financial condition, results of operations, cash flows
and/or future prospects. We have not established a formal management
succession plan. Accordingly, should we lose the services of Mr.&nbsp;Arrillaga,
our Board of Directors may have to search outside of EuroBancshares for a
qualified permanent replacement. This search may be prolonged and we cannot
assure you that we will be able to locate and hire a qualified replacement. We
do not maintain key man life insurance policies on any of our senior executive
officers. We currently do not have any employment agreements with our senior
executive officers, with the exception of a Severance Payment Agreement with
Yadira R. Mercado, our Executive Vice President and Chief Financial Officer.
If any of our senior executive officers leaves his or her respective position,
our business, financial condition, results of operations, cash flows and/or
future prospects may suffer.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also depend upon the experience of the non-executive officers of our
subsidiaries, the managers of our banking facilities and on their relationships
with the communities they serve. We may not be able to retain our current
personnel or attract additional qualified key persons as needed.

<P align="left" style="font-size: 10pt"><B><I>The regulatory capital treatment of our junior subordinated debentures and
related trust preferred securities is uncertain.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial holding companies with more than $150.0&nbsp;million in assets, like
us, must maintain minimum capital ratios. In particular, we must maintain a
leverage ratio of Tier 1 capital to average assets of 5.0%; a Tier 1 risk-based
capital ratio of 6.0% of risk-weighted assets; and a total risk-based capital
ratio (Tier 1 and Tier 2 capital) of 10.0% of risk-weighted assets to be
considered &#147;well-capitalized&#148; for regulatory purposes.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Federal Reserve Board&#146;s current rules regarding the capital treatment
of trust preferred securities allow us to count trust preferred securities as
Tier 1 capital up to 25.0% of our total Tier 1 capital for regulatory purposes.
The remaining portion counts as Tier 2 capital. As of December&nbsp;31, 2003, we
had $45.0&nbsp;million in trust preferred securities of which $20.9&nbsp;million counted
as Tier 1 capital and $24.1&nbsp;million counted as Tier 2 capital.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, the Financial Accounting Standards Board issued a
revision to Financial Accounting Standards Board Interpretation No.&nbsp;46,
<I>Consolidation of Variable Interest Entities, </I>that required the deconsolidation
of certain &#147;variable interest entities,&#148; such as our statutory trust
subsidiaries that issued the trust preferred securities. As a result, our
statutory trusts are not consolidated with us or Eurobank. Commencing on
December&nbsp;31, 2003, we refer to the trust preferred securities we issued through
Eurobank Statutory Trust I and Eurobank Statutory Trust II as junior
subordinated debentures instead of trust preferred securities, as we had prior
to that date. In July&nbsp;2003, the


<P align="center" style="font-size: 10pt">12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Federal Reserve Board issued a supervisory letter instructing bank holding
companies to continue to include the trust preferred securities in their Tier 1
capital for regulatory capital purposes until notice is given to the contrary.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;6, 2004, the Federal Reserve Board issued a notice of proposed
rulemaking and requested public comment on a proposed rule that would limit the
aggregate amount of trust preferred securities that bank holding companies
would be able to include in Tier 1 capital to 25.0% of their total Tier 1
capital, net of goodwill. Further, the amount of trust preferred securities
and certain other elements in excess of the limit that could be included in
Tier 2 capital would be limited to 50.0% of Tier 1 capital, net of goodwill and
certain other intangibles. Comments on the proposed rule are to be submitted
by July&nbsp;11, 2004. There can be no assurance that the proposed rule will be
adopted in its current form, or that the Federal Reserve Board will continue to
allow institutions to include trust preferred securities issued by trust
subsidiaries or debentures issued to trust subsidiaries in Tier 1 capital for
regulatory capital purposes. A determination by the Federal Reserve Board not
to continue to allow the inclusion of our junior subordinated debentures or the
trust preferred securities in Tier 1 capital, or otherwise limiting the
inclusion of such debentures or securities in Tier 1 capital, could have a
material and adverse impact on our regulatory capital levels and cause our
capital ratios to fall below the levels necessary to be considered
&#147;well-capitalized&#148; under current regulatory guidelines. This could impact our
ability to grow our assets. In addition, inadequate regulatory capital levels
may result in the imposition of certain operating restrictions on us and
Eurobank.

<P align="left" style="font-size: 10pt"><B><I>Competition from other financial intermediaries may adversely affect our
profitability.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We face substantial competition in originating loans and leases and in
attracting deposits. The competition in originating loans and leases comes
principally from other United States, Puerto Rico and foreign banks, mortgage
banking companies, consumer finance companies, credit unions, insurance
companies and other institutional lenders and purchasers of loans and leases.
We will encounter greater competition as we expand our operations. A number of
institutions with which we compete have significantly greater assets, capital
and other resources. Increased competition could require us to increase the
rates we pay on deposits or lower the rates we offer on loans and leases, which
could adversely effect our profitability. This competition may also limit our
future growth and earnings prospects.

<P align="left" style="font-size: 10pt"><B><I>Our business, financial condition, results of operations, cash flows and/or
future prospects could be adversely affected by the highly regulated
environment in which we operate.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, as a Puerto Rico incorporated financial holding company, and our
subsidiaries, are each subject to federal and Puerto Rico governmental
supervision and regulation. Federal and state regulation of the banking
industry, along with tax and accounting laws, regulations, rules and standards,
may limit our operations significantly and control the methods by which we
conduct business, as they do those of other banking organizations. Many of
these regulations are intended to protect depositors, the public, or the FDIC
insurance funds, not stockholders. Regulatory requirements affect our lending
practices, capital structure, investment practices, dividend policy and many
other aspects of our business. There are laws and regulations that restrict
transactions between us and our various subsidiaries. These requirements may
constrain our operations, and the adoption of new laws and changes to or repeal
of existing laws may have a further impact on our business, financial
condition, results of operations, cash flows and/or future prospects. Also,
the burden imposed by those federal and state regulations may place banks in
general, and Eurobank in particular, at a competitive disadvantage compared to
less regulated competitors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also subject to requirements with respect to the confidentiality of
information obtained from customers concerning their identity, business and
personal financial information, employment and other matters. We have adopted
information security policies and procedures that require our personnel to
agree to keep all such information confidential and we monitor compliance with
these requirements; however, we cannot assure you that these requirements will
be complied with in all cases. Failure to comply with confidentiality
requirements could result in material liability and adversely affect our
business, financial condition, results of operations, cash flows and/or future
prospects.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both EuroBancshares and Eurobank currently meet all applicable minimum
regulatory capital requirements. While it is expected that we will continue to
meet all regulatory capital requirements in the future, we cannot assure you in
this regard, and any failure to meet any of these requirements could have a
material adverse effect on our


<P align="center" style="font-size: 10pt">13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">business, financial condition, results of operations, cash flows and/or
future prospects. Financial holding companies and financial institutions are
extensively regulated and currently face an uncertain regulatory environment.
Applicable laws, regulations, interpretations, enforcement policies and
accounting principles have been subject to significant changes in recent years,
and may be subject to significant future changes. We cannot assure you that
such future changes will not adversely affect our business, financial
condition, results of operations, cash flows and/or future prospects.

<P align="left" style="font-size: 10pt"><B><I>As a financial holding company, we are dependent on receiving dividends from
Eurobank in order to pay dividends and other obligations, and there are
restrictions on Eurobank&#146;s ability to pay dividends to us.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a financial holding company, and we conduct no business operations.
Our principal asset is the outstanding capital stock of Eurobank. As a
result, we must rely on dividend payments from Eurobank to meet our
obligations. Dividend payments from Eurobank are subject to Puerto Rico law
and to regulatory limitations, generally based on capital levels and current
and retained earnings, imposed by the various regulatory agencies with
authority over Eurobank. The ability of Eurobank to pay dividends, however, is
always subject to regulatory restrictions if paying dividends would impair its
profitability, financial condition or other cash flow requirements.
Furthermore, our acquisition of BankTrust could also adversely effect
Eurobank&#146;s ability to pay dividends to us. Although Eurobank is considered
&#147;well-capitalized&#148; under applicable FDIC guidelines, we cannot assure you that
Eurobank will continue to meet the criteria under these regulatory guidelines,
in which case Eurobank may stop paying dividends or reduce the amount of
dividends paid to us.

<P align="left" style="font-size: 10pt"><B><I>Monetary policy and other economic factors could affect our profitability
adversely.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following factors will affect the demand for, and the pricing of,
loans and leases and our ability to attract deposits:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in governmental economic and monetary policies;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Puerto Rico Internal Revenue Code of 1994, as amended, and banking and credit regulations;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>national and local economic growth rates;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>employment rates; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>population trends.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success will depend in significant part upon our ability to maintain a
sufficiently large interest spread between the rates of interest we receive on
loans, leases and other investments and the rates we pay out on deposits and
other liabilities. The monetary and economic factors listed above, and the
need to pay rates sufficient to attract deposits, may adversely affect our
ability to maintain an interest spread sufficient to result in operating
profits. We do not anticipate significant risk from foreign currency
transactions.

<P align="left" style="font-size: 10pt"><B><I>We have certain risks associated with our lease servicing activities.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We retain the responsibility for servicing the automobile leases that we
sell, and are therefore entitled to an ongoing fee based on the outstanding
principal balances of the leases we service. The value of these servicing
assets are subject to credit, prepayment and interest rate risk. Significant
decreases in interest rates may lead to increases in the prepayment of leases
by borrowers, which may reduce the value of our servicing asset. If
prepayments increase above the expected levels, the value of our servicing
assets will decrease. We may be required to recognize this decrease in value
by taking a charge against our current earnings.

<P align="left" style="font-size: 10pt"><B><I>Future terrorist activities and United States military involvement in the
Middle East and elsewhere may adversely affect the financial markets and our
business, financial condition, results of operations, cash flows and/or future
prospects.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aftermath of the war with Iraq, the continuing occupation of Iraq,
instability in the Middle East and terrorist attacks in the United States and
around the world have had a substantial impact on the United States and world


<P align="center" style="font-size: 10pt">14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">economies and securities markets. The nature, scope and duration of the
war and the occupation cannot be predicted with any certainty. Terrorist
attacks on the World Trade Center and the Pentagon on September&nbsp;11, 2001 closed
some of the United States securities markets for a four day period and similar
events cannot be ruled out. The Iraq war and occupation, terrorism and related
geopolitical risks have led, and may in the future lead, to increased
short-term market volatility and may have adverse long-term effects on United
States and world economies and markets generally. Those events could adversely
affect our business, financial condition, results of operations, cash flows
and/or future prospects.

<P align="left" style="font-size: 10pt"><B><I>We rely heavily on technology and computer systems and computer failure could
result in loss of business and adversely affect our earnings.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advances and changes in technology could significantly affect our business
and operations. We may face many challenges, including the increased demand
for providing customers access to their accounts and the systems to perform
banking transactions electronically. Our ability to compete depends on our
ability to continue to adapt technology on a timely and cost-effective basis to
meet these demands. In addition, our business and operations are susceptible
to negative effects from computer system failures, communication and energy
disruption, and unethical individuals with the technological ability to cause
disruptions or failures of our data processing systems.

<P align="left" style="font-size: 10pt"><B><I>We are subject to litigation, which could result in substantial judgment or
settlement costs.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are regularly involved in litigation matters in the ordinary course of
our business. We believe that current litigation matters should not have a
material adverse effect on our business, financial condition, results of
operations, cash flows and/or future prospects. We cannot assure you, however,
that we will be able to successfully defend or resolve any current or future
litigation matters, in which case those litigation matters could have a
material and adverse effect on our business, financial condition, results of
operations, cash flows and/or future prospects.

<P align="left" style="font-size: 10pt"><B><I>The properties that we own and our foreclosed real estate assets could subject
us to environmental risks and associated costs.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is a risk that hazardous substances or wastes, contaminants,
pollutants or other environmentally restricted substances could be discovered
on our properties or our foreclosed assets (particularly in the case of real
estate loans). In this event, we might be required to remove the substances
from the affected properties or to engage in abatement procedures at our sole
cost and expense. Besides being directly liable under applicable federal and
Commonwealth statutes for our own conduct, we may also be held liable under
certain circumstances for actions of borrowers or other third parties on
property that collateralizes one or more of our loans or on property that we
own. Potential environmental liability could include the cost of remediation
and also damages for any injuries caused to third-parties. We cannot assure
you that the cost of removal or abatement will not substantially exceed the
value of the affected properties or the loans secured by those properties, that
we would have adequate remedies against the prior owners or other responsible
parties or that we would be able to resell the affected properties either prior
to or following completion of any such removal or abatement procedures. If
material environmental problems are discovered prior to foreclosure, we
generally will not foreclose on the related collateral or will transfer
ownership of the loan to a subsidiary. It should be noted, however, that the
transfer of the property or loans to a subsidiary may not protect us from
environmental liability. Furthermore, despite these actions on our part, the
value of the property as collateral will generally be substantially reduced
and, as a result, we may suffer a loss upon collection of the loan. Currently,
we are not, and none of our subsidiaries is, a party to any pending legal
proceeding under any environmental statute, nor are we aware of any instances
that may give rise to such liability.

<P align="left" style="font-size: 10pt"><B><I>We rely on third-party professionals to provide certain financial services to
our customers.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on selected outside investment managers to provide specialized
investment advice and asset management services to our customers. We cannot
assure you that any of these providers will be able to continue to provide
these services to our customers or that they will be able to adequately meet
our customers&#146; or our needs. Further, we cannot be sure that our customers
will continue to utilize the services of these investment managers through us,
rather than directly from the investment management firms themselves. The loss
of any of these outside investment managers may impact our ability to provide
customers with quality service or some types of portfolio management without
incurring the cost of replacing them.


<P align="center" style="font-size: 10pt">15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Risks Relating to an Investment in Our Common Stock</B>

<P align="left" style="font-size: 10pt"><B><I>Our common stock does not have a trading history and you may not be able to
trade our common stock if an active trading market does not develop.
Additionally, the price of our common stock may fluctuate significantly.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest in us will lead
to an active trading market in our common stock or how liquid that market might
become. A public trading market having the desired characteristics of depth,
liquidity and orderliness depends upon the presence in the marketplace of
willing buyers and sellers of the common stock at any given time, which
presence is dependent upon the individual decisions of investors over which
neither we nor any market maker has any control.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The initial public offering price of our common stock will be determined
by negotiation between the representatives of the underwriters and us. This
price may not be indicative of prices that will prevail in any future trading
market. You may not be able to sell shares of our common stock at or above our
initial public offering price.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, the market price of our common stock may be highly volatile
and subject to wide fluctuations in response to numerous factors, including but
not limited to the following:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>actual or anticipated fluctuations in our operating results;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in interest rates;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the public&#146;s reaction to our press releases, announcements and filings with the SEC;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in earnings estimates or recommendations by research analysts;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>future sales of our common stock;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in general conditions in the United States or Puerto
Rico economy, financial markets or the banking industry; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other developments affecting our competitors or us.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The stock markets, from time to time, experience extreme price and volume
fluctuations that may be unrelated or disproportionate to the operating
performance of companies. These broad fluctuations may adversely affect the
market price of our common stock, regardless of our trading performance.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, stockholders have often brought securities class action
litigation against a company following periods of volatility in the market
price of their securities. We may be the target of similar litigation in the
future, which could result in substantial costs and divert management&#146;s
attention and resources.

<P align="left" style="font-size: 10pt"><B><I>As a new investor, you will incur immediate and substantial dilution in the
tangible book value per share of your investment in our common stock.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you purchase shares of our common stock in this offering, you will
experience an immediate and substantial dilution of $&#091;&nbsp;&nbsp;&nbsp;&#093; net tangible book
value per share of your investment. This means that the price you pay for the
shares you acquire in this offering will be higher than their net tangible book
value per share. For more information regarding dilution, see the section of
this prospectus captioned &#147;<I>Dilution</I>.&#148;

<P align="left" style="font-size: 10pt"><B><I>Your share ownership may be diluted by the issuance of additional shares of our
common stock in the future.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your share ownership may be diluted by the issuance of additional shares
of our common stock in the future. First, we have adopted a stock option plan
that provides for the granting of stock options to our directors, executive
officers and other employees. As of March&nbsp;15, 2004, 578,432 shares of our
common stock were issuable under options granted in connection with our stock
option plan. In addition, &#091;363,000&#093; shares of our common stock are reserved
for future issuance to directors, officers and employees under our stock option
plan. It is probable that the


<P align="center" style="font-size: 10pt">16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">stock options will be exercised during their respective terms if the fair
market value of our common stock exceeds the exercise price of the particular
option. If the stock options are exercised, your share ownership will be
diluted.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, our amended and restated certificate of incorporation
authorizes the issuance of up to 150,000,000 shares of common stock, but does
not provide for preemptive rights to the holders of our common stock. Any
authorized but unissued shares following the offering will be available for
issuance by our Board of Directors. Therefore, persons who purchase shares in
the offering will not automatically have the right to subscribe for additional
shares of common stock issued at any time in the future. As a result, if we
issue additional shares of common stock to raise additional capital or for
other corporate purposes, you may be unable to maintain your pro rata ownership
in EuroBancshares.

<P align="left" style="font-size: 10pt"><B><I>Future sales of common stock by existing stockholders may have an adverse
impact on the market price of our common stock.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of a substantial number of shares of our common stock in the public
market following this offering, or the perception that large sales could occur,
could cause the market price of our common stock to decline or limit our future
ability to raise capital through an offering of equity securities. After
completion of this offering, there will be &#091;&nbsp;&nbsp;&nbsp;&#093; shares of our common
stock outstanding. All of the shares of common stock sold in this offering
will be freely tradable without restriction or further registration under the
federal securities laws unless purchased by our &#147;affiliates&#148; within the meaning
of Rule&nbsp;144 under the Securities Act, which shares will be subject to the
resale limitations of Rule&nbsp;144, or purchased under the directed share program,
which shares will be subject to a 180-day lock-up period. &#091;&nbsp;&nbsp;&nbsp;&#093; of the
remaining shares of outstanding common stock, representing approximately &#091;&nbsp;&nbsp;&nbsp;&#093;%
of the outstanding common stock upon completion of this offering, will be
&#147;restricted securities&#148; under the Securities Act, subject to restrictions on
the timing, manner and volume of sales of those shares. We, our directors and
officers, the selling stockholders and substantially all of our existing
stockholders have entered into lock-up agreements (and the purchasers of shares
of our common stock under the directed share program will agree to
restrictions) generally providing, subject to limited exceptions, that they
will not, without the prior written consent of Keefe, Bruyette &#038; Woods, Inc.,
directly or indirectly, during the period ending 180&nbsp;days after the date of
this prospectus, offer to sell, or otherwise dispose of any shares of our
common stock. Following the closing of this offering, we also intend to file a
registration statement on Form S-8 under the Securities Act covering the
&#091;363,000&#093; shares of our common stock reserved for issuance under our stock
option plan as of March&nbsp;15, 2004. Accordingly, subject to applicable vesting
requirements and exercise with respect to options, shares registered under that
registration statement will be available for sale in the open market
immediately after the 180-day lock-up agreements expire.

<P align="left" style="font-size: 10pt"><B><I>Holders of our junior subordinated debentures have rights that are senior to
those of our stockholders.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;18, 2001, we issued $25.8&nbsp;million of floating rate junior
subordinated debentures in connection with a $25.0&nbsp;million trust preferred
securities issuance by our subsidiary, Eurobank Statutory Trust I. The 2001
junior subordinated debentures mature in 2031. On December&nbsp;19, 2002, we issued
$20.6&nbsp;million of floating rate junior subordinated interest debentures in
connection with a $20.0&nbsp;million trust preferred securities issuance by our
subsidiary, Eurobank Statutory Trust II. The 2002 junior subordinated
debentures mature in 2032. The purpose of these transactions was to raise
additional capital to fund our continued growth.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments of the principal and interest on the trust preferred securities
of Eurobank Statutory Trust I and Eurobank Statutory Trust II are conditionally
guaranteed by us. The 2001 and 2002 junior subordinated debentures are senior
to our shares of common stock. As a result, we must make payments on the
junior subordinated debentures before any dividends can be paid on our common
stock and, in the event of our bankruptcy, dissolution or liquidation, the
holders of the junior subordinated debentures must be satisfied before any
distributions can be made on our common stock. We have the right to defer
distributions on the 2001 and 2002 junior subordinated debentures (and the
related trust preferred securities) for up to five years, during which time no
dividends may be paid on our common stock.


<P align="center" style="font-size: 10pt">17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt"><B><I>Holders of our Series&nbsp;A Preferred Stock have rights senior to those of our
common stockholders.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with our acquisition of BankTrust, we issued 429,507 shares
of our Series&nbsp;A Preferred Stock to certain stockholders of BankTrust in
exchange for their shares of the Series&nbsp;A and Series&nbsp;B preferred stock of
BankTrust. Our Series&nbsp;A Preferred Stock has rights and preferences that could
adversely affect holders of our common stock. For example, we generally are
unable to declare and pay dividends on our common stock if there are any
accrued and unpaid dividends on our Series&nbsp;A Preferred Stock for the preceding
twelve months. Additionally, upon any voluntary or involuntary liquidation,
dissolution, or winding up of our business, the holders of our Series&nbsp;A
Preferred Stock are entitled to receive distributions out of our available
assets before any distributions can be made to holders of our common stock.

<P align="left" style="font-size: 10pt"><B><I>Provisions of our amended and restated certificate of incorporation and amended
and restated bylaws, as well as state and federal banking regulations, could
delay or prevent a takeover of us by a third party.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation and amended and
restated bylaws could delay, defer or prevent a third party from acquiring us,
despite the possible benefit to our stockholders, or could otherwise adversely
affect the price of our common stock. For example, our bylaws contain advance
notice requirements for nominations for election to our Board of Directors and
for proposing matters that stockholders may act on at stockholder meetings. We
also have a staggered board of directors, which means that only one-third of
our Board of Directors can be replaced by stockholders at any annual meeting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any individual, acting alone or with other individuals, who is seeking to
acquire, directly or indirectly, 10.0% or more of our outstanding common stock
must comply with the Change in Bank Control Act, which requires prior notice to
the Federal Reserve for any acquisition. Additionally, any entity that wants
to acquire 5.0% or more of our outstanding common stock, or otherwise to
control us, may need to obtain the prior approval of the Federal Reserve under
the Bank Holding Company Act of 1956, as amended. As a result, prospective
investors in our common stock need to be aware of and to comply with those
requirements, to the extent applicable. Approval for an acquisition may also
be required by the Commissioner of Financial Institutions of Puerto Rico.

<P align="left" style="font-size: 10pt"><B><I>We currently do not intend to pay dividends on our common stock. In addition,
our future ability to pay dividends is subject to restrictions. As a result,
capital appreciation, if any, of our common stock will be your sole source of
gains for the foreseeable future.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not historically and we currently do not intend to pay any
dividends on our common stock. In addition, since we are a financial holding
company with no significant assets other than Eurobank, we have no material
source of income other than dividends that we receive from Eurobank.
Therefore, our ability to pay dividends to our stockholders will depend on
Eurobank&#146;s ability to pay dividends to us. Moreover, banks and bank holding
companies are both subject to federal and Puerto Rico regulatory restrictions
on the payment of cash dividends. We intend to retain the earnings of Eurobank
to support growth and build equity capital. Accordingly, you should not expect
to receive dividends from us in the foreseeable future.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The banking laws of Puerto Rico require that a reserve fund be created and
that annual transfers of at least 10.0% of Eurobank&#146;s annual net income be made
to that reserve fund, until the reserve fund equals total paid-in capital.
Such transfers restrict retained earnings, which would otherwise be available
for dividends. If net losses are experienced, however, such losses will
initially be charged to retained earnings before reducing the reserve fund.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also restricted from paying dividends on our common stock if we
have deferred payments of the interest on, or an event of default has occurred
with respect to, our junior subordinated debentures. In addition, we generally
are unable to declare and pay dividends on our common stock if there are any
accrued and unpaid dividends on our Series&nbsp;A Preferred Stock for the preceding
12&nbsp;months.


<P align="center" style="font-size: 10pt">18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt"><B><I>Your shares are not an insured deposit.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your investment in our common stock will not be a bank deposit and will
not be insured or guaranteed by the FDIC or any other government agency. Your
investment will be subject to investment risk, and you must be capable of
affording the loss of your entire investment.


<P align="left" style="font-size: 10pt"><B>Risks Related to United States Taxation</B>

<P align="left" style="font-size: 10pt"><B><I>If we or any of our subsidiaries are determined to be a passive foreign
investment company, certain U.S. holders of our stock could be subject to
adverse tax consequences.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The United States Internal Revenue Code provides special rules for
distributions received by certain U.S. stockholders on the stock of a passive
foreign investment company, known as a &#147;PFIC,&#148; as well as amounts received from
the sale or other disposition of such stock. If either we or any of our
subsidiaries are determined to be a PFIC for any taxable year, certain of our
U.S. stockholders would generally be subject to taxation under special rules,
regardless of whether we or any of our subsidiaries remains a PFIC, with
respect to (1)&nbsp;any &#147;excess distribution&#148; made by us to the stockholder, and (2)
any gain realized on the sale, pledge or other disposition of our common stock
or the stock of the subsidiary that was determined to be a PFIC. We believe
that neither we nor any of our subsidiaries will be determined to be a PFIC in
our current taxable year, and we expect to continue to conduct our affairs in a
manner so that neither we nor any of our subsidiaries qualifies as a PFIC in
the foreseeable future. However, we can give no assurance in this regard. For
a more detailed explanation of the tax consequences of PFIC classification to
U.S. stockholders and U.S. stockholders who are also bona fide residents of
Puerto Rico, see the section of this prospectus captioned <I>&#147;Taxation&#151;United
States Taxation&#151;Passive Foreign Investment Company Rules.&#148;</I>

<P align="left" style="font-size: 10pt"><B><I>If we or any of our subsidiaries are classified as a foreign personal holding
company, certain U.S. holders of our stock could be subject to adverse tax
consequences.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A non-United States corporation will be classified as a foreign personal
holding company, known as a &#147;FPHC,&#148; for United States federal income tax
purposes if (1)&nbsp;at any time during the taxable year at issue, five or fewer
individuals who are United States citizens or residents, referred to as a
&#147;United States group,&#148; own or are deemed to own (pursuant to certain
constructive ownership rules) more than 50% of all classes of the corporation&#146;s
stock measured by voting power or value, and (2)&nbsp;at least 60% of its gross
income for the taxable year is &#147;FPHC income.&#148; If we or any of our subsidiaries
are classified as a FPHC in any taxable year, a portion of the applicable
&#147;undistributed foreign personal holding company income&#148; (as defined for United
States federal income tax purposes) would be imputed to certain of our U.S.
stockholders on the last day on which a United States group existed in the
applicable taxable year. If we are a FPHC, such income would be taxable as a
deemed dividend to these stockholders to the extent of our current and
accumulated earnings and profits even if no cash dividend were actually paid
and would not be eligible for a reduced rate of tax under recently enacted
legislation. Further, in such case, upon the death of any United States
individual owning shares in a FPHC, such individual&#146;s heirs or estate would not
be entitled to a &#147;step-up&#148; in the basis of the common shares which might
otherwise be available under United States federal income tax laws. If we are
not a FPHC and such income is from one or more of our subsidiaries that are
FPHCs, then the &#147;undistributed foreign personal holding company income&#148; of the
subsidiaries that are FPHCs could be taxable as a deemed dividend to these U.S.
stockholders in certain circumstances.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, both we and our subsidiaries satisfied the stock
ownership test for classification as FPHCs in 2004 (<I>i.e</I>., 50% or more of the
shares of our stock have been owned or deemed owned by a United States group)
and the stock ownership test could continue to be satisfied after the initial
public offering. Unless Eurobank and its subsidiaries that are organized and
doing business under the banking and credit laws of Puerto Rico (&#147;Banking
Subsidiaries&#148;) receive certificates from the Commissioner of the Internal
Revenue Service that they are not FPHCs, Eurobank and such subsidiaries would
likely meet the gross income test and be treated as FPHCs in 2004.
Furthermore, if Eurobank and its Banking Subsidiaries do not receive
certificates for 2004, it is likely that we would also meet the gross income
test and be treated as a FPHC in 2004. We expect, however, that neither we nor
any of our subsidiaries will be a FPHC, in our current taxable year based on
our expectation that the Internal Revenue Service will certify that Eurobank
and each of its Banking Subsidiaries are not FPHCs and on certain projections
we have made with respect to our gross income following this offering. Due to
certain legal and factual uncertainties,


<P align="center" style="font-size: 10pt">19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">including that the Internal Revenue Service may not make such
certifications, we cannot be certain that either we or any of our subsidiaries
will not be considered a FPHC in 2004 and in the foreseeable future. For a
more detailed explanation of the tax consequences of FPHC classification to
U.S. stockholders and U.S. stockholders who are also bona fide residents of
Puerto Rico, see the section of this prospectus captioned <I>&#147;Taxation&#151;United
States Taxation&#151;Foreign Personal Holding Company Rules.&#148;</I>

<P align="left" style="font-size: 10pt"><B><I>Our former independent public accountant, Arthur Andersen LLP, has been found
guilty of federal obstruction of justice charges and you are unlikely to be
able to exercise effective remedies against them in any legal action.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we have dismissed Arthur Andersen LLP as our independent public
accountants and engaged KPMG LLP, Arthur Andersen LLP provided us with auditing
services for prior fiscal periods through December&nbsp;31, 2001, including issuing
an audit report with respect to our audited consolidated financial statements
as of and for the year ended December&nbsp;31, 2001 included in this prospectus. On
June&nbsp;15, 2002, a jury in Houston, Texas found Arthur Andersen LLP guilty of a
federal obstruction of justice charge arising from the federal government&#146;s
investigation of Enron Corp. On August&nbsp;31, 2002, Arthur Andersen LLP ceased
practicing before the SEC.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were unable to obtain Arthur Andersen LLP&#146;s consent to the inclusion in
this prospectus of its report with respect to our audited consolidated
financial statements as of and for the year ended December&nbsp;31, 2001. Rule
437(a) under the Securities Act permits us to dispense with the requirement to
file their consent. As a result, you may not have an effective remedy against
Arthur Andersen LLP in connection with a material misstatement or omission with
respect to our audited consolidated financial statements that are included in
this prospectus, including any claim under Section&nbsp;1l of the Securities Act.
In addition, even if you were able to assert a claim, as a result of its
conviction and other lawsuits, Arthur Andersen LLP may fail or otherwise have
insufficient assets to satisfy claims made by investors or by us that might
arise under federal securities laws or otherwise relating to any alleged
material misstatement or omission with respect to our audited consolidated
financial statements.


<P align="left" style="font-size: 10pt"><B>Risks Related to Our Acquisition of BankTrust</B>

<P align="left" style="font-size: 10pt"><B><I>There may be undiscovered risks or losses associated with the recent BankTrust
acquisition.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We acquired substantially all of the assets of BankTrust, including,
without limitation, its loan and lease portfolio. Although our management team
conducted due diligence with respect to BankTrust, we have not previously owned
or operated BankTrust and we do not have any detailed working experience
related to its operations. We may suffer losses or undisclosed liabilities
with respect to the assets and liabilities of BankTrust, including, with
respect to its loan and lease portfolio, impairment of the ability of borrowers
to repay loans and leases, declines in the value of the collateral securing
loans, or inadequacy of the allowances for loan and lease losses. One or more
of these factors might cause us to have additional losses or liabilities,
additional loan charge-offs, or increases in allowances for loan and lease
losses, which could have a material adverse effect on our business, financial
condition, results of operations, cash flows and/or future prospects.

<P align="left" style="font-size: 10pt"><B><I>We may not be able to integrate BankTrust operations with our business efficiently.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our efforts to integrate the operations of BankTrust with our own are subject to risks, including:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>possible loss of customers and deposits;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>possible loss of key personnel of BankTrust;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulties assimilating the personnel and operations of BankTrust;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>possible disruption of our ongoing business and additional burdens on our management team;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulties in maintaining uniform standards, controls, procedures and policies; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulties in ensuring accurate and timely reporting of financial information.
</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt">20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot be certain that we will realize the benefits from the BankTrust
acquisition that we anticipate. If we fail to integrate the operations of
BankTrust efficiently, it could have a material adverse effect on our business,
financial condition, results of operations, cash flows and/or future prospects.

<P align="left" style="font-size: 10pt"><B><I>We may incur adverse accounting consequences due to the acquisition of
BankTrust.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will account for our acquisition of BankTrust as a purchase transaction
in accordance with generally accepted accounting principles. Under this
accounting treatment, and in accordance with Statement of Financial Accounting
Standards No.&nbsp;141, <I>Business Combinations</I>, the purchase price will be assigned
to the fair value of the net tangible and intangible assets acquired, with any
excess amounts assigned to &#147;goodwill.&#148; In accordance with Statement of
Financial Accounting Standards No.&nbsp;142, <I>Goodwill and Other Intangible Assets</I>,
qualifying intangibles, such as core deposit intangibles, will be amortized by
charges to future earnings over their expected useful lives. Amortization of
core deposit intangibles is non-deductible for tax purposes. The remaining
goodwill will be capitalized and evaluated for impairment (diminished value) on
an annual basis or if circumstances arise in which it is more likely than not
that the fair market value of the related reporting unit has been reduced. If
such goodwill were to be deemed impaired, that impairment would be measured,
and any such amount would be charged against current earnings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not anticipate booking any goodwill or any core deposit intangible
in connection with the BankTrust acquisition. However, we will have one year
from the closing date of the BankTrust acquisition to determine the actual
amount of goodwill and/or any core deposit intangible that should be recorded
in connection with the BankTrust acquisition. If we determine that we are
required to record goodwill or a core deposit intangible, this will have a
negative impact on our tangible capital levels and could also have an impact on
our future earnings.

<P align="left" style="font-size: 10pt"><B><I>We may experience losses due to past due or problem assets acquired in the
BankTrust acquisition.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the assets we acquired in the BankTrust acquisition have issues
regarding credit quality. Specifically, as of December&nbsp;31, 2003, $9.3&nbsp;million
in loans that we acquired from BankTrust were problem loans. Included in these
problem loan totals are nonaccrual loans and loans that are classified as
&#147;Watch or Special Mention,&#148; &#147;Substandard&#148; and &#147;Doubtful&#148; on the watch list that
was presented monthly to the BankTrust Board of Directors. Taking into account
the consolidation of the BankTrust loans with Eurobank&#146;s pre-existing loans,
Eurobank would have had approximately $36.1&nbsp;million in past due and
nonperforming loans, on a pro forma basis, as of December&nbsp;31, 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We analyze our loan and lease classification and review processes
regularly, and make modifications if needed, and report those results monthly
at Board of Directors meetings. However, we cannot assure you that regulators,
in reviewing our loan and lease portfolio, will not request us to materially
increase our allowance for loan and lease losses. Actual losses are dependent
upon future events and, as such, further additions to the level of specific and
general loan and lease loss allowances may become necessary.

<P align="left" style="font-size: 10pt"><B><I>We will have certain risks associated with the assumption of derivative
instruments and hedging activities of BankTrust.</I></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with our acquisition of BankTrust, we assumed a number of
derivative instruments previously utilized by BankTrust to mitigate risks
associated with changes in interest rates. The hedging strategies employed by
BankTrust may not be successful in mitigating our risks associated with changes
in interest rates. Under applicable accounting and reporting standards, every
derivative instrument is required to be recorded on the consolidated balance
sheet as either an asset or a liability measured at its fair value. As with
all of our derivative instruments, we may realize gains or losses associated
with changes in the fair value of the derivative instruments assumed in the
BankTrust acquisition depending on their hedge designation and whether the
hedge is effective in achieving offsetting changes in the fair value of cash
flows of the asset or liability hedged. The existence of derivatives might
mitigate somewhat, but will not offset, the risks related to changes in
interest rates. Moreover, all hedging instruments are subject to counter-party
risk.


<P align="center" style="font-size: 10pt">21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="403"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the statements under the captions &#147;<I>Prospectus Summary</I>,&#148; &#147;<I>Risk
Factors</I>,&#148; &#147;<I>Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</I>,&#148; &#147;<I>Business</I>,&#148; and elsewhere in this prospectus constitute
forward-looking statements. You can identify these statements from our use of
the words &#147;may,&#148; &#147;should,&#148; &#147;could,&#148; &#147;potential,&#148; &#147;continue,&#148; &#147;plan,&#148;
&#147;forecast,&#148; &#147;estimate,&#148; &#147;project,&#148; &#147;believe,&#148; &#147;intend,&#148; &#147;anticipate,&#148; &#147;expect,&#148;
&#147;target,&#148; &#147;is likely,&#148; &#147;will,&#148; or the negative of these terms, and similar
expressions. These forward-looking statements may include, among other things:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>statements and assumptions relating to projected growth,
earnings, earnings per share and other financial performance
measures, as well as management&#146;s short-term and long-term
performance goals;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>statements relating to the anticipated effects on results of
operations or financial condition from recent and expected
developments or events, including the BankTrust acquisition;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>statements relating to our business and growth strategies; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other statements, projections or assumptions that are not historical facts.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our expectations are based on reasonable assumptions.
However, these forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause our actual results,
performance or achievements, or industry results, to differ materially from our
expectations of future results, performance or achievements expressed or
implied by these forward-looking statements. In addition, our past results of
operations do not necessarily indicate our future results. We discuss these
and other uncertainties in the &#147;<I>Risk Factors</I>&#148; section of this prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should not place undue reliance on any forward-looking statements.
These statements speak only as of the date of this prospectus. Except as
otherwise required by federal securities laws, we undertake no obligation to
publicly update or revise any forward-looking statements or the risk factors
described in this prospectus, whether as a result of new information, future
events, changed circumstances or any other reason after the date of this
prospectus.


<P align="center" style="font-size: 10pt">22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="404"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>BUSINESS</B>



<P align="left" style="font-size: 10pt"><B>Overview</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a diversified financial holding company headquartered in San Juan,
Puerto Rico, offering a broad array of financial services through our wholly
owned banking subsidiary, Eurobank, and our wholly owned insurance agency
subsidiary, EuroSeguros. As of December&nbsp;31, 2003, we had, on a consolidated
basis, total assets of $1.3&nbsp;billion, net loans and leases of $890.0&nbsp;million,
total deposits of $984.5&nbsp;million, and stockholders&#146; equity of $65.1&nbsp;million.
We currently operate through a network of 21 branch offices located throughout
Puerto Rico. On May&nbsp;3, 2004, we acquired all of the capital stock of
BankTrust, a commercial bank headquartered in San Juan, Puerto Rico with $567.2
million in assets as of December&nbsp;31, 2003. On a pro forma basis, as of
December&nbsp;31, 2003, giving effect to the acquisition and our recent issuance of
shares of our common stock in a private placement offering related to that
acquisition, we had total assets of $1.8&nbsp;billion, net loans and leases of $1.2
billion, total deposits of $1.4&nbsp;billion and stockholders&#146; equity of $87.6
million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a relationship-driven financial services company focused on
providing personalized banking services. We established our position in the
small and middle market business community as a secondary alternative to our
larger competitors, who we believed were underserving the market. Today, we
compete head to head with all Puerto Rico commercial banks for the primary
banking relationship of these customers. Our personalized customer service and
experienced and focused management team are at the core of our strategy. While
we have grown in size, we remain focused on providing services with a personal
touch. Additionally, we have sought to further develop our footprint
throughout the entire Island by opening branches along the main vehicular
arteries that circle Puerto Rico. By the year 2007, we intend to have a branch
located within a 10-minute drive of approximately 80% of the population of
Puerto Rico, achievable with a 27 branch network.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our niche is to provide one-on-one services to small and mid-sized
commercial businesses in Puerto Rico. Most of these businesses are involved in
service industries, wholesale and retail distribution, dairy farming,
construction, manufacturing, transportation and professional services, and have
annual sales between $2.0 and $40.0&nbsp;million. However, we also provide
responsive customer service and convenient banking products to smaller
companies with sales ranging from $500,000 to $2.0&nbsp;million, consisting of
lawyers, healthcare providers, CPAs, engineers and small contractors. While we
do not mass market to the retail segment, we do provide retail banking services
to the owners and families of our targeted commercial and small business
customers, their employees and individuals who reside or work near our branch
offices. These customers are usually also depositors of Eurobank. We seek to
provide all of our customers with quick, responsive service and foster a
culture in which customers are valued and respected.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of the recent robust housing demand in Puerto Rico, we target
experienced real estate developers and provide them with acquisition
development and construction loans. We place particular emphasis on
single-family homes, townhouses and walk-up developments throughout the Island.
We also finance commercial real estate development and construction projects,
particularly if they are owner-occupied, generally limiting our maximum credit
exposure to $7.5&nbsp;million for these types of credits. Our mortgage banking
group, EuroMortgage, was initially organized to support these activities by
providing financing to the purchasers of these real estate units. However,
through a staff of salespeople, today we also provide mortgages to our branch
customers and the general public. On a selective basis, we provide financing
to owner-occupied properties and to a lesser extent to income producing
properties.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To reduce interest rate risk, in 1999 we organized EuroLease, a
specialized group within Eurobank, which provides open-end lease financing
pursuant to which the lessee is responsible for the residual value, if any, of
the leased asset. The short to medium-term fixed rate financing provided by
EuroLease blends well with the primarily floating rate financing provided by
our commercial lending group.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term, it is our objective to leverage our relationships with our
primary customers by cross-selling to them a complete array of banking products
and services directly or through third-party providers. Through our trust
department, EuroSeguros, and Eurofinancial, we seek to assist our customers
with a full array of wealth management products and services.


<P align="center" style="font-size: 10pt">23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Eurobank</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eurobank, our principal subsidiary, is a full-service Puerto Rico
commercial bank with its main office located in San Juan, Puerto Rico.
Eurobank has 21 branches located throughout Puerto Rico. It was originally
chartered as a trust company under the laws of the Commonwealth of Puerto Rico
in 1979, and commenced operations under the name &#147;Espa&#241;ola de Finanzas Trust
Company.&#148; Subsequently, Eurobank obtained authority to conduct banking
activities and in December&nbsp;1988 obtained FDIC insurance for its deposits and
changed its name to &#147;First Community Trust Company.&#148; In December&nbsp;1990, Banco
Europeo de Finanzas, S.A., a bank organized under the laws of the Kingdom of
Spain, purchased 65.0% of Eurobank&#146;s stock, and shortly thereafter the Bank&#146;s
name was changed to Eurobank and Trust Company. Banco Europeo sold or optioned
all of its remaining shares in Eurobank in 1997, and is no longer a stockholder
of Eurobank. In 1992, the Bank amended its charter in order to become a
commercial bank regulated by the banking laws of Puerto Rico and its name was
changed to Eurobank. Eurobank is regulated by the Commissioner of Financial
Institutions of Puerto Rico and the FDIC.


<P align="left" style="font-size: 10pt"><B>Our Strategic Plan</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary business objectives are to maintain our strong asset growth
and enhance profitability, becoming the premier small and middle market
commercial bank in Puerto Rico. Our core customers are small and mid-sized
businesses, real estate development companies and the owners, executives and
employees of these businesses. Our success is largely based on our
personalized services philosophy. We specifically target customers who want to
deal directly with people they know and trust. As convenience remains an
overriding factor in customer choice, we have continued to establish de novo
branches throughout the Island to provide such convenience, and at the same
time we have continued to enhance our technology platform.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed a strategy that focuses on providing superior service
through highly qualified and relationship-oriented employees who are committed
to their respective communities. Through this strategy we intend to grow our
business, expand our customer base and improve profitability. We believe this
strategy has already proven successful as evidenced by our five year compounded
growth in earnings of 267.1% and earnings per share of 204.6%. The key
elements of our strategy are:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Focus on Our Targeted Customers</I>. We focus our time and
resources on the following targeted customer segments: small and
mid-sized businesses, real estate development companies and the
owners, executives and employees of these businesses. In this
regard, we seek to leverage our business banking relationships by
cross-selling to the personal financial needs of these business
owners, executives and employees.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Provide Superior and Convenient Service to Our Customers. </I>We
strive to provide superior customer service through convenient
access to our branches and personalized relationship banking. We
have 21 branch offices strategically located throughout Puerto Rico.
We intend to open six additional branches by the end of 2007.
After the addition of these new branch offices, we will have a
branch office located within a 10-minute drive of approximately 80%
of the Island&#146;s population. Under our business model we provide
each commercial customer with its own relationship manager for all
its banking needs. These relationship managers and our executive
management team regularly visit customers at their places of
business.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Hire and Retain Well-Trained and Qualified Employees. </I>We are
continuing to grow our franchise by providing superior customer
service through committed, qualified and relationship-oriented
employees. We seek to hire experienced and qualified employees that
prefer our relationship banking approach. These employees are
specifically incented through our compensation program to leverage
our commercial relationships by cross-selling our products and
services to the owners, executives and employees of our business
customers.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Use the Lease Financing Business to Mitigate Interest Rate
Risk. </I>We use our lease financing business to mitigate our interest
rate risk by offsetting the variable rate nature of our commercial
portfolio with a short to medium-term fixed rate product. We plan
to maintain the approximate size of the lease portfolio relative to
the size of the total loan portfolio, while increasing the volume of
leases originated for resale to other financial institutions.</TD>
</TR>


</TABLE>

<P align="center" style="font-size: 10pt">24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>De Novo Branching and Acquisitions</I>. We seek to increase our
presence throughout the Island through selective acquisitions and
the opening of de novo branches in attractive locations. Our de
novo expansion outside of the San Juan metropolitan market has
followed Puerto Rico&#146;s primary traffic arteries to areas that have
been growing.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Maximize Growth of our International Banking Entity</I>. Because
EBS Overseas, as our subsidiary IBE, will generally not be subject
to federal or Puerto Rico income tax, we will seek to maximize the
growth of this IBE as interest rates and applicable law permit.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Our De Novo Branch and Acquisition Strategy</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our growth strategy is concentrated on increasing our banking presence
throughout the island of Puerto Rico. Our recent expansion has been the result
of internal growth, acquisitions and the opening of de novo branch offices.
Consistent with our operating philosophy and growth strategy, we regularly
evaluate opportunities to acquire other banks or bank branches, expand our
market coverage and share through de novo branching and enhance our product and
service offerings. Eurobank&#146;s expansion out of the San Juan metropolitan area
has followed Puerto Rico&#146;s primary traffic arteries to new locations poised for
growth. We believe that the Puerto Rico banking environment, which is
dominated by large banks, has afforded us a continuing opportunity to gain new
customer relationships and to expand existing relationships. The growth in our
branch network has expanded our presence throughout the Island and increased
our customer base, providing tangible benefits that include an increase of
total deposits of 16.8%, core deposits of 26.9% and earnings of 42.5% for the
year ended 2003 as compared to the levels for the year ended 2002. Each branch
now has the ability to sell not only traditional products such as commercial
credit, leasing, construction, mortgages, consumer credit and personal secured
loans, but also to cross-sell our entire product line, including insurance
through EuroSeguros, and investment products through our trust department and
through Eurofinancial account representatives.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>De Novo Branches</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the past three years, we have opened four new banking offices in
Humacao, Manat&#237;, Mayag&#252;ez and Luquillo. Furthermore, in March&nbsp;2004, we opened
our newest branch in Hatillo, Puerto Rico. We are currently planning to open
branches in the following municipalities: Aguadilla, Cabo Rojo/San Germ&#225;n,
Yauco, Can&#243;vanas and Cayey. Our newer branches are located along the major
vehicular arteries that encircle the island of Puerto Rico. By the year 2007,
we expect to have a branch located within a ten minute drive of 80% of the
population of Puerto Rico.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Mergers and Acquisitions</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 1997, we have completed acquisitions of three banks in Puerto Rico
with combined assets of approximately $675.1&nbsp;million. In the early 1990s, we
acquired two branches from Banco Financiero and certain assets and liabilities
of a failed bank from the FDIC. The following is a summary of our material
acquisitions since 1997.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>BankTrust Acquisition</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;3, 2004, we acquired all of the capital stock of BankTrust, a
Puerto Rico chartered commercial bank, through the merger of BankTrust with and
into Eurobank. The aggregate purchase price for the capital stock of BankTrust
was $23.5&nbsp;million, and consisted of the issuance of 357,747 shares of our
common stock, 429,507 shares of our Series&nbsp;A Preferred Stock, and $6.7&nbsp;million
in cash. There were no changes in our Board of Directors or our senior
management team as a result of the BankTrust acquisition. We funded a portion
of the purchase price with proceeds we received from the issuance of 369,231
shares of our common stock at $16.25 per share in a private placement of our
common stock to our existing stockholders and optionholders. In connection
with the private placement and the acquisition of BankTrust, our Board of
Directors engaged an independent third-party financial advisor, Feldman
Financial Advisors, Inc., to determine the fairness, from a financial point of
view, to our stockholders of the merger consideration paid to BankTrust&#146;s
stockholders and the terms of the private placement. The acquisition was
accounted for using the purchase method of accounting under generally accepted
accounting principles.


<P align="center" style="font-size: 10pt">25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BankTrust provided a broad range of financial products and services to its
customers, including commercial, mortgage and personal loans, financial leases,
checking and savings accounts, asset management and trust services. BankTrust
operated five branch offices &#150; two were located in San Juan and the other
three were located in Guaynabo, Mayag&#252;ez and Ponce. BankTrust also had one
loan production office in San Juan and operated an IBE under the name &#147;BT
International.&#148; We are in the process of closing four of the five BankTrust
branches, as well as the loan production office, and consolidating these
operations into our existing branch network. Eurobank will continue to operate
BT International as a division of Eurobank and the Guaynabo branch office as a
branch of Eurobank. Prior to our acquisition, BankTrust was operating under a
cease and desist order issued by the FDIC and the Commissioner of Financial
Institutions of Puerto Rico dated as of September&nbsp;16, 2003. This order was
lifted in connection with the acquisition. As of December&nbsp;31, 2003, BankTrust
had total assets of $567.2&nbsp;million, total deposits of $429.6&nbsp;million,
stockholders&#146; equity of $43.8&nbsp;million and $334.0&nbsp;million in assets under
management. On the closing date, the estimated fair value of the assets
acquired was $517.8&nbsp;million and the estimated fair value of the deposits and
other liabilities assumed was $494.3&nbsp;million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The BankTrust acquisition is consistent with our growth strategy. Its
product offering and customer mix complement our existing product offering and
customer mix. We believe the acquisition affords us certain revenue synergies.
A substantial portion of the assets we acquired are of high quality with
yields that are at or above market rates. Likewise, we have the opportunity to
cross-sell our other products and services to the newly acquired customers of
BankTrust. This acquisition also provides us with a significant trust and
wealth management group that enhances our own efforts in this area. BankTrust
had a highly-trained staff of trust and wealth management officers. The key
managers and employees of this group remained with us after the closing. We
believe that this will allow us to grow our trust business faster than if we
had grown it organically.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the BankTrust acquisition, we expect to retain
approximately 35 of the 180 BankTrust employees and close four of the five
branches, which will result in immediate cost savings to us. Under the terms
of the merger agreement, a substantial portion of the costs and expenses
associated with the branch closings, the liquidation of its operations, and
employee reductions were effectively borne by the stockholders of BankTrust
through a reduction in the aggregate purchase price. In addition, a
substantial portion of the problem assets of BankTrust were transferred to a
special purpose vehicle for the benefit of the BankTrust stockholders. All of
these factors will result in immediate cost savings to us and reduced the level
of problem assets we acquired from BankTrust.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Banco Financiero de Puerto Rico and Banco del Commercio de Puerto Rico
Acquisitions</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;15, 2002, we acquired all of the issued and outstanding
capital stock of Banco Financiero de Puerto Rico for an aggregate purchase
price of $1.5&nbsp;million, consisting of the issuance of common stock valued at
$1.2&nbsp;million and $326,000 in cash. Banco Financiero was merged with and into
Eurobank. Banco Financiero operated through three branch offices in Ponce,
Puerto Rico. The acquisition was accounted for using the purchase method of
accounting under generally accepted accounting principles. The estimated fair
value of the assets acquired and liabilities assumed of $2.8&nbsp;million exceeded
the acquisition price of $1.8&nbsp;million including additional cost associated with
the acquisition of $214,000. The Banco Financiero acquisition was accretive to
our earnings for the year ended December&nbsp;31, 2003, as we reduced the
pre-closing level of noninterest expense associated with its operations by more
than 75.0% within the first 60&nbsp;days after closing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;26, 1997, we acquired all of the issued and outstanding capital
stock of Banco del Commercio de Puerto Rico through a share exchange and the
merger of Banco del Commercio with and into Eurobank. Prior to our
acquisition, Banco del Commercio operated six branch offices in the San Juan,
Carol&#237;na and Caguas regions. On the closing date, the net book value of the
assets and liabilities of Banco del Commercio were $69.3&nbsp;million and $65.6
million, respectively. The acquisition was accounted for as a pooling of
interests under generally accepted accounting principles. The Banco del
Commercio acquisition was accretive to our earnings for the year ended December
31, 1998, as we reduced the pre-closing level of noninterest expense associated
with its operations by more than 70.0% within the first 60&nbsp;days after closing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both Banco Financiero and Banco del Commercio were also operating subject
to cease and desist orders issued by the FDIC prior to their acquisition by
Eurobank. Nevertheless, we were able to integrate the operations of both


<P align="center" style="font-size: 10pt">26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">banks with our operations and, in both instances, achieve significant cost
savings within a short period of time after the respective closing dates of
each acquisition.


<P align="left" style="font-size: 10pt"><B>Products and Services</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a full service financial services company. We meet our commercial
and retail customers&#146; banking needs with an encompassing range of financial
services. We are a locally owned, independent financial institution and are
engaged in substantially all of the business operations customarily conducted
by independent financial institutions in Puerto Rico, including the acceptance
of checking, savings and time deposits and the making of commercial and
consumer loans, mortgage loans, real estate loans, lease financing, and other
installment and term loans. In addition, we offer our customers internet
banking, electronic funds transfers through ACH services, cash management,
vault services, loan and deposit sweep accounts and lock box services.
Eurobank does a substantial amount of business with individuals, as well as
with customers in commercial, industrial and professional businesses. Eurobank
also offers trust and wealth management services.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the convenience of our customers, we offer drive through banking
facilities, automated teller machines, night depository, personalized checks,
credit cards, debit cards, internet banking, cash management and safe deposit
boxes. Our services also include cashier&#146;s checks, travelers&#146; checks, domestic
and foreign wire transfers, account research, stop payment orders and telephone
transfers between accounts.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate and market our products and services primarily through four
business groups and two operating subsidiaries. The following provides a
summary description of our core business groups and operating subsidiaries:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Commercial Banking Group</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary lending focus is providing commercial loans and owner-occupied
real estate loans to local businesses with annual sales ranging from $2.0
million to $40.0&nbsp;million. Typically, our customers have financing requirements
between $1.0&nbsp;million and $5.0&nbsp;million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our commercial banking services are concentrated in two categories:
commercial and construction. Our strategy has been to target small and
mid-sized commercial businesses and to build relationships by providing
individualized attention. In the construction category, we seek to develop
relationships with experienced developers who develop units throughout the
Island in the $125,000 to $185,000 price range and whose peak maximum credit
needs for a particular project generally are less than $7.5&nbsp;million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We focus on a broad line of financial products and services to small and
mid-sized businesses through full service banking offices. Each commercial
lending branch has senior management with extensive lending experience. These
managers exercise substantial authority over credit presentation and pricing
initiatives, subject to centralized loan approvals for most credits over
$200,000. This decentralized management approach, coupled with continuity of
service by the same staff members, enables us to develop long-term customer
relationships, maintain high quality service and respond quickly to customer
needs. The centralized approval process, however, provides credit control. We
believe that our emphasis on local relationship banking, together with a
conservative approach to lending, are important factors in our success and
growth. As a result of the development of broad banking relationships with
customers and the convenience and service of our banking offices, we have
experienced growth in core deposits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We centralize most credit and support functions in order to achieve credit
quality consistency and cost efficiencies in the delivery of products and
services by each banking office. The central office provides services such as
data processing, bookkeeping, accounting, treasury management, credit approval,
loan review, compliance, risk management and internal auditing to enhance our
delivery of quality service. We also provide overall direction in the areas of
credit policy and administration, strategic planning, marketing, investment
portfolio management and other financial and administrative services. The
branch offices work closely with our central office to develop new products and
services needed by our customers and to introduce enhancements to existing
products and services.


<P align="center" style="font-size: 10pt">27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over the last five years, our commercial and construction loans have grown
40.3% on a compounded basis. The following table shows end of period balances
of commercial and construction loans for the periods indicated below:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="17"><B>As of December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B>(in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">$525,251</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">435,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">276,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">198,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">135,517</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Leasing Group</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EuroLease is engaged in the lease financing business. The leases offered
by EuroLease are open-ended pursuant to which the lessee is responsible for the
residual value of the leased unit. At December&nbsp;31, 2003, approximately 97.3%
of all originations were automobile leases. The remaining originations were
primarily medical equipment and construction equipment leases.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately 75.4% of our new automobile leases are financed on a no
residual value basis because the automobiles are transferred to the lessee at
the end of the lease term. For those that do have a residual value, the lessee
is contractually responsible for the full residual amount at the end of the
lease term. We do not have the risk of fluctuations in automobile values
relative to residual value. Instead, our risk is a credit risk regarding
whether the lessee will perform on its obligation to purchase the automobile at
the end of the contract at residual value. In addition, in some instances
EuroLease will refinance the automobile purchased at the residual value.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New automobile leases are offered for terms of up to 72&nbsp;months. Leases
with terms of 72&nbsp;months will be financed based on no residual value. Lessees
may also choose a 60-month lease term, in which case we offer financing with a
maximum of a 35.0% residual value. This higher residual value product is
usually offered only on high-end European and Japanese automobiles based on
historical used automobile resale values.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under current Puerto Rican law, the lessee is deemed to be the title
holder of a leased automobile and therefore responsible for all tort liability
associated with the operation and possession of the automobile.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered the automobile leasing business in order to assist us in
managing our interest rate risk. We determined that a short to medium-term
fixed rate product, such as lease financings, was needed to mitigate our
interest rate risk resulting from our high volume of variable rate commercial
loans. Our entry into the lease financing market was facilitated by our
ability to attract a veteran management team, low entry costs and the
opportunity to gain market share.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed procedures designed to facilitate the success of our
lease financing business. Our salespeople generate the leases at the
automobile dealer level. We are highly selective with respect to our
customers, and are aided in this selection by referrals from the automobile
dealers. We also market this service to our targeted customers. While most of
our leases are for automobiles, in some cases we have been willing to provide
equipment lease financing for our commercial customers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe the collection process is an integral component to a successful
leasing business. Our collection efforts at EuroLease start 10&nbsp;days after the
due date of each lease. A collections staff of eight internal collectors and
four outside collectors is managed by a Collections Manager and three
supervisors. Our internal collectors are responsible for all efforts to
collect on leases under 30&nbsp;days past due. If a customer cannot be reached by
phone, the account is then assigned to the outside collectors staff. When the
account reaches 60&nbsp;days past due, repossession efforts are started. If a
customer does not deliver the automobile voluntarily, the case is referred to
our outside collections lawyers. Most of our repossessions are voluntary.
Court proceedings for repossession take approximately 60&nbsp;days. The loss on the
sale of repossessed assets as a percentage of the lease balance at the date of
repossession was 14.2% in 2003, 7.5% in 2002 and 4.5% in 2001. The ratio of
loss on the sale of repossessed assets to our leasing portfolio calculated
using the year end balance was 0.82% in 2003, 0.51% in 2002 and 0.10% in 2001.


<P align="center" style="font-size: 10pt">28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, we held $314.2&nbsp;million in leases. The following
table sets forth the dollar volume of leases originated by EuroLease and the
end of period balances of leases, net of unearned interest, for the periods
indicated below:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>As of or for the year ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Originations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">185,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">138,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">78,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">64,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,576</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">End of period balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,394</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EuroLease intends to continue to increase its origination volume by
expanding the number of full-time representatives and increasing its marketing
efforts to its existing portfolio of more than 13,000 lease customers. It also
intends to focus on improving the overall quality and service to its network of
dealers. We seek to avoid an excess concentration of leases as a percentage of
interest-earning assets. We plan to maintain the approximate size of the lease
portfolio relative to the size of the total loan portfolio, while increasing
the volume of leases originated for resale to other financial institutions.
Typically, we retain the right to service the leases we sell. During 2003, we
sold approximately $50.0&nbsp;million in leases.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Mortgage Banking Group</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1999, we centralized our mortgage lending operation into a dedicated
group known as EuroMortgage. EuroMortgage offers Federal National Mortgage
Association, or FNMA, Veterans Affairs, or VA, and Federal Housing
Administration, or FHA, and Freddie Mac loans, as well as conforming and
non-conforming mortgage loans. In 2003, EuroMortgage increased mortgage
production significantly, taking advantage of prevailing low mortgage rates to
continue boosting loan originations, as well as refinancing existing mortgages.
We are an approved seller/servicer for FNMA and Freddie Mac. EuroMortgage has
continued to make inroads in the market by providing for the efficient and
expeditious turnaround of new loan applications and by establishing certain
strategic relationships that allow access to secondary mortgage markets on a
best price basis.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our targeted market for mortgage banking is the financing of the homes or
units financed by our construction lending department. We also provide
mortgage banking services to our retail customers and to the owners, executives
and employees of our targeted commercial customers. In addition, our
salespeople engage in marketing and direct selling efforts to the general
community. A majority of the loans originated through EuroMortgage are sold
into the secondary market with servicing released. We have been authorized by
FNMA and Freddie Mac to create mortgage loan pools to be sold in the secondary
market or marketed in connection with our wealth management activities.
However, as of March&nbsp;15, 2004, we had not created any such pool. It is our
intention to create such pools in the near future.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All mortgages originated by EuroMortgage are fixed-rate mortgages with a
maximum term of 30&nbsp;years. Recently, EuroMortgage has purchased mortgage loans
from approved small mortgage bankers to complement its originations. We intend
to pursue this segment of the business in the future as a complement to our
intention to create mortgage pools. All purchased loans will be underwritten
under the same standards used to underwrite internally originated loans.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the dollar volume of mortgage originations
by Eurobank and the end of period balances of mortgages for the periods
indicated below:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="37%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>As of or for the year ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Originations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">53,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">32,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,944</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">End of period balance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,152</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our strategy is to sell conforming FNMA and Freddie Mac mortgages either
as whole loans or in the form of mortgage-backed securities. We also sell the
servicing rights to the mortgage loans that we originate except for those
mortgage loans we hold for long-term investment.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Trust and Wealth Management Group</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eurobank&#146;s trust and wealth management group offers retirement benefits,
personal trust and wealth management services. This group was established in
2002, and as of December&nbsp;31, 2003, had approximately $344.2&nbsp;million in assets
under management giving effect to the $334.0&nbsp;million of trust assets which were
acquired in the BankTrust merger. We anticipate that there will be some
run-off of this acquired trust business; however, we expect to retain a
substantial portion of the acquired core trust business. Historically, the
revenues associated with our trust and wealth management group have not been
material, but as a result of the BankTrust acquisition, we expect a significant
increase in revenues generated by this group.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eurofinancial, our brokerage unit, is part of our trust and wealth
management group and commenced operations during the fourth quarter of 2002.
Eurofinancial, which offers a full array of investment products and services
through a third-party broker dealer, was created to serve our customers&#146;
investment needs. It is part of our strategy of creating financial centers in
which each customer may access a variety of integrated financial products and
services. Investment products are offered through an association with
Financial Networks, Inc., a registered broker-dealer. In relation to our
wealth management efforts, we offer financial planning and investment
management/brokerage services through third-party providers to the owners or
executives of our targeted customers. During 2003, Eurofinancial sold
approximately $10.0&nbsp;million in investments to our customers. Eurofinancial
currently has three registered brokers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Insurance Agency Subsidiary</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EuroSeguros, our general insurance agency, was organized in the fourth
quarter of 2002 as a wholly owned subsidiary of EuroBancshares. EuroSeguros
primarily offers automobile, property and casualty, and guaranteed auto
protection insurance to customers in our market area. While EuroSeguros
represents several insurance companies in Puerto Rico, it primarily offers its
insurance products through its association with Marsh-Salda&#241;a, Inc., Puerto
Rico&#146;s largest insurance brokerage firm, and a subsidiary of Marsh &#038; McLennan,
Inc. EuroSeguros is licensed and regulated by the Office of the Commissioner
of Insurance of Puerto Rico.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EuroSeguros&#146; goals for the year 2004 are to expand to offer title
insurance products and to continue to work closely with the real estate
department&#146;s mortgage customers, leasing customers, and branch professionals,
while continuing to enhance personalized service to all of these customers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>International Banking Entities</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have an IBE that operates as a division of Eurobank under the name
Eurobank International, and are in the process of organizing a new IBE that
will operate as a subsidiary of Eurobank under the name EBS Overseas. We
intend to transfer substantially all of the assets of Eurobank International to
EBS Overseas. We also have an IBE that operates as a division of Eurobank
under the name BT International. We acquired this IBE in connection with the
acquisition of BankTrust. We will continue to operate BT International as a
division of Eurobank and will not immediately transfer its assets to our new
subsidiary IBE, EBS Overseas.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IBEs are limited under the IBE Act with respect to the types of activities
they can undertake. In general terms, IBEs may accept deposits or borrow money
from other IBEs and from &#147;foreign persons.&#148; For the purposes of the IBE Act, a
&#147;foreign person&#148; is defined as anyone who is not a resident of Puerto Rico.
IBEs are also permitted to engage in any activity that is financial in nature
outside of Puerto Rico that is permissible for a bank holding company or a
foreign office or subsidiary of a United States bank under applicable United
States law. Typically, we borrow funds in the United States in the form of
repurchase obligations or brokered deposits (considered foreign under the IBE
Act) and invest those funds primarily in United States government securities.
The income earned from this activity is tax exempt. For more information
regarding the regulation of IBEs, see the section of this prospectus captioned
"<I>Supervision and Regulation &#150; International Banking Center Regulatory Act.&#148;</I>


<P align="center" style="font-size: 10pt">30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Eurobank International is authorized to invest in notes and bonds issued
by the U.S. government, the Commonwealth of Puerto Rico, other foreign
governments and their agencies, and U.S. and foreign corporations. As of
December&nbsp;31, 2003, Eurobank International&#146;s investment portfolio consisted
of the following: 58.14%, mortgage-backed securities issued or guaranteed by
government or government sponsored agencies, 26.53% U.S. Treasury obligations,
12.28% U.S. government agency obligations, 1.46% mortgage-backed securities
issued by U.S. Corporations, 0.93% in other debt securities issued by U.S.
Corporations, and 0.66% in PR Public Authorities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have structured Eurobank International&#146;s investment portfolio so that
it can perform well in different interest rate environments. The interest and
market risk of Eurobank International&#146;s investment portfolio is generally lower
than that of other IBE&#146;s in Puerto Rico. The typical IBE investment portfolio
includes debt securities with maturities of up to 10&nbsp;years and mortgage-backed
securities with expected average maturities of up to 12&nbsp;years funded primarily
with short-term brokerage deposits and loans secured by repurchase obligations
(&#147;repos&#148;). The maturities on debt obligations in Eurobank International&#146;s
investment portfolio range from 1.5 to seven years with an estimated average
maturity as of December&nbsp;31, 2003 of 39&nbsp;months. The maturities of mortgage-backed
securities in the portfolio also range from 1.5 to seven years, with an
average maturity as of December&nbsp;31, 2003 of approximately 5.31&nbsp;years. In order
to reduce the effective duration of the portfolio, we generally amortize the
premiums associated with mortgage-backed securities for a time period two years
less than the estimated average maturity at purchase date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assuming the organization of EBS Overseas and the transfer of assets from
Eurobank International, we estimate that, as of May&nbsp;31, 2004, EBS Overseas
will have total assets of approximately $400.0&nbsp;million, repurchase obligations
of approximately $250.0&nbsp;million, borrowings from BT International of
approximately $140.0&nbsp;million and stockholders equity of approximately $10.0
million. Further, we estimate that, as of May&nbsp;31, 2004, BT International will
have total assets of approximately $150.0&nbsp;million, deposits of approximately
$129.0&nbsp;million, repurchase agreements of approximately $20.0&nbsp;million and
stockholders equity of approximately $1.0&nbsp;million.


<P align="left" style="font-size: 10pt"><B>Eurobank Statutory Trust I and II</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;11, 2001, Eurobank Statutory Trust I, a special purpose
statutory trust subsidiary of EuroBancshares, was formed for the purpose of
issuing $25.0&nbsp;million in trust preferred securities, which were issued on
December&nbsp;18, 2001. On December&nbsp;10, 2002, Eurobank Statutory Trust II, a
special purpose statutory trust subsidiary of EuroBancshares was formed for the
purpose of issuing $20.0&nbsp;million in trust preferred securities, which were
issued on December&nbsp;19, 2002. For additional information, see the sections of
this prospectus captioned &#147;<I>Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations &#150; Other Sources of Funds,&#148; </I>and <I>&#147;Description
of EuroBancshares Capital Stock &#150; Junior Subordinated Debentures; Trust
Preferred Securities.&#148;</I>


<P align="left" style="font-size: 10pt"><B>Market</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consider our primary market area to be the island of Puerto Rico. We
serve this market through our main office and branches in the greater
metropolitan area of San Juan and our branches in Bayam&#243;n, Caguas, Carol&#237;na,
Cidra, Condado, Guaynabo, Hatillo, Ponce, Humacao, Luquillo, San Lorenzo,
Manati and Mayag&#252;ez, Puerto Rico. Puerto Rico is the fourth largest of the
Caribbean Islands and is located approximately 1,100 miles southeast of Miami.
It is approximately 100 miles long and 35 miles wide.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Puerto Rico came under United States sovereignty in 1898 and obtained
commonwealth status in 1952. Puerto Ricans have been citizens of the United
States since 1917. The United States and Puerto Rico share a common defense,
market and currency. The Commonwealth of Puerto Rico exercises virtually the
same control over its internal affairs as do the fifty states. Most federal
taxes, except those such as Social Security taxes which are imposed by mutual
consent, are not levied in Puerto Rico. No federal income tax is collected
from Puerto Rico residents on income earned in Puerto Rico, except for certain
federal employees who are subject to taxes on their salaries. According to the
United States Census Bureau, the population of Puerto Rico was 3.8&nbsp;million in
2000, compared to 3.5&nbsp;million in 1990. As of 2000, the population of San Juan,
the Island&#146;s capital and largest city, was approximately 434,000.

<P align="center" style="font-size: 10pt">31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The economy of Puerto Rico is closely linked to that of the United States.
As such, factors affecting the United States economy usually have a
significant impact on the performance of the Puerto Rico economy. These
include exports, direct investment, the amount of federal transfer payments,
the level of interest rates, the level of oil prices, the rate of inflation and
tourist expenditures. Consequently, the economic slowdowns in the United
States in 2001 and 2002 and the subsequent recovery in 2003, which continues in
2004, have also been reflected in the Puerto Rico economy. During the fiscal
year 2003, preliminary reports of the Puerto Rico Planning Board indicated that
the economy registered an increase of 1.9% in real gross product. Gross
product was $47.4&nbsp;billion in fiscal year 2003 compared to $45.0&nbsp;billion in
fiscal year 2002. According to the Puerto Rico Department of Labor and Human
Resources, the average unemployment rate in Puerto Rico was 12.0% in fiscal
year 2003. However, this figure does not take into account the self-employment
rate of individuals in Puerto Rico which is estimated to be approximately
15.0%, more than double the level in the United States.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The dominant sectors of the Puerto Rico economy are manufacturing and
services. The manufacturing sector has undergone fundamental changes over the
years as a result of increased emphasis on higher wages, high technology
industries, such as pharmaceuticals, biotechnology, electronics, computers,
microprocessors, professional and scientific instruments and certain high
technology machinery and equipment. The services sector, including finance,
insurance, real estate, wholesale and retail trade and tourism, also plays a
major role in the economy. It ranks second only to manufacturing in
contribution to the gross domestic product and leads all sectors in providing
employment. The other material sectors of the Puerto Rican economy include
government, transportation and agriculture.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, there were 16 commercial bank and trust companies
operating in Puerto Rico. Total assets of these institutions as of December
31, 2003 were $61.0&nbsp;billion. As of December&nbsp;31, 2003, there were 35
International Banking Entities operating in Puerto Rico licensed to conduct
offshore banking transactions, with total assets of $56.5&nbsp;billion. As of June
30, 2003, the latest date for which statistics are available, Eurobank held
2.4% of the deposits held by financial institutions in Puerto Rico. As a
result of the BankTrust acquisition, as of December&nbsp;31, 2003, we estimate that
we held approximately 3.3% of deposits held by all commercial banks in Puerto
Rico.


<P align="left" style="font-size: 10pt"><B>Properties</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal offices, including the principal offices of the Bank, are
located in our main office building at 270 Mu&#241;oz Rivera Avenue in San Juan,
Puerto Rico. In addition to the main office, we operate at 25 locations.
While all of Eurobank&#146;s 21 branch facilities provide full banking services, we
consider 16 of these to be primarily commercial loan generating facilities. In
connection with the BankTrust acquisition we added one additional branch office
located in Guaynabo, Puerto Rico. All other branches acquired in the BankTrust
acquisition are in the process of being closed and their operations
consolidated with our other branches. A substantial portion of the expenses
associated with these branch closings were effectively borne by the
stockholders of BankTrust through a reduction in the aggregate purchase price.
The following is a list of our operating locations:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Lease Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Location</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Date<SUP>(1)</SUP></B><HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Owned or Leased</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Main Office:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">270 Mu&#241;oz Rivera Avenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Owned<SUP> (2) </SUP></TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">San Juan, Puerto Rico 00918</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Departments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">EuroLease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/31/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">State Road #2, Km. 2.5<BR>
Kennedy Avenue<BR>
San Juan, Puerto Rico 00920</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Lease Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Location</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Date<SUP>(1)</SUP></B><HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Owned or Leased</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">EuroMortgage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5/31/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">State Road
#190<BR>
Lot #1, Km. 0.7<BR>
La Cer&#225;mica Industrial Park<BR>
Carol&#237;na, Puerto Rico 00983</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Credit Administration:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">1302 Jes&#250;s T. Pi&#241;ero Avenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/31/2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">San Juan, Puerto Rico 00918</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Old Corona Building</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/31/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Building #5,
Second Floor, Local #3<BR>Santurce, Puerto Rico 00907
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Branches:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Bayam&#243;n Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/30/2017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Comer&#237;o
Avenue, corner of Sierra Bayam&#243;n<BR>
Bayam&#243;n, Puerto Rico 00961</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Caguas I Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5/31/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">A-1
Mu&#241;oz Rivera Avenue<BR>
Caguas, Puerto Rico 00725</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Caguas II Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/30/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">32 Acosta Street, corner of Ruiz Belvis
<BR>Caguas, Puerto Rico 00725</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Carol&#237;na Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/30/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">State Road #190<BR>
Lot #1, Km. 0.7<BR>
La Cer&#225;mica Industrial Park<BR>
Carol&#237;na, Puerto Rico 00983</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cidra Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/30/2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Luis Mu&#241;oz Rivera Street<BR>
corner of Jos&#233; de Diego<BR>
Cidra, Puerto Rico 00739</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Condado Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Expired<SUP> (3) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1408 Magdalena
Avenue<BR>
Santurce, Puerto Rico 00907</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Hato Rey Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Owned<SUP> (2) </SUP></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">270
Mu&#241;oz Rivera Avenue<BR>
San Juan, Puerto Rico 00918</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Humacao Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5/31/2026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Plaza Mall
Lot #3, State Road No.&nbsp;PR52<BR>
Corner State Road No.&nbsp;PR3<BR>
Humacao, Puerto Rico 00791</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Lease Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Location</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Date<SUP>(1)</SUP></B><HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Owned or Leased</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Luquillo Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/29/2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">State Road
No.&nbsp;PR3, Km. 36.2<BR>
Luquillo, Puerto Rico 00773</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Manat&#237; Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/30/2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">State Road
No.&nbsp;PR2, Km. 49.5<BR>
Manat&#237;, Puerto Rico 00674</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Ponce Plaza Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/31/2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Mayor Street,
corner of Isabel Street<BR>
Ponce, Puerto Rico 00731</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Ponce Hostos Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/31/2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">26 Hostos
Avenue<BR>
Ponce, Puerto Rico 00731</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Ponce Morell Campos Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/31/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">State Road
#10, Km. 1.5<BR>
Ponce, Puerto Rico 00731</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Ponce Marvesa Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Expired<SUP> (4) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Marvesa
Building #100<BR>
La Rambla<BR>
Ponce, Puerto Rico 00731</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Puerto Nuevo Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/31/2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1302 Jes&#250;s T. Pi&#241;ero<BR>
corner de Diego Avenue<BR>
San Juan, Puerto Rico 00921</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">San Francisco Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/30/2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Villas de
San Francisco Shopping Center<BR>
85 de Diego Avenue<BR>
R&#237;o Piedras, Puerto Rico 00927</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">San Lorenzo Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/01/2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">155 South Luis
Mu&#241;oz Rivera Street<BR>
San Lorenzo, Puerto Rico 00754</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">San Patricio Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/15/2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">San Patricio
Office Center<BR>
8 Tabonuco Street<BR>
Guaynabo, Puerto Rico 00969</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em; background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Villa Palmera Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/31/2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Eduardo Conde
Avenue<BR>
corner of Tapia Street<BR>
Santurce, Puerto Rico 00915</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mayag&#252;ez Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/30/2025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">State Road
No.&nbsp;PR2, Km. 153.2<BR>
Mayag&#252;ez, Puerto Rico 00681</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Lease Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
        <TD nowrap align="left"><B>Location</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Date<SUP>(1)</SUP></B><HR size="1" noshade></TD>
        <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Owned or Leased</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Hatillo Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/30/2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Leased</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:0px; text-indent:-0px">State Road
No.&nbsp;PR2, Km. 87.0<BR>
Hatillo, Puerto Rico 00659</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>





<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Most of these leases have options for extensions. In
addition, several have early termination clauses.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The properties owned by EuroBancshares located at 270 Mu&#241;oz
Rivera Avenue are part of a 180,000 square foot commercial
office building. EuroBancshares owns a portion of the lobby
area on the ground floor where it operates a branch and also
owns the first floor of this office building where its
headquarters are located. In addition, EuroBancshares also owns
certain parking spaces and a portion of the common areas of this
office building.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The lease at this location expired on March&nbsp;21, 2004, but
Eurobank continues to pay rent to the lessor on a month-to-month
basis. Eurobank is currently in the process of negotiating with
the landlord the lease rate on our option to renew for a
five-year term. We believe this issue will be resolved in the
near future.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(4)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The lease at this location expired on January&nbsp;1, 1997, but
Eurobank continues to pay rent to the lessor on a month-to-month
basis. Eurobank believes that the lessor will not require
Eurobank to vacate the premises in the immediate future.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><B>Environmental Compliance</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to our obligations under environmental laws with respect to
property that we own, there are several federal and state statutes that govern
the rights and obligations of financial institutions with respect to
environmental issues. In addition to being directly liable under these
statutes for its own conduct, a financial institution may also be held liable
under certain circumstances for the actions of borrowers or other third parties
on property that collateralizes a loan held by the institution. This potential
liability may far exceed the original amount of the loan made by the financial
institution, which is secured by the property. Currently, we are not a party
to any legal proceedings involving potential liability under applicable
environmental laws.


<P align="left" style="font-size: 10pt"><B>Legal Proceedings</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are currently the defendant in a suit filed on November&nbsp;14, 1994 by
Carlos Gonzalez Jusino in the Superior Court of Puerto Rico, Ponce Section
(<I>Carlos Gonzalez Jusino v. Eurobank &#038; Trust Company </I>&#150; Civil #JAC 1994-0608).
The complaint alleges that money was permitted to be withdrawn from a corporate
account at the Bank without full written authorization, and seeks restoration
of $890,075.99 in funds, interest thereon, and attorney&#146;s fees. While the
trial court found in favor of the plaintiff, we have appealed the ruling and
believe that we should ultimately prevail based on legal precedent we feel
favors our position.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the foregoing, there are no material pending legal proceedings
to which we or Eurobank is a party or to which any of our properties are
subject; nor are there material proceedings known to us, in which any director,
officer or affiliate or any principal stockholder is a party or has an interest
adverse to us or Eurobank.


<P align="left" style="font-size: 10pt"><B>Employees</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had approximately 377 full-time equivalent employees as of December&nbsp;31,
2003. Our future success will depend in part on our ability to attract, retain
and motivate highly qualified management and other personnel. We provide
health, life and disability coverage for our employees and make contributions
on behalf of eligible employees under a plan intended to qualify as a
simplified employee pension plan under the Puerto Rico Internal Revenue Code.
Our employees are not represented by a collective bargaining agreement and we
have never experienced a strike or similar work stoppage. We consider our
relationship with our employees to be good.

<DIV align="left">
<A name="405"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>USE OF PROCEEDS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that the net proceeds to us from the sale of our common stock
in this offering, assuming an initial public offering price of $&#091;&nbsp;&nbsp;&nbsp;&#093; per
share, the midpoint of the range shown on the cover of this prospectus, will be
approximately $&#091;&nbsp;&nbsp;&nbsp;&#093; million. If the underwriters exercise their
over-allotment option in full, we estimate our net


<P align="center" style="font-size: 10pt">35
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">proceeds will be $&#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093; million. Net proceeds are what we expect to
receive after paying the underwriters&#146; discount and other expenses of the
offering. We will not receive any proceeds from the sale of shares of our
common stock by the selling stockholders. We intend to use our net proceeds
for general corporate purposes, which may include:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>making capital contributions and loans to our banking and non-banking subsidiaries;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increasing capital ratios to support our asset growth;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>establishing de novo branches;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increasing working capital;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>leveraging the growth of our subsidiary IBE; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>making acquisitions.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pending the optimal investment of the net proceeds, we intend to invest
such proceeds in short-term, interest-bearing securities, certificates of
deposit or guaranteed obligations of the United States.

<DIV align="left">
<A name="406"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>DIVIDEND POLICY</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not paid cash dividends historically, nor do we anticipate paying
any cash dividends in the foreseeable future. Instead, we anticipate that all
of our earnings in the foreseeable future will be used for working capital, to
support our operations and to finance the growth and development of our
business. Any future determination relating to dividend policy will be made at
the discretion of our Board of Directors and will depend on a number of
factors, including our future earnings, capital requirements, financial
condition, future prospects and other factors that our Board of Directors may
deem relevant.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a holding company, we ultimately depend on Eurobank to provide funding
for our noninterest expenses and dividends. Various banking laws applicable to
Eurobank limit the payment of dividends, management fees and other
distributions by Eurobank to us, and may therefore limit our ability to pay
dividends on our common stock. We are also restricted from paying dividends on
our common stock if we have deferred payments of the interest, or if an event
of default has occurred, on our junior subordinated debentures. In addition,
we generally are unable to declare and pay dividends on our common stock if
there are any accrued and unpaid dividends on our Series&nbsp;A Preferred Stock for
the preceding twelve months. For additional information, see the sections of
this prospectus captioned &#147;<I>Supervision and Regulation &#150; EuroBancshares &#150;
Regulatory Restrictions on Dividends; Source of Strength&#148; and &#147;Supervision and
Regulation &#150; Eurobank &#150; Dividends.</I>&#148;

<DIV align="left">
<A name="407"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>DILUTION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net tangible book value per share is determined at any date by subtracting
our total liabilities and preferred stock from the total book value of our
tangible assets and dividing the difference by the number of shares of common
stock deemed to be outstanding as of that date. Our net tangible book value,
as of December&nbsp;31, 2003, was approximately $&#091;&nbsp;&nbsp;&nbsp;&#093; million, or $&#091;&nbsp;&nbsp;&nbsp;&#093; per
share of common stock. After giving effect to adjustments relating to: (1)&nbsp;the
issuance of 357,747&nbsp;shares of common stock in connection with the acquisition
of BankTrust, (2)&nbsp;the receipt of $6.0&nbsp;million upon the sale of 369,231 shares
of common stock in the May&nbsp;12, 2004 private placement, (3)&nbsp;the receipt of
$&#091;&nbsp;&nbsp;&nbsp;&#093; upon the exercise of stock options to purchase &#091;&nbsp;&nbsp;&nbsp;&#093; shares of
our common stock, and (4)&nbsp;the sale of the &#091;&nbsp;&nbsp;&nbsp;&#093; shares of our common stock in
this offering at an assumed initial public offering price of $&#091;&nbsp;&nbsp;&nbsp;&#093; per share,
the midpoint of the range shown on the cover of this prospectus, and after
deducting estimated underwriting discounts and commissions paid by us and our
estimated offering expenses, our pro forma net tangible book value as of
December&nbsp;31, 2003 would have been approximately $&#091;&nbsp;&nbsp;&nbsp;&#093; million, or $&#091;&nbsp;&nbsp;&nbsp;&#093; per
share. This represents an immediate increase in pro forma net tangible book
value of $&#091;&nbsp;&nbsp;&nbsp;&#093; per share to our stockholders as of December&nbsp;31, 2003, and an
immediate dilution in pro forma net tangible book value of $&#091;&nbsp;&nbsp;&nbsp;&#093; per share
to new investors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table illustrates the per share dilution to the new
investors:


<P align="center" style="font-size: 10pt">36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="84%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Per Share</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Initial public offering price per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net tangible book value per share as of December
31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2"><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Increase per share attributable to the issuance
of 369,231 shares of common stock in the private
placement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2"><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Increase per share attributable to the issuance
of &#091;_________&#093; shares of common stock in
connection with the BankTrust acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2"><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Increase per share attributable to the issuance
of &#091;_________&#093; shares of common stock upon the
exercise of outstanding options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2"><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Pro forma net tangible book value per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2"><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Increase per share attributable to this offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2"><HR noshade size="1"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Pro forma as adjusted net tangible book value per
share after this offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Dilution per share to new investors in this offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes, on a pro forma basis as of December&nbsp;31,
2003, after giving effect to (1)&nbsp;the sale of common stock in the private
placement, (2)&nbsp;the issuance of common stock in connection with the BankTrust
acquisition, and (3)&nbsp;the exercise of stock options, the differences for (1)
stockholders owning shares as of December&nbsp;31, 2003, (2)&nbsp;stockholders purchasing
shares of common stock in the private placement, (3)&nbsp;stockholders receiving
shares of common stock in the BankTrust acquisition, (4)&nbsp;stockholders receiving
shares of common stock upon the exercise of stock options, and (5)&nbsp;investors in
this offering, with respect to the total number of shares of common stock
purchased from us, the total consideration paid to us, and the average price
per share paid before deducting fees and expenses. With respect to the
options, the amounts shown assume that each holder paid cash for such
securities.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares Purchased</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Total Consideration</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price Per</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Share</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders existing as of December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders from private placement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders from BankTrust acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">New investors for this offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
   <TD nowrap align="center" colspan="3"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><HR size="1" noshade></TD>
        </TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
   <TD nowrap align="center" colspan="3"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><HR size="4" noshade></TD>
        </TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The tables and calculations above, dated as of December&nbsp;31, 2003, do not
take into account (1) &#091;&nbsp;&nbsp;&nbsp;&#093; shares of our common stock issuable upon
exercise of options granted under our existing stock incentive plan since
December&nbsp;31, 2003 with an exercise price equal to the initial public offering
price of our common stock; and (2) &#091;&nbsp;&nbsp;&nbsp;&#093; shares of our common stock
currently available for future grant or issuance under our stock incentive
plan.

<DIV align="left">
<A name="408"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>CAPITALIZATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is our capitalization as of December&nbsp;31, 2003:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on an actual basis;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on a pro forma basis to give effect to the following events,
as if each event had occurred on December&nbsp;31, 2003:</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the issuance and sale of 369,231 shares of common stock
in the May&nbsp;12, 2004 private placement and the application of the
net proceeds therefrom;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the acquisition of BankTrust on May&nbsp;3, 2004 and the
issuance of 357,747 shares of common stock, 429,507 shares of
Series&nbsp;A Preferred Stock, and the payment of $6.7 million in
cash in connection therewith; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on a pro forma as adjusted basis to give effect to the
issuance and sale of the &#091;&nbsp;&nbsp;&nbsp;&#093; shares of common stock offered
by us in this offering at an assumed initial public offering price
of $&#091;&nbsp;&nbsp;&nbsp;&#093; per share, the midpoint of the range shown on the cover of
this prospectus and the application of the net proceeds therefrom as
if it had occurred as of December&nbsp;31, 2003.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The outstanding share information as of December&nbsp;31, 2003 excludes (1)
&#091;&nbsp;&nbsp;&nbsp;&#093; shares of common stock reserved for issuance upon the exercise of
outstanding options at a weighted average exercise price of $&#091;&nbsp;&nbsp;&nbsp;&#093; per share,
and (2) &#091;&nbsp;&nbsp;&nbsp;&#093; shares of common stock reserved for issuance pursuant to
future option grants under our 2002 Stock Option Plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should read the following table in conjunction with &#147;<I>Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations</I>,&#148;
&#147;<I>Description of EuroBancshares Capital Stock</I>&#148; and our consolidated financial
statements and related notes appearing elsewhere in this prospectus.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>As of December 31, 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Actual</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Pro Forma</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Pro Forma As<BR>Adjusted</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Long-term Indebtedness:</B><SUP> (1) </SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Junior subordinated debentures due December&nbsp;18, 2031</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Junior subordinated debentures due December&nbsp;19, 2032</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Stockholders&#146; Equity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Common stock, par value $0.01 per share, 150,000,000
shares authorized, 6,973,698 shares issued and
outstanding, actual; &#091;_______&#093; shares issued and
outstanding on a pro forma basis; &#091;_______&#093; shares
issued and outstanding on a pro forma basis and as
adjusted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noncumulative Preferred Stock, Series&nbsp;A, par value
$0.01 per share, 20,000,000 shares authorized, no
shares issued and outstanding, actual; &#091;_______&#093;
shares issued and outstanding on a pro forma basis
and as adjusted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Paid in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Retained earnings reserve fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Undivided profits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated other comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">65,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Capital Ratios:</B><SUP> (2) </SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Leverage ratio<SUP> (3) </SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.76</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tier 1 risk-based capital ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total risk-based capital ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tangible total stockholders&#146; equity to tangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right"><SUP>(1)</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Excludes FHLB advances, which were approximately $10.7
million as of December&nbsp;31, 2003.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><SUP>(2)</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">As of December&nbsp;31, 2003, $20.9&nbsp;million of our junior
subordinated debentures associated with the trust preferred
securities issuance counted as Tier 1 capital and $24.1&nbsp;million
counted as Tier 2 capital under current Federal Reserve Board
guidelines.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right"><SUP>(3)</SUP></TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The leverage ratio is Tier 1 capital divided by average
quarterly assets, after deducting goodwill, intangible assets and net
deferred assets in excess of regulatory maximum limits.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="409"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SELECTED CONSOLIDATED FINANCIAL DATA</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selected financial data shown below for the five-year period ended
December&nbsp;31, 2003 has been derived from our audited financial statements.
EuroBancshares was incorporated on November&nbsp;21, 2001. As a result, the
financial information below for the years 2003 and 2002 includes consolidated
information for both EuroBancshares and Eurobank. Financial data shown for the
years 2001, 2000, and 1999 includes the financial information for Eurobank
only.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should read this information in conjunction with &#147;<I>Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations</I>&#148; and
the financial statements and the related notes included elsewhere in this
prospectus. Results from past periods are not necessarily indicative of
results that may be expected for any future period. Average balances have been
computed using daily averages.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>As of or for the year ended December 31,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(dollars in thousands, except per share data)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Income Statement Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">71,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">54,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">44,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net interest income after provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noninterest income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Service charges and other fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Gain on sale of loans and leases, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Gain on sale of securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Loss on sale of other real estate owned and
repossessed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(663</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(310</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(86</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total noninterest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noninterest expense:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Professional fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Other noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Extraordinary gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Common Share Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per common share &#150; basic:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per common share &#150; diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Book value per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Common shares outstanding at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,973,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,939,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,778,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,027,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,027,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average diluted shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,117,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,862,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,213,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,063,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,021,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">39
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>As of or for the year ended December 31,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Balance Sheet Data (at end of period):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,320,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,035,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">607,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">452,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">305,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment securities held to maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gross loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">899,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">767,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">458,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">312,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">984,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">843,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">485,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Performance Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Return on average common stockholders&#146; equity<SUP> (1) </SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16.50</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">13.56</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.34</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.39</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.48</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Return on average assets<SUP> (2) </SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net interest margin<SUP> (3) </SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Efficiency ratio<SUP> (4) </SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loans to deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Asset Quality Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nonperforming loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other real estate owned and repossessed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total nonperforming assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nonperforming assets to total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.51</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.87</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.18</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.05</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.26</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nonperforming loans to total loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for loan and lease losses to nonperforming loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for loan and lease losses to total loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net charge-offs to average loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Capital Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Leverage ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.76</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.93</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.27</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.15</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.43</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tier 1 risk-based capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total risk-based capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tangible common equity to tangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Return on common average equity is determined by dividing net income
by average common equity.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Return on average assets is determined by dividing net income by
average assets.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Net interest margin is determined by dividing net interest income
(fully taxable equivalent) by average interest-earning assets.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(4)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">The efficiency ratio is determined by dividing total noninterest
expense by an amount equal to net interest income (fully taxable
equivalent) plus noninterest income.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="410"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The unaudited pro forma condensed consolidated balance sheet as of
December&nbsp;31, 2003 and the unaudited pro forma condensed consolidated statements
of income for the year ended December&nbsp;31, 2003 combine the audited historical
financial statements of EuroBancshares with BankTrust after giving effect to
the following transactions:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the sale of 369,231 shares of common stock in the private
placement on May&nbsp;12, 2004 and the application of $6.0&nbsp;million of net
proceeds from such sale; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our acquisition of BankTrust on May&nbsp;3, 2004.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro forma adjustments to the balance sheet are computed as if the
transactions occurred at December&nbsp;31, 2003, while the pro forma adjustments to
the statements of income are computed as if the transactions occurred on
January&nbsp;1, 2003, the earliest period presented. These statements were prepared
giving effect to the purchase accounting adjustments and other assumptions
described in the accompanying notes.


<P align="center" style="font-size: 10pt">40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The pro forma condensed combined financial statements contain adjustments
relating to (1)&nbsp;the transfer of certain net assets not subject to the merger to
a special purpose vehicle for the benefit of the BankTrust stockholders prior
to the effective time of the merger; (2)&nbsp;estimated fair values of assets and
liabilities acquired; and (3)&nbsp;estimated transaction and integration costs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The combined entity expects to achieve certain consolidation benefits in
the form of operating expense reductions and revenue enhancements. However,
the selected unaudited pro forma combined statement of income does not reflect
any of these anticipated cost savings and benefits expected to result from the
merger. Management cannot assure you either that those benefits and cost
reductions will actually occur or what will be the ultimate level of operating
expense reductions or revenue enhancements. The selected unaudited pro forma
combined statement of income also shows other noninterest income and an unusual
recovery that will not be recurring. Income taxes for BankTrust for the year
ended December&nbsp;31, 2003 includes charges amounting to $7.5&nbsp;million which result
from establishing a valuation allowance for net deferred tax assets at that
date. Such charges will also not be recurring. Therefore, the pro forma
combined statement of income shown are not indicative of the results of future
operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The unaudited pro forma information is presented for informational
purposes only. This information should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
and accompanying notes of EuroBancshares, included with this prospectus. The
unaudited pro forma financial information should not be construed as indicative
of the actual operations that would have occurred had the merger occurred at
the date or at the beginning of the periods indicated.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Given the information regarding the acquisition, the actual consolidated
financial position and results of operations will differ, perhaps even
significantly, from the pro forma amounts reflected below because, among other
things, assumptions used in preparing the pro forma financial information may
be revised in the future due to changes in values of assets, including the
finalization of the calculation of the market valuation of the assets and
liabilities acquired, resulting goodwill, the core deposit intangible and
changes in operating results between the dates of the unaudited pro forma
financial information and the date on which the acquisition was completed, as
well as related tax effects.


<P align="center" style="font-size: 10pt">41
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>Unaudited Pro Forma Condensed Balance Sheet</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following unaudited pro forma condensed balance sheet as of December
31, 2003 has been prepared to reflect the acquisition by EuroBancshares of all
of the capital stock of BankTrust after giving effect to the adjustments
described in the notes to the pro forma condensed financial statements. The
acquisition has been accounted for as a purchase transaction. These statements
should be read in conjunction with the other financial statements and notes
thereto included elsewhere in this prospectus.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>For the Year Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>EuroBancshares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>BankTrust</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Adjustments</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Pro Forma Combined</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">62,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">38,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">(3,490) </TD>
    <TD><SUP> (a)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">97,613</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">328,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">458,437</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">899,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(7,179) </TD>
    <TD><SUP> (b) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,287,426</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Less: allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,394</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,992</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,127</TD>
    <TD> <SUP> (c) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,259</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Real estate owned and repossessed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,910</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Furniture, fixtures and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(2,690) </TD>
    <TD><SUP> (d) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,544</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,812 </TD>
    <TD><SUP> (e) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,067</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,320,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">567,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(8,420</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,879,738</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">984,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">429,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,000 </TD>
    <TD><SUP> (f) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,418,120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,924 </TD>
    <TD><SUP> (f) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308,885</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Subordinated notes and debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,393</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,878 </TD>
    <TD><SUP> (g) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,715</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,255,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">523,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,792,113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Stockholders&#146; Equity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Term preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">(14,378) </TD>
    <TD><SUP> (h)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Perpetual preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,229 </TD>
    <TD><SUP> (i) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Common equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(30,151)</TD>
    <TD> <SUP> (j) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,826</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,215</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,215 </TD>
    <TD><SUP> (k) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,869</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,137) </TD>
    <TD><SUP> (k) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(807</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">65,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">43,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(21,222</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">87,625</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,320,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">567,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(8,420</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,879,738</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">42
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>Unaudited Pro Forma Condensed Statements of Income</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following unaudited pro forma condensed statements of income have been
prepared to reflect the acquisition by EuroBancshares of all of the capital
stock of BankTrust after giving effect to the adjustments described in the
notes to the pro forma condensed financial statements. The acquisition has
been accounted for as a purchase transaction. These statements should be read
in conjunction with the other financial statements and notes thereto included
elsewhere in this prospectus.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>For the Year Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>EuroBancshares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>BankTrust</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Adjustments</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Pro Forma Combined</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(in thousands, except per share data)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Interest Income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">64,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">(554) </TD>
    <TD><SUP> (l) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">97,964</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,303</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest bearing deposits and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">799</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">71,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">39,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(554</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">110,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Interest Expense:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">27,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">17,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">(500)</TD>
    <TD> <SUP> (m) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">44,425</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Securities sold under agreements to repurchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,860</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Notes payable and other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(703)</TD>
    <TD> <SUP> (m) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,886</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">31,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">22,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,203</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">53,171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">39,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">16,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">56,895</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,906</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net interest income after provision for
loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">33,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">11,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">44,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Noninterest Income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Service charges and fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">5,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">4,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">10,009</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net gain on sale of securities available-for-sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,198</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net loss on sale of other real estate owned,
repossessed assets, and on disposition of other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(663</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(671</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,334</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gain on sale of loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,152</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total noninterest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">9,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">5,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">15,025</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Noninterest Expense:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">15,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">6,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">21,936</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Professional services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,218</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,032</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">28,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">17,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">46,186</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income (loss)&nbsp;before unusual recovery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unusual recovery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="right">&#150;</TD>

    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,304</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net income before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">13,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">2,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">16,132</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,665 </TD>
    <TD><SUP> (o) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">253 </TD>
    <TD><SUP> (n) </SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,497</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,782</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Common Share Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Earnings per common share &#150; basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Earnings per common share &#150; diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Common shares outstanding at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,973,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,700,676</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Average diluted shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,117,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,667,614</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Not available.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">43
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<P align="center" style="font-size: 10pt"><B>Notes to Unaudited Pro Forma Combined Consolidated Financial Information</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Note 1- Basis of Presentation of BankTrust Acquisition</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;3, 2004 we acquired all of the outstanding capital stock of
BankTrust. The unaudited pro forma combined consolidated balance sheet as of
December&nbsp;31, 2003 and the unaudited pro forma condensed consolidated statements
of income for the year ended December&nbsp;31, 2003 combine the historical financial
statements of EuroBancshares with BankTrust after giving effect to the
acquisition using the purchase method of accounting in accordance with
generally accepted accounting principles. Pro forma adjustments to the balance
sheet are computed as if the transaction occurred at December&nbsp;31, 2003, while
the pro forma adjustments to the statements of income are computed as if the
transaction occurred on January&nbsp;1, 2003, the earliest period presented.


<P align="left" style="font-size: 10pt"><B><I>Note 2- BankTrust Purchase Price</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These unaudited pro forma combined consolidated financial statements are
based on the estimated aggregate purchase price for all of the issued and
outstanding capital stock of BankTrust of $23.6&nbsp;million at December&nbsp;31, 2003.
The actual price upon closing amounted to $23.5 which is comprised of cash in
the amount of $6.7&nbsp;million, the issuance of 357,747 shares of our common stock
and the issuance of 429,507 shares of our Series&nbsp;A Preferred Stock. The
allocation of the purchase price between the classes of BankTrust stock is as
follows:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the holders of BankTrust common stock received a total of
$6.5&nbsp;million, of which 11.26%, or $726,478, was paid in cash and
$5.7&nbsp;million was paid through the issuance of 352,330 shares of our
common stock;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the holders of BankTrust Series&nbsp;A preferred stock received a
total of $1.8&nbsp;million, of which 50%, or $899,923 was paid in
cash, $837,675 was paid through the issuance of 33,507 shares of our
of our Series&nbsp;A Preferred Stock; and $88,026 was paid through the
issuance of 5,417 shares of our common stock; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the holders of BankTrust Series&nbsp;B preferred stock received a
total of $15.0&nbsp;million, of which 34%, or $5.1&nbsp;million was paid in
cash and $9.9&nbsp;million was paid through the issuance of 396,000
shares of our Series&nbsp;A Preferred Stock.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Note 3- Allocation of BankTrust Purchase Price</I></B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="78%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Purchase Price</B></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD nowrap align="center" colspan="3"><HR noshade size="1"></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B>(in thousands)</B></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B></B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,156</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loans and lease receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,034</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less: Allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,865</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate owned and repossessed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,535</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,648</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(433,571</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90,662</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,821</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total estimated purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purchase price adjustments are subject to further refinement,
including the determination of the final goodwill, the core deposit intangible
and its life for amortization purposes. For pro forma presentation purposes
only, we have estimated a core deposit intangible of $1.4&nbsp;million and an other
intangible related to the value of the trust business acquired of $500,000.
Also, in the pro forma combined balance sheet the estimated fair value of the
assets acquired less liabilities assumed exceeded the acquisition price by $2.7
million, including additional costs associated with the acquisition. This
excess resulted in a negative goodwill, which was used to eliminate the value
of the core deposit intangible by $1.4&nbsp;million, the value of trust business
intangible by $500,000 and certain assets acquired by $642,000.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with Statement of Financial Accounting Standards No.&nbsp;141,
<I>Business Combinations </I>and No.&nbsp;142 <I>Goodwill and Other Intangible Assets</I>,
goodwill and intangible assets with indefinite lives are not amortized for
acquisitions initiated after June&nbsp;30, 2001; therefore, no goodwill amortization
is presented in the pro forma financial statements. Also, if there is a core
deposit intangible it should be amortized over the estimated life of the
deposit relationships acquired and recorded as a charge to operations. No
charge to operations was presented as amortization for the core deposit
intangible in the pro forma combined income statement because its value was
reduced by application of a portion of the negative goodwill mentioned in the
previous paragraph.


<P align="left" style="font-size: 10pt"><B><I>Note 4- Key to Pro Forma Adjustments for BankTrust Acquisition</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Summarized below are the pro forma adjustments (in thousands) necessary to
reflect the acquisition of BankTrust based on the purchase method of
accounting:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adjustment to cash to reflect:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="89%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash portion of purchase price paid for BankTrust capital stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,826</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Proceeds received from sale of EuroBancshares common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Working capital transferred to special purpose vehicle prior to the closing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Costs of lease terminations to be paid by BankTrust per Merger Agreement
prior to the closing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,464</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,490</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adjustment for loans and leases transferred to special purpose
vehicle prior to closing by BankTrust in the amount of $11.1&nbsp;million
and a fair value adjustment for loans and leases in the amount of $3.9
million for amounts in excess of reserves.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reduction of allowance for loan and lease losses for loans
transferred to special purpose vehicle.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adjustment for transfer of furniture, fixtures and equipment to the
special purpose vehicle by BankTrust prior to the closing and
mark-to-market adjustment for furniture, fixtures and equipment
acquired.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adjustment to establish deferred tax assets, net of certain other
assets transferred to the special purpose vehicle prior to the closing.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fair value adjustment on deposits and borrowings.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adjustment to reflect pre-closing merger related cost incurred by
BankTrust in the amount of $3.9&nbsp;million associated with certain
severance payments, medical insurance payments, employment contract
cancellations, retention bonuses, insurance policies retained,
provision for payments on Series&nbsp;B preferred stock, service contracts
terminated and other assets.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(h)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Elimination of BankTrust Series&nbsp;B preferred stock.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reflects elimination of BankTrust Series&nbsp;A preferred stock and
issuance of 429,507 shares of EuroBancshares Series&nbsp;A Preferred Stock
in connection with the BankTrust acquisition.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(j)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reflects the elimination of the BankTrust common stock and the
issuance of 357,747 shares of EuroBancshares common stock in connection
with the BankTrust acquisition and the May&nbsp;12, 2004 private placement.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(k)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Elimination of BankTrust retained earnings and accumulated other
comprehensive income account.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(l)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adjustments made to reflect the amortization of the estimated fair
value adjustments on the loan portfolio.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">45
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(m)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adjustments made to reflect the amortization of estimated fair
value adjustments to deposits, borrowings and core deposit intangible.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(n)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Estimated effect of adjustment of 39% statutory rate.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">(o)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Income taxes for BankTrust for the year ended December&nbsp;31, 2003
includes charges amounting to $7.5&nbsp;million which result from
establishing a valuation allowance for net deferred tax assets at that
date.</TD>
</TR>

</TABLE>

<DIV align="left">
<A name="411"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS<BR>
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion and analysis presents our consolidated financial
condition and results of operations for the years ended December&nbsp;31, 2003, 2002
and 2001. This discussion should be read together with the &#147;<I>Selected
Historical Financial and Operating Data</I>,&#148; our financial statements and the
notes thereto, and other financial data included in this prospectus. In
addition to the historical information provided below, we have made certain
estimates and forward-looking statements that involve risks and uncertainties.
Our actual results could differ significantly from those anticipated in these
estimates and in the forward-looking statements as a result of certain factors,
including those discussed in the section of this prospectus captioned &#147;<I>Risk
Factors</I>,&#148; and elsewhere in this prospectus.


<P align="left" style="font-size: 10pt"><B>Overview</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a diversified financial holding company headquartered in San Juan,
Puerto Rico, offering a broad array of financial services through our wholly
owned banking subsidiary, Eurobank, and our wholly owned insurance agency
subsidiary, EuroSeguros. As of December&nbsp;31, 2003, we had, on a consolidated
basis, total assets of $1.3&nbsp;billion, net loans and leases of $890.0&nbsp;million,
total deposits of $984.5&nbsp;million, and stockholders&#146; equity of $65.1&nbsp;million.
We currently operate through a network of 21 branch offices located throughout
Puerto Rico. On May&nbsp;3, 2004, we acquired all of the capital stock of
BankTrust, a commercial bank headquartered in San Juan, Puerto Rico with $567.2
million in assets as of December&nbsp;31, 2003. On a pro forma basis, as of
December&nbsp;31, 2003, giving effect to the acquisition and our recent issuance of
shares of our common stock in a private placement offering related to that
acquisition, we had total assets of $1.8&nbsp;billion, net loans and leases of $1.2
billion, total deposits of $1.4&nbsp;billion and stockholders&#146; equity of $87.6
million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated on November&nbsp;21, 2001 and became the parent bank
holding company for Eurobank on July&nbsp;1, 2002. Thus, financial statements and
other data for the years 2001, 2000, and 1999 include financial information for
Eurobank only. Our consolidated financial statements for each of the years in
the two-year period ended December&nbsp;31, 2003 include the results of operations
for each of our wholly owned subsidiaries: Eurobank, EuroSeguros, Eurobank
Statutory Trust I, and Eurobank Statutory Trust II. Eurobank Statutory Trust I
and Eurobank Statutory Trust II are special purpose vehicles that were used to
issue the trust preferred securities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over the past three years, we have experienced significant balance sheet
growth. Our management team has implemented a strategy of building our core
banking franchise by focusing on commercial loans, business transaction
accounts, our lease financing business and acquisitions. We believe that this
strategy will increase recurring revenue streams, enhance profitability,
broaden our product and service offerings and continue to build stockholder
value.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2001 and 2002, we raised an aggregate of $46.4&nbsp;million through the
issuance of junior subordinated debentures in connection with the trust
preferred securities issuances. We believe that the supplemental capital
raised in connection with the issuance of these securities will allow us to
achieve and maintain our status as a well-capitalized institution and to
sustain our continued loan growth.


<P align="left" style="font-size: 10pt"><B>2003 Key Performance Indicators</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe the following were key indicators of our performance and
results of operations in 2003:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our total assets grew to $1.3&nbsp;billion at the end of 2003,
representing an increase of 27.6%, from $1.0&nbsp;billion at the end of
2002;
</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt">46
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our total loans grew to $889.6&nbsp;million at the end of 2003,
representing an increase of 16.7%, from $762.6&nbsp;million at the end of
2002;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our total deposits grew to $984.5&nbsp;million at the end of 2003,
representing an increase of 16.8%, from $843.0&nbsp;million at the end of
2002;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our total revenue grew to $80.6&nbsp;million for the year ended of
2003, representing an increase of 36.6%, from $59.0&nbsp;million for the
year ended of 2002; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our net income grew to $9.9&nbsp;million for the year ended of
2003, representing an increase of 43.5%, from $6.9&nbsp;million for the
year ended of 2002.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These items, as well as other factors, contributed to the increase in net
income for 2003 to $9.9&nbsp;million, or $1.39 per common share, assuming dilution,
and are discussed in further detail throughout this &#147;<I>Management&#146;s Discussion
and Analysis of Financial Condition and Results of Operations&#148; </I>section of this
prospectus.


<P align="left" style="font-size: 10pt"><B>Critical Accounting Policies</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This discussion and analysis of our financial condition and results of
operations is based upon our financial statements, which have been prepared in
accordance with United States generally accepted accounting principles. The
preparation of these consolidated financial statements requires management to
make estimates and judgments that effect the reported amounts of assets and
liabilities, revenues and expenses, and related disclosures of contingent
assets and liabilities at the date of our financial statements. Actual results
may differ from these estimates under different assumptions or conditions. The
following is a description of our significant accounting policies used in the
preparation of the accompanying consolidated financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Loans and Allowance for Loan and Lease Losses</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans that management has the intent and ability to hold for the
foreseeable future, or until maturity or payoff, are reported at their
outstanding unpaid principal balances adjusted by any charge-offs, unearned
finance charges, allowance for loan and lease losses, and net deferred
nonrefundable fees or costs on origination. The allowance for loan and lease
losses is an estimate to provide for probable collection losses in our loan and
lease portfolio. Losses are charged and recoveries are credited to the
allowance account at the time a loss is incurred or a recovery takes place.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We follow a consistent procedural discipline and account for loan and
lease loss contingencies in accordance with Statement of Financial Accounting
Standards (SFAS)&nbsp;No.&nbsp;5, Accounting for Contingencies, and SFAS No.&nbsp;114,
Accounting by Creditors for Impairment of a Loan, as amended by SFAS No.&nbsp;118,
Accounting by Creditors for Impairment of a Loan &#150; Income Recognition and
Disclosures. For a description of how each portion of the allowance for loan
and lease losses is determined, see the section of this discussion and analysis
captioned <I>&#147;Allowance for Loan and Lease Losses.&#148;</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our allowance for loan and lease losses is adequate;
however, regulatory agencies, including the Commissioner of Financial
Institutions of Puerto Rico and the FDIC, as an integral part of their
examination process, periodically review our allowance for loan and lease
losses and may from time to time require us to reclassify our loans and leases
or make additional provisions to our allowance for loan and lease losses.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We classify loans as nonperforming when they become 90&nbsp;days past due.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Servicing Assets</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have no contracts to service loans for others, except for servicing
rights retained on lease sales. The total cost of loans or leases to be sold
with servicing assets retained is allocated to the servicing assets and the
loans or leases (without the servicing assets), based on their relative fair
values. Servicing assets are amortized in proportion to, and over the period
of, estimated net servicing income. In addition, we assess capitalized
servicing assets for impairment based on the fair value of those assets.



<P align="center" style="font-size: 10pt">47
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To estimate the fair value of servicing assets we consider prices for
similar assets and the present value of expected future cash flows associated
with the servicing assets calculated using assumptions that market participants
would use in estimating future servicing income and expense, including discount
rates, anticipated prepayment and credit loss rates. For purposes of
evaluating and measuring impairment of capitalized servicing assets, we
evaluate separately servicing retained for each loan portfolio sold. The
amount of impairment recognized, if any, is the amount by which the capitalized
servicing assets exceed its estimated fair value. Impairment is recognized
through a valuation allowance with changes included in net income for the
period in which the change occurs. Servicing assets are included as part of
other assets in the balance sheets.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Other Real Estate Owned and Repossessed Assets</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other real estate owned, or OREO, and repossessed assets, normally
obtained through foreclosure or other workout situations, are initially
recorded at fair value at the date of foreclosure, establishing a new cost
basis. Any resulting loss is charged to the allowance for loan and lease
losses. An appraisal of other real estate properties and repossessed assets is
made periodically after its acquisition, and comparison between the appraised
value and the carrying value is performed. Additional declines in value after
acquisition, if any, are charged to current operations.


<P align="left" style="font-size: 10pt"><B>Results of operations as of and for the years ended December&nbsp;31, 2003, 2002 and 2001</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Net Interest Income and Net Interest Margin</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income is the difference between interest income, principally
from loan, lease and investment securities portfolios, and interest expense,
principally on customer deposits and borrowings. Net interest income is our
principal source of earnings. Changes in net interest income result from
changes in volume, spread and margin. Volume refers to the average dollar
level of interest-earning assets and interest-bearing liabilities. Spread
refers to the difference between the average yield on interest-earning assets
and the average cost of interest-bearing liabilities. Margin refers to net
interest income divided by average interest-earning assets, and is influenced
by the level and relative mix of interest-earning assets and interest-bearing
liabilities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income was $39.6&nbsp;million during the year ended December&nbsp;31,
2003, as compared to $29.8&nbsp;million during the year ended December&nbsp;31, 2002 and
$23.2&nbsp;million during the year ended December&nbsp;31, 2001, representing an increase
of $9.8&nbsp;million, or 32.7%, in 2003 and an increase of $6.6&nbsp;million, or 28.6%,
in 2002. These increases were primarily the result of higher volumes of
interest-earning assets. However, the level of increase was partially offset
by a decline in our net interest margin. Our net interest margin decreased to
3.75% for the year ended December&nbsp;31, 2003 as compared to 4.29% during 2002,
and 4.97% during 2001. In the past two years, the Federal Reserve Board&#146;s
interest rate cuts deteriorated our net interest margin due to our asset
sensitive position. Our net interest spread also decreased to 3.41% in 2003,
from 3.73% in 2002, and from 4.12% in 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our average interest-earning assets were $1.1&nbsp;billion in 2003, as compared
with $719.7&nbsp;million in 2002 and $498.0&nbsp;million in 2001, representing increases
of 51.3% in 2003 and 44.5% in 2002. Average net loans were $833.6&nbsp;million in
2003, compared to $572.8&nbsp;million in 2002 and $380.2&nbsp;million in 2001,
representing increases of 45.5% and 50.6% in 2003 and 2002, respectively.
Primarily due to the eleven interest rate cuts by the Federal Reserve Board
during 2001, average yields on interest-earning assets decreased to 7.94% in
2002 from 9.44% in 2001. The Federal Reserve Board&#146;s interest rate cuts in
June&nbsp;2003 and November&nbsp;2002 further lowered the average yields on our
interest-earning assets to 6.80% in 2003. Prime interest rate reductions in
2002 and 2001 offset most of the improvements in portfolio composition that
would have otherwise resulted. However, due to the growth of interest-earning
assets in 2003 (attributable in part to our acquisition of Banco Financiero de
Puerto Rico on December&nbsp;15, 2002), our total interest income significantly
increased by 30.1% to $71.5&nbsp;million in 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Average interest-bearing liabilities also increased by 57.2% to $979.6
million in 2003, compared to $623.2&nbsp;million in 2002, after increasing by 49.0%
from $418.4&nbsp;million in 2001. Total interest expense increased by 24.7% to
$31.9&nbsp;million in 2003 from $25.1&nbsp;million in 2002. The increase in our interest
expense is due mainly to the significant growth of our deposit portfolio,
which, in turn, is attributable in part to our acquisition of Banco Financiero
de Puerto Rico on December&nbsp;15, 2002. Our interest expense also increased in
2002 by 17.5%, compared to $21.4&nbsp;million in 2001, again due to our deposit
portfolio growth. The average interest rate we paid for interest-bearing
deposits decreased to 3.05% and 3.65% in 2003 and 2002, respectively, from
4.47% in 2001. This decline


<P align="center" style="font-size: 10pt">48
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">in our average interest rate was influenced by the fact that the prime
interest rate is the lowest it has been in 45&nbsp;years.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, our average
balances of assets, liabilities and stockholders&#146; equity, in addition to the
major components of net interest income and our net interest margin:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="37%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="35"><B>Year Ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate/</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate/</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate/</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Balance</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Interest</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Yield<SUP>(1)</SUP></B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Balance</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Interest</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Yield<SUP>(1)</SUP></B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Balance</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Interest</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Yield<SUP>(1)</SUP></B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">ASSETS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest earning assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net loans and leases<SUP>(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">833,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">64,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.99</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">572,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">48,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.83</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">380,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.61</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Securities of U.S. government
agencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.61</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Puerto Rico government
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Securities purchased under
agreements to resell and
federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest-earning deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,957</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total interest-earning assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,088,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">497,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.44</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total noninterest-earning assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">TOTAL ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,140,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">755,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">525,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LIABILITIES AND STOCKHOLDERS&#146;
EQUITY:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest-bearing liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Money market deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">47,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.12</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.13</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.06</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">NOW deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Savings deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Time certificates of deposit in
denominations of $100,000 or
more</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">392,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">288,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.66</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total interest-bearing liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">979,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">623,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.47</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noninterest-bearing liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Noninterest-bearing deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total noninterest-bearing
liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">TOTAL LIABILITIES AND
STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,140,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">755,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">525,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net interest income (tax
equivalent)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net interest spread(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.41</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.73</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.12</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net interest margin(4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.75</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.29</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.97</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Yields on tax-exempt securities, loans and leases are calculated on a
fully taxable equivalent basis.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Loan fees (costs)&nbsp;have been included in the calculation of interest
income. Loan fees were approximately $1.7&nbsp;million, $1.2&nbsp;million, and $1.1
million for the years ended December&nbsp;31, 2003, 2002, and 2001,
respectively. Loans are net of the allowance for loan and lease losses,
deferred fees, unearned income, and related direct costs.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Represents the average rate earned on interest-earning assets less the
average rate paid on interest-bearing liabilities.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(4)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Represents net interest income on a fully taxable equivalent basis as a
percentage of average interest-earning assets.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">49
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, the dollar
amount of changes in interest earned and paid for interest-earning assets and
interest-bearing liabilities and the amount of change attributable to changes
in average daily balances (volume)&nbsp;or changes in average daily interest rates
(rate)&nbsp;on a fully taxable equivalent basis. The impact of changes in the mix
of interest-earning assets and interest-bearing liabilities is reflected in our
net interest income.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>Year Ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>2003 over 2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>2002 over 2001</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Increases/(Decreases)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Increases/(Decreases)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Due to Change In</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Due to Change In</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Volume</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Volume</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">INTEREST EARNED ON:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loans <SUP>(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(7,002</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4,468</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,184</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Securities of U.S. government
agencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(505</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(664</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(663</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Puerto Rico government
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Securities purchased under
agreements to resell and
federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest-earning deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total interest-earning assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(7,515</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,140</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,531</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">INTEREST PAID ON:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Money market deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">NOW deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Savings deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Time certificates of deposit in
denominations of $100,000
or more</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,649</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,502</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">642</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(130</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(368</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(231</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(154</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(80</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total interest-bearing liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,849</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,844</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">827</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,666</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(3,296</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,704</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Loan fees (costs)&nbsp;have been included in the calculation of interest
income. Loan fees were approximately $1.7&nbsp;million, $1.2&nbsp;million, and $1.1
million for the years ended December&nbsp;31, 2003, 2002, and 2001,
respectively. Loans are net of the allowance for loan and lease losses,
deferred fees, unearned income, and related direct costs.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Provision for Loan and Lease Losses</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We determine a provision for loan and lease losses that we consider
sufficient to maintain an allowance to absorb probable losses inherent in our
portfolio as of the balance sheet date. For additional information concerning
this determination, see the section of this discussion and analysis captioned
<I>&#147;Allowance for Loan and Lease Losses.&#148;</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our provision for loan and lease losses increased to $6.5&nbsp;million in 2003,
from $3.4&nbsp;million and $2.4&nbsp;million in 2002 and 2001, respectively. These
increases in our provisions were mainly due to the growth of our total loan and
lease portfolio, resulting in an increase in nonperforming loans and leases,
and an increase in our net credit losses to $4.0&nbsp;million in 2003, from $3.0
million and $914,000 in 2002 and 2001, respectively. The increase in our
nonperforming loans and net credit losses was also, in part, a result of our
acquisition of Banco Financiero de Puerto Rico. We acquired a $72.2&nbsp;million
loan portfolio as a result of the Banco Financiero merger.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Noninterest Income</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the various components of our noninterest
income for the periods indicated:



<P align="center" style="font-size: 10pt">50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>Year Ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Amount)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(%)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Amount)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(%)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Amount)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(%)</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Service charges and other fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">60.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">107.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">77.1</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gain on sale of loans and leases, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Gain on sale of securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loss on sale of other real estate
owned, repossessed assets, and on
disposition of other assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(663</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(311</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(86</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.8</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total noninterest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total noninterest income was $9.0&nbsp;million in 2003, and $4.0&nbsp;million in
2002, as compared with $4.7&nbsp;million in 2001, representing an annual growth rate
of 125.0% in 2003, and an annual decrease of 14.9% in 2002 from 2001 levels.
Noninterest income represented approximately 0.8%, 0.5% and 0.9% of average
assets in 2003, 2002 and 2001, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of our efforts to diversify our revenue sources, we currently
earn noninterest income from various sources. Our largest noninterest income
source is service charges, primarily on deposit accounts, representing 60.3%,
107.7% and 77.1% of total noninterest income in 2003, 2002 and 2001,
respectively. This income source increased to $5.5&nbsp;million in 2003, from $4.3
million in 2002, and $3.6&nbsp;million in 2001. These increases were primarily due
to an increase in our number of transactional and savings accounts. We
constantly review service charge rates to maximize service charge income while
maintaining a competitive position.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on the sale of loans and leases of $3.5&nbsp;million was the second
largest source of noninterest income in 2003, as compared to $0 in 2002, and
$975,000 in 2001. Income from gain on sale of loans and leases as a percentage
of total noninterest income was 39.2%, 0.0% and 20.6% in 2003, 2002 and 2001,
respectively. This source of noninterest income is derived primarily from the
sale of lease financing contracts and mortgage loans. During June and December
2003, we sold lease financing contracts on a limited recourse basis with
carrying values of $30.0 and $20.0&nbsp;million, respectively, to a third party. We
retained servicing responsibilities for the lease financing contracts sold. We
surrendered control of the lease financing receivables, as defined by SFAS No.
140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities, and accounted for these transactions as sales,
recognizing net gains of approximately $1.8&nbsp;million for the June&nbsp;2003 sale and
$1.0&nbsp;million for the December&nbsp;2003 sale. While no sales of our lease financing
contracts were made in 2002, in December&nbsp;2001 we sold $9.0&nbsp;million in lease
financing contracts, recognizing a gain of approximately $975,000. In
addition, in September&nbsp;2003 we sold approximately $42.8&nbsp;million in mortgage
loans to another financial institution. We did not retain the servicing rights
on these mortgage loans and we accounted for this transaction as a sale,
resulting in a gain of approximately $700,000. We did not sell any of our
mortgage loans in 2002 and 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The third largest source of noninterest income during 2003 was the net
gain on the sale of securities. During the year ended December&nbsp;31, 2003,
proceeds from sales of investment securities were approximately $83.2&nbsp;million,
with approximately $707,000 in gains realized. While there were no sales of
investment securities during 2002, proceeds from sales of investment securities
during the fiscal year ended December&nbsp;31, 2001 totaled approximately $16.5
million, with $194,000 in gross gains realized.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our final component of noninterest income is the net gain/loss on the sale
of our OREO, repossessed assets and other assets. We experienced net losses in
this component of $663,000, $311,000 and $86,000 for the years ended December
31, 2003, 2002 and 2001, respectively. This trend of progressively greater
losses is attributable primarily to an increased volume of losses in our lease
financing portfolio as such portfolio has increased in size, which created net
losses on the sale of repossessed automobiles and equipment totaling $655,000,
$305,000 and $95,000 for the years 2003, 2002 and 2001, respectively. As our
volume of lease financings has increased, in order to avoid building our
inventory of repossessed automobiles, we have been more aggressive in our
disposition efforts. OREO and repossessed assets were $6.4&nbsp;million, $7.6
million and $3.0&nbsp;million for the years ended December&nbsp;31, 2003, 2002 and 2001,
respectively. As a result, the volume of loss on sale of OREO and repossessed
assets has increased 14.2% in 2003, 7.5% in 2002 and 4.3% in 2001. There were
no losses on the sale of OREO for these years.


<P align="center" style="font-size: 10pt">51
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The loss on the sale of repossessed assets as a percentage of the lease
balance at the date of repossession was 14.2% in 2003, 7.5% in 2002, and 4.3%
in 2001. The ratio of loss on the sale of repossessed assets to our year end
leasing portfolio balance was 0.82% in 2003, 0.51% in 2002, and 0.10% in 2001.
The increase in our loss ratio for the last three years is due in part to
increases in the size of our lease portfolio. Our lease portfolio increased
from $134.5&nbsp;million at the end of fiscal 2001 to $314.2 at the end of fiscal
2003, an increase of 133.6%. When our inventory of repossessed assets is
larger, we are more aggressive in our disposition efforts. This strategy
permits us to move inventory at a faster pace, but increases our losses per
unit.


<P align="left" style="font-size: 10pt"><B>Noninterest Expense</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth a summary of noninterest expenses for the
periods indicated:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>Year Ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Amount)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(%)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Amount)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(%)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Amount)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(%)</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Salaries and employee benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">53.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">54.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">53.2</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Occupancy and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Professional fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Directors&#146; fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Office supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other real estate owned and
other repossessed assets
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Promotion and advertising</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Lease expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Municipal taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commissions and service fees
credit and debit cards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total noninterest expense increased to $28.9&nbsp;million in 2003, from
$21.9&nbsp;million in 2002 and $17.6&nbsp;million in 2001. This represents a year over
year increase in noninterest expense of 31.6% for 2003, 24.6% for 2002 and
25.3% for 2001. These increases can be attributed to the expanded personnel
and occupancy costs associated with our business growth, our acquisition of
Banco Financiero, and the recent opening of our four new branch offices
(Mayaguez in 2003, Humacao and Ponce (2)&nbsp;in 2002). Our expansion of various
groups, including EuroLease, our construction lending activities and our trust
and wealth management group, also contributed to the increase in our total
noninterest expense. Due to our continuing efforts to minimize noninterest
expense, however, noninterest expenses as a percentage of average assets
declined 2.5% in 2003, from 2.9% in 2002, and from 3.4% in 2001. We believe
that our efforts to expand without comparative increases in our number of
employees, in addition to the effect of the Banco Financiero acquisition, have
improved our operational efficiency. Our efficiency improvement is evidenced
by the decrease in our efficiency ratio to 57.9% in 2003, 62.9% in 2002, and
59.7% in 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that the overall volume of our noninterest expense will
continue to increase as we grow. However, we remain committed to controlling
costs and efficiency and expect to moderate these increases relative to our
revenue growth.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Salaries and employee benefits totaled $15.4&nbsp;million, $11.9&nbsp;million and
$9.4&nbsp;million, or 53.5%, 54.5% and 53.3% of total noninterest expenses, in 2003,
2002 and 2001, respectively. Despite the new branch openings and significant
asset growth in the past two years, we have limited full-time employee growth
by making efforts to ensure our operations are efficient. We had 377 full-time
equivalent employees as of December&nbsp;31, 2003, compared with 355 and 269 in 2002
and 2001, respectively. Our volume of assets per employee increased to $3.5
million for the year ended 2003 from $2.9&nbsp;million and $2.3&nbsp;million for the
years ended 2002 and 2001, respectively.


<P align="center" style="font-size: 10pt">52
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Occupancy and equipment expenses totaled $5.9&nbsp;million, $4.6&nbsp;million and
$4.0&nbsp;million, or 20.5%, 20.9% and 22.6% of total noninterest expenses, in 2003,
2002 and 2001, respectively. These cost increases are attributable primarily
to the expansion of our branch network and franchise.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional fees were $1.2&nbsp;million, $914,000 and $816,000 or 4.3%, 4.2%
and 4.6% of total noninterest expenses, in 2003, 2002 and 2001, respectively.
These increases are attributable primarily to the growth of our business and
other legal, consulting and professional fees related to our capital raising
efforts, acquisitions and our other actions to implement our strategic plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Office supplies expenses were $984,000, $747,000 and $663,000, or 3.4%,
3.4% and 3.8% of our total noninterest expenses, in 2003, 2002 and 2001,
respectively. These increases are attributable primarily to the expansion of
our branch network and franchise.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our expenses related to OREO and repossessed assets were $693,000,
$516,000 and $226,000, or 2.4%, 2.4% and 1.3% of total noninterest expenses in
2003, 2002 and 2001, respectively. This increase is attributable primarily to
the growth of our loan and lease portfolio, and in particular, our lease
financing portfolio. Repossessed assets are initially recorded at fair value
upon repossession and are charged to the allowance for loan and lease losses.
These assets are then periodically evaluated and recorded at fair value. Any
subsequent decline in the fair value is charged to current operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insurance expenses were $628,000, $385,000 and $353,000, or 2.2%, 1.8% and
2.0% of our total noninterest expense in 2003, 2002 and 2001, respectively.
Increases in insurance expenses are attributable primarily to the expansion of
our branch network and our general growth.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal taxes increased to $725,000 in 2003, from $498,000 and $347,000
in 2002 and 2001, respectively. These increases are directly attributable to
our asset growth.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commissions and service fees on credit and debit cards increased to $1.1
million in 2003, from $765,000 and $824,000 in 2002 and 2001, respectively.
This increase is attributable primarily to the increase in the size of our
commercial loan portfolio, which provide us with merchant point-of-sale
business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other noninterest expenses also increased annually during the prior
three-year period, however, these increases were related in large part to our
asset growth over this period. Due in part to management&#146;s commitment to
overhead control, these expense increases were significantly outpaced by our
revenue growth rate.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also expect our noninterest expense to increase as a result of our
becoming a publicly-traded company. Specifically, we expect increases in audit
fees, legal fees associated with public reporting, printing costs, proxy
solicitation costs, additional directors, and officers&#146; insurance cost and
other expenses generally associated with publicly-traded companies.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Provision for Income Taxes</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 federal income tax. As of December&nbsp;31, 2003, our tax provision
and related accounts are substantially identical to those of Eurobank&#146;s.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2003, we recorded a $3.4&nbsp;million income
tax expense as compared to $2.7&nbsp;million in 2002, and $2.1&nbsp;million in 2001. Our
current income tax provision is lower than a provision based on the statutory
tax rate applicable to Eurobank, which is 39.0%, because we have interest
income from certain investments that is exempt from Puerto Rico income tax.
Exempt interest relates mostly to interest earned on obligations of the United
States and Puerto Rico governments and certain mortgage-backed securities held
by Eurobank International. The main reason for the increase of 2003 tax
expense is the increase in our income before taxes of 55.0%, 8% and 33.8% when
compared to 2002 and 2001, respectively.


<P align="center" style="font-size: 10pt">53
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax expense is the sum of two components: current tax expense and
deferred tax expense (benefit). Current tax expense is calculated by applying
our current tax rate to taxable income. The deferred tax expense accounts for
the change in deferred tax assets (liabilities)&nbsp;from year to year. 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. As of December&nbsp;31, 2003,
2002 and 2001, we had net deferred tax assets of $4.0&nbsp;million, $3.7&nbsp;million and
$946,000, respectively. Please refer to &#147;<I>Note 18- Income Taxes</I>&#148; to our 2003
consolidated financial statements for further details.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Extraordinary Gain on Acquisition of Banco Financiero de Puerto Rico</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective December&nbsp;15, 2002, we acquired all of the capital stock of Banco
Financiero de Puerto Rico for a purchase price of $1.5&nbsp;million. The purchase
price consisted of the issuance of our common stock, valued at $1.2&nbsp;million at
that time, and $326,000 in cash. The estimated fair value of the assets
acquired less liabilities assumed of $2.8&nbsp;million exceeded the acquisition
price of $1.8&nbsp;million, including additional costs associated with the
acquisition of $215,000. This excess resulted in an extraordinary gain on
business acquisition of $1.1&nbsp;million after reducing the value of certain assets
acquired by $456,000. Please refer to &#147;<I>Note 2- Acquisition&#148; </I>to our 2003
consolidated financial statements for further details.


<P align="left" style="font-size: 10pt"><B>Financial Condition as of and for the Years Ended December&nbsp;31, 2003, 2002 and 2001</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total assets increased to $1.3&nbsp;billion as of December&nbsp;31, 2003, a
27.6% increase, when compared to $1.0&nbsp;billion and $607.7&nbsp;million as of December
31, 2002 and 2001, respectively. The increase during 2003 was primarily the
result of growth in our investment securities and loan and lease portfolio.
The increase during 2002 was primarily the result of growth in loans and leases
from current operations and from those assets acquired in the acquisition of
Banco Financiero de Puerto Rico.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total deposits increased by $141.5&nbsp;million, or 16.8%, to reach $984.5
million as of December&nbsp;31, 2003 as compared to $843.0&nbsp;million as of December
31, 2002. Our asset growth during 2003 was also funded with a $143.4&nbsp;million
increase in securities sold under agreements to repurchase. Total deposits as
of December&nbsp;31, 2002 increased by $357.4&nbsp;million, or 73.6%, when compared to
$485.7&nbsp;million as of December&nbsp;31, 2001. The increase during 2002 was, in part,
the result of our acquisition of Banco Financiero, in which we acquired $84.2
million of deposits. Growth for the year 2002 was also funded with a $36.8
million increase in securities sold under agreements to repurchase and a $20.0
million issuance of trust preferred capital securities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, our total stockholders&#146; equity was $65.1&nbsp;million,
representing an increase of 13.5% from $57.3&nbsp;million as of December&nbsp;31, 2002.
Our total stockholders&#146; equity as of December&nbsp;31, 2002 represented an increase
of 19.9% from $47.8&nbsp;million as of December&nbsp;31, 2001. In addition to earnings
from operations and stock options exercised, our stockholders&#146; equity was also
impacted by a $2.4&nbsp;million decrease, and a $1.2&nbsp;million increase, in our
unrealized gain (loss)&nbsp;on investment securities available for sale as of
December&nbsp;31, 2002 and 2001, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Short-Term Investments and Interest-bearing Deposits in Other Financial
Institutions</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell federal funds, purchase securities under agreements to resell, and
deposit funds in interest-bearing accounts in other financial institutions to
help meet liquidity requirements and provide temporary holdings until the funds
can be otherwise deployed or invested. As of December&nbsp;31, 2003, 2002 and 2001,
we had $19.3&nbsp;million, $29.9&nbsp;million and $14.7&nbsp;million, respectively, in
interest-bearing deposits in other financial institutions, and $20.5&nbsp;million,
$45.0&nbsp;million and $8.1&nbsp;million, respectively, in purchased securities under
agreements to resell.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Investment Securities</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our investment portfolio primarily serves as a source of interest income
and, secondarily, as a source of liquidity and a management tool for our
interest rate sensitivity. We manage our investment portfolio according to a
written investment policy implemented by our Asset/Liability Management
Committee. Our investment policy is reviewed at least annually by our Board of
Directors. Investment balances, including cash equivalents and
interest-bearing deposits in other financial institutions, are subject to
change over time based on our asset/liability funding


<P align="center" style="font-size: 10pt">54
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">needs and our interest rate risk management objectives. Our liquidity
levels take into consideration anticipated future cash flows and all available
sources of credits and are maintained at levels management believes are
appropriate to assure future flexibility in meeting our anticipated funding
needs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our investment portfolio consists of securities we intend to hold until
maturity, or &#147;held-to-maturity securities,&#148; and all other securities are
classified as &#147;available-for-sale.&#148; The carrying values of our
available-for-sale securities are adjusted for unrealized gain or loss as a
valuation allowance, and any gain or loss is reported on an after-tax basis as
a component of other comprehensive income.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the composition, book value and market value
of our investment portfolio by major category as of the dates indicated:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Available-for-Sale</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Held-to-Maturity</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Total</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Estimated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Estimated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Estimated</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair Value</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair Value</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair Value</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>(in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>December&nbsp;31, 2003:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. treasury securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">84,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">84,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,116</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S.
government agencies obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,930</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px">Collateralized mortgage obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,189</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,134</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">State and municipal obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,575</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,994</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">326,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">324,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">326,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">324,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>December&nbsp;31, 2002:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. treasury securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,260</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. government agencies obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,863</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Collateralized mortgage obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,722</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">State and municipal obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,758</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,065</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">143,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">145,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">143,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">145,795</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>December&nbsp;31, 2001:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. treasury securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">17,737</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. government agencies obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,556</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Collateralized mortgage obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,028</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,336</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">State and municipal obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,052</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Available-for-sale securities, which are stated at their fair market
value, increased to $324.9&nbsp;million as of December&nbsp;31, 2003 from $145.8&nbsp;million
and $88.7&nbsp;million as of December&nbsp;31, 2002 and 2001, respectively. These
increases are representative of our strategy to enhance our liquidity level
through the use of available-for-sale securities in addition to immediately
available funds. The majority of our immediately available funds are
maintained in the form of overnight investments. As of December&nbsp;31, 2003,
investment securities having a carrying value of approximately $243.0&nbsp;million
were pledged to secure borrowings and deposits of public funds and to comply
with other pledging requirements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Investment Portfolio &#150; Maturity and Yields</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the contractual maturity of investment
securities held in our investment portfolio and their weighted average yields:



<P align="center" style="font-size: 10pt">55
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>As of December 31, 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Within</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>After One but Within Five</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>After Five but Within Ten</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>After</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>One Year</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Ten Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Total</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Yield</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Yield</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Yield</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Yield</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Yield</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Investments
available-for-sale:<SUP>(1) (2)</SUP></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. treasury obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.94</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.94</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. government agencies
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.75</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage backed securities<SUP>(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.87</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">State &#038; political
subdivisions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.68</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.64</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total investments
available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">287,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">324,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Other Investments:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">FHLB stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment in statutory trust</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.63</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total other investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.09</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">287,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.27</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.95</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.63</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">328,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.21</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Based on estimated fair value.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">All of our income from investments in available-for-sale securities is
tax exempt because these securities are held in our IBE. The yields shown
in the above table are not calculated on a fully taxable equivalent basis.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Maturities of mortgage-backed securities and collateralized mortgage
obligations, or CMOs, are based on anticipated lives of the underlying
mortgages, not contractual maturities. CMO maturities are based on cash
flow (or payment) windows derived from broker market consensus.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Other Earning Assets</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For various business purposes, we make investments in earning assets other
than the interest-earning securities discussed above. As of December&nbsp;31, 2003,
our investment in other earning assets included $2.0&nbsp;million in FHLB stock and
$1.4&nbsp;million equity in our statutory trusts. Prior to 2003, the only other
earning assets we held were insignificant amounts of FHLB stock. Our holdings
of FHLB stock as of December&nbsp;31, 2002 and 2001 totaled $2.4&nbsp;million and $1.2
million, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the balances of other earning assets as of
dated indicated:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>As of December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Type</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>(in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Statutory trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Federal FHLB stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,251</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,251</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B><I>Loan and Lease Portfolio</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary source of income is interest on loans and leases. The
following table presents the composition of our loan and lease portfolio by
category as of the dates indicated:



<P align="center" style="font-size: 10pt">56
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>As of December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; secured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">321,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">268,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">161,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">123,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">87,946</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">259,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,227</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commercial and industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,815</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Consumer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,196</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gross loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">901,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">770,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">462,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">316,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">187,678</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less: Unearned income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,774</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,041</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,020</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,686</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,687</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total loans, net of unearned income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">899,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">767,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">458,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">312,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">185,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less: Allowance for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">889,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">760,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">454,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">309,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">183,848</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, 2002 and 2001, our total loans and leases, net of
unearned income, were $899.4&nbsp;million, $767.8&nbsp;million and $458.7&nbsp;million,
respectively. The increase in our loan and lease volume during 2003 and 2001
resulted primarily from the growth of our operations. The significant increase
in our loan and lease volume in 2002 was largely the result of our acquisition
of Banco Financiero. Our total loans and leases, net of unearned income as a
percentage of total assets, however, declined to 68.1% in 2003 from 74.2% and
75.5% in 2002 and 2001, respectively, as growth in other assets, such as our
investment securities, outpaced the growth of our loan and lease portfolio.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Real estate secured loans, the largest component of our loan and lease
portfolio, consist primarily of commercial real estate loans and/or commercial
lines of credit that are extended to finance the purchase and/or improvement of
commercial real estate and/or businesses thereon or for business working
capital purposes. The properties may be either owner-occupied or for
investment purposes. Our loan policy adheres to the real estate loan
guidelines promulgated by the FDIC in 1993. The policy provides guidelines
including, among other things, review of appraised value, limitation on
loan-to-value ratio, and minimum cash flow requirements to service debt. Loans
secured by real estate equaled $321.3&nbsp;million, $268.3&nbsp;million and $161.8
million as of December&nbsp;31, 2003, 2002 and 2001, respectively. The volume of
our real estate loans has increased significantly as a result of our growth and
as a result of our acquisition of Banco Financiero. In the acquisition, we
acquired real estate loans totaling $11.8&nbsp;million. The percentage of our real
estate secured loans in relation to our total loan and lease portfolio,
however, has remained relatively constant. Real estate secured loans as a
percentage of total loans and leases were 35.7%, 34.9% and 35.3% for fiscal
years ended 2003, 2002 and 2001, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease financing contracts, the second largest component of our loan
portfolio, consist of automobile and equipment leases made through our leasing
group, EuroLease, to individuals and corporate customers. In the last two
years, we have deemphasized equipment leasing and focused on automobile
leasing. As of December&nbsp;31, 2003, approximately 75.4% of our lease financing
contracts were for new automobiles, approximately 20.2% were for used
automobiles and the remaining 4.4% consisted primarily of construction and
medical equipment leases. The volume of our lease financing contracts
increased to $320.9&nbsp;million, $259.5&nbsp;million and $140.7&nbsp;million at the end of
2003, 2002 and 2001, respectively. Lease financing contracts, as a percentage
of total loans and leases were 35.7%, 33.8% and 30.7% at the end of 2003, 2002
and 2001, respectively. In December&nbsp;2001, we sold $9.0&nbsp;million in lease
contracts to Banco Financiero de Puerto Rico. Upon the acquisition of Banco
Financiero in December&nbsp;2002, these leases once again became part of our lease
portfolio. During June and December&nbsp;2003, we sold lease contracts with
carrying values of $30.0&nbsp;million and $20.0&nbsp;million, respectively, to another
financial institution, while retaining servicing responsibilities. The lease
contracts sold in 2003 were sold on a limited recourse basis. The recourse is
limited to a maximum of 5.0% of the principle balance on any defaulted lease,
subject to an aggregate limitation of 5.0% on all of the leases sold.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial and industrial loans include revolving lines of credit as well
as term business loans. Commercial and industrial loans increased to $179.7
million, $152.8&nbsp;million and $107.0&nbsp;million as of December&nbsp;31, 2003, 2002 and
2001, respectively. The significant increase in commercial and industrial
loans in 2002 is attributable to our


<P align="center" style="font-size: 10pt">57
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">acquisition of Banco Financiero de Puerto Rico. Commercial and industrial
loans as a percentage of total loans were 20.0%, 19.9% and 23.3% at the end of
2003, 2002 and 2001, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction loans are not a significant part of our total loan portfolio.
Construction loans decreased to $48.5&nbsp;million as of December&nbsp;31, 2003 from
$54.9&nbsp;million as of December&nbsp;31, 2002. Construction loans were $32.5&nbsp;million
as of December&nbsp;31, 2001. Construction loans as a percentage of total loans and
leases were 5.4%, 7.2% and 7.1% as of December&nbsp;31, 2003, 2002 and 2001,
respectively. Since we introduced our construction lending product in the year
2000, strategic objectives with respect to residential construction lending
have resulted in outstanding balances in the $40.0&nbsp;million to $50.0&nbsp;million
range, and at the end of 2003 outstanding balances of our construction loans
were $48.5&nbsp;million. During 2003, a combination of factors led to a slight
decrease in loans in this category. Due to a slowdown in the economy and a
reduction in permits for private residential construction, acceptable risk
opportunities were not as plentiful in the market. This slowdown coupled with
our conservative underwriting strategy resulted in fewer lending opportunities.
Furthermore, a number of projects were completed and sold during the year
2003, and as a result the corresponding loans were paid down.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer loans have historically represented a small part of our total
loan and lease portfolio. The majority of consumer loans consist of personal
installment loans, credit cards and consumer lines of credit. We make consumer
loans only to complement our commercial business, and these loans are not
emphasized by our branch managers. As a result, repayment on this portfolio
has generally exceeded or equaled origination, except for 2002, when we
acquired consumer loans in connection with our acquisition of Banco Financiero
de Puerto Rico. Consumer loans decreased to $26.6&nbsp;million as of December&nbsp;31,
2003, from $31.5&nbsp;million as of December&nbsp;31, 2002, as compared to $18.1&nbsp;million
as of December&nbsp;31, 2001. Consumer loans as a percentage of total loans and
leases were 3.0%, 4.1% and 3.9% at the end of 2003, 2002 and 2001,
respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our loan terms vary according to loan type. Commercial term loans
generally have maturities of three to five years, while we generally limit real
estate loan maturities to five to eight years. Lines of credit, in general,
are extended on an annual basis to businesses that need temporary working
capital and/or import/export financing. The following table shows our maturity
distribution of loans and leases as of the dates indicated. The table excludes
the nonaccrual loans in the amount of $17.1&nbsp;million, and includes unearned
income and deferred fees totaling $2.9&nbsp;million as of December&nbsp;31, 2003.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>As of December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Over 1 Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>through 5 Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Over 5 Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Floating or</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Floating or</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>One Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fixed</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Adjustable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fixed</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Adjustable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>or Less<SUP>(1)</SUP></B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">37,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; secured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">309,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commercial and industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,709</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Consumer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,035</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314,986</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">441,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">327,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">113,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">882,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Maturities are based upon contract dates. Demand loans are included
in the one year or less category and totaled $199.9&nbsp;million as of
December&nbsp;31, 2003.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Nonperforming Loans, Leases and Assets</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonperforming assets consist of loans and leases on nonaccrual status,
loans 90&nbsp;days or more past due and still accruing interest, loans that have
been restructured resulting in a reduction or deferral of interest or
principal, OREO, and other repossessed assets.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the amounts of nonperforming assets (net of
the portion guaranteed by the United States government) as of the dates
indicated:



<P align="center" style="font-size: 10pt">58
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>As of December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(dollars in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loans contractually past due 90&nbsp;days or more
but still accruing interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nonaccrual loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,256</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total nonperforming loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,090</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">790</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other repossessed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total nonperforming assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,880</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nonperforming loans to total loans and leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.01</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.90</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.46</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.31</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nonperforming assets to total loans and
leases plus repossessed property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.73</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nonperforming assets to total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.25</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We continuously review present and estimated future performance of the
loans and leases within our portfolio and risk-rate such loans in accordance
with a risk rating system. Loans are generally placed on nonaccrual status
when they become 90&nbsp;days past due, unless we believe the loan is adequately
collateralized and we are in the process of collection. The nonrecognition of
interest income on an accrual basis does not constitute forgiveness of the
interest, and collection efforts are continuously pursued. Loans may be
restructured by management when a borrower has experienced some change in
financial status, resulting in an inability to meet the original repayment
terms, and when we believe the borrower will eventually overcome financial
difficulties and repay the loan in full.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, our nonperforming loans and leases have increased in connection
with the growth of our loan and lease portfolio. The recent economic downturn
further increased our nonperforming loans and leases to $26.8&nbsp;million, $22.1
million and $10.2&nbsp;million as of December&nbsp;31, 2003, 2002 and 2001, respectively,
as compared with $7.6&nbsp;million and $6.1&nbsp;million as of December&nbsp;31, 2000 and
1999, respectively. The ratio of nonperforming loans and leases over total
loans and leases increased to 3.0% and 2.9% as of December&nbsp;31, 2003 and 2002,
respectively, compared to 2.3% as of December&nbsp;31, 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OREO consists of properties acquired by foreclosure or similar means and
that management intends to offer for sale. Other repossessed assets are
comprised primarily of repossessed automobiles and equipment subject to lease
contracts. OREO and repossessed assets are initially recorded at fair value.
Any resulting loss is charged to the allowance for loan and lease losses. An
appraisal of OREO and repossessed assets is made periodically after a property
is acquired, and a comparison between the appraised value and the carrying
value is performed. Additional declines in value after acquisition, if any,
are charged to current operations. Gains or losses on disposition of OREO and
repossessed assets, and related operating income and maintenance expenses, are
included in current operations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, our OREO consisted of 13 properties with an
aggregate value of $2.8&nbsp;million, compared to 10 properties with an aggregate
value of $2.0&nbsp;million as of December&nbsp;31, 2002, and one property valued at
$29,000 as of December&nbsp;31, 2001. The significant increase in OREO in 2002 from
2001 is primarily attributable to eight properties acquired in the Banco
Financiero de Puerto Rico acquisition in December&nbsp;2002.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other repossessed assets as of December&nbsp;31, 2003, 2002 and 2001 were $3.6
million, $5.7&nbsp;million and $3.0&nbsp;million, respectively. The increase in volume
of repossessed assets from 1999 to 2002 was attributable to increases in
volumes of our automobile lease originations. As our volume of lease
financings has increased, in order to avoid building our inventory of
repossessed automobiles, we have been more aggressive in our disposition
efforts. The reduction in repossessed assets during 2003 was attributable to
these increased disposition efforts.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Together with OREO, the ratio of nonperforming assets as a percentage of
total loans and leases plus repossessed property improved in 2003 to 3.7%, from
3.9% in 2002, compared to 2.9% as of December&nbsp;31, 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Allowance for Loan and Lease Losses</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have established an allowance for loan and lease losses to provide for
loans in our portfolio that may not be repaid in their entirety. The allowance
is based on our regular, monthly assessments of the probable estimated


<P align="center" style="font-size: 10pt">59
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">losses inherent in the loan and lease portfolio. Our methodology for
measuring the appropriate level of the allowance relies on several key
elements, which include the formula described below, specific allowances for
identified problem loans and portfolio segments and the unallocated allowance.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The formula portion of our allowance is calculated by applying loss
factors to all categories of loans and leases outstanding in our portfolio. We
use historic loss rates, determined over a period of years, plus migration
analysis techniques. The resulting loss factors are then multiplied against
the current period&#146;s balance of loans outstanding to derive an estimated loss.
We adjust the historical loss percentage for each pool of loans to reflect any
current conditions that are expected to result in loss recognition. Factors
that we consider include, but are not limited to:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>effects of any changes in lending policies and procedures,
including those for underwriting, collection, charge-offs, and
recoveries;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the experience, ability and depth of our lending
management and staff;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>concentrations of credit that might affect loss experience
across one or more components of the portfolio;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>levels of, and trends in, delinquencies and nonaccruals; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>national and local economic business trends and conditions.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Specific allowances are established in cases where management has
identified significant conditions or circumstances related to a credit that
management believes indicate a high probability that a loss will be incurred.
This amount may be determined either by a method prescribed by SFAS No.&nbsp;114,
Accounting by Creditors for Impairment of a Loan, or by a method that
identifies certain qualitative factors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The unallocated portion of the allowance contains amounts that are based
on management&#146;s evaluation of conditions that are not directly measured in the
determination of the formula and specific allowances. The evaluation of the
inherent loss with respect to these conditions is subject to a higher degree of
uncertainty because they are not identified with specific problem credits or
portfolio segments. The conditions evaluated in connection with the
unallocated portion of the allowance include the following:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general economic and business conditions affecting our key
lending areas;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>then-existing economic and business conditions of areas
outside the lending areas, such as other sections of the United
States and Caribbean;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>credit quality trends, including trends in nonperforming
loans and leases expected to result from existing conditions;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>loan and lease concentrations by collateral and by obligor;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>specific industry conditions within portfolio segments;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recent loss experience in particular segments of the portfolio;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>duration of the current business cycle;</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>bank regulatory examination results and guidance; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>findings of our internal and external loan review examiners.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our loan review officer reviews these conditions on an ongoing basis in
discussion with our executive management, senior lenders and credit officers.
To the extent that any of these conditions is evidenced by a specifically
identifiable problem credit or portfolio segment as of the evaluation date,
management&#146;s estimate of the effect of such condition may be reflected as a
specific allowance, applicable to such loan or portfolio segment. When any of
these conditions is not evidenced by a specifically identifiable problem loan
or portfolio segment, management&#146;s evaluation of the probable loss related to
such conditions is reflected in the unallocated portion of the allowance.


<P align="center" style="font-size: 10pt">60
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although our management believes that the allowance for loan and lease
losses is adequate to absorb probable losses on existing loans that may become
uncollectible, there can be no assurance that our allowance will prove
sufficient to cover actual loan and lease losses in the future. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the adequacy of our allowance for loan and lease losses.
Such agencies may require us to make additional provisions to the allowance
based upon their judgments about information available to them at the time of
their examinations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below summarizes, for the periods indicated, loan balances at
the end of each period, the daily averages during the period, changes in the
allowance for loan and lease losses arising from loans and leases charged-off,
recoveries on loans and leases previously charged-off, and additions to the
allowance, and certain ratios related to the allowance for loan and lease
losses:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>Year Ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1999</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(dollars in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average total loans and leases outstanding
during period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">842,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">577,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">383,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">246,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">161,880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total loans and leases outstanding at end
of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">899,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">767,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">458,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">312,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">185,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for loan and lease losses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,033</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Charge-offs:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; secured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commercial and industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">512</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Consumer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">827</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total charge-offs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,417</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Recoveries:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; mortgages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commercial and industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Consumer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total recoveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">424</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loan charge-offs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">993</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,103</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance acquisition &#151; Banco Financiero</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loan charge-offs to average total loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.47</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.51</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.24</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.18</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for loan and lease losses to total loans
at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loan charge-offs to allowance for loan
losses at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46.34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net loan charge-offs to provision for
loan and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90.03</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rapid growth of our loan and lease portfolio in the past five years
required an increased allowance for loan and lease losses. The allowance for
loan and lease losses increased by 35.8%, or $2.5&nbsp;million, to $9.4&nbsp;million as
of December&nbsp;31, 2003, from $6.9&nbsp;million as of December&nbsp;31, 2002, as compared to
$4.5&nbsp;million as of December&nbsp;31, 2001. Despite the increases from provisions in
our allowance for loan and lease loss, the rapid growth of our loan portfolio
lowered the allowance for loan and lease losses as a percentage of total loans
and leases from 1.0% at the end of 2001 to 0.9% at the end of 2002. However,
the allowance for loan and lease losses as a percentage of total loans and
leases increased to 1.0% in 2003 in connection with our decision to amend our
credit policy to charge off


<P align="center" style="font-size: 10pt">61
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">a portion of our lease finance contracts that are over 120&nbsp;days past due.
We have established a recourse liability reserve for the estimated losses on
this limited reserve.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net charge-offs to average total loans and leases decreased to 0.47% in
2003 when compared to 0.51% in 2002 and 0.24% in 2001. Increases in these
ratios for 2003 and 2002, when compared to 2001, were primarily due to the
following:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in 2003, we amended our credit policy to require the charging
off of a portion of our lease financing contracts that were over 120
days past due; and</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in 2002, additional charge-offs were taken after our
acquisition of Banco Financiero, primarily of commercial and lease
financing contracts acquired in the acquisition.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below presents an allocation for loan and lease losses among the
various loan categories and sets forth the percentage of loans and leases in
each category to gross loans or leases. The allocation of the allowance for
loan and lease losses as shown in the table should neither be interpreted as an
indication of future charge-offs, nor as an indication that charge-offs in
future periods will necessarily occur in these amounts or in the indicated
proportions:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>&nbsp;</B></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="40"><HR size="1" noshade></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2001</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2000</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>1999</B><HR size="1" noshade></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loan</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loan</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loan</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loan</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loan</B></TD>
</TR>


<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Category</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Category</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Category</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Category</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Category</B></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>to Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>to Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>to Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>to Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>to Gross</B></TD>
</TR>

<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loans(1)</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loans<SUP>(1)</SUP></B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loans<SUP>(1)</SUP></B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loans<SUP>(1)</SUP></B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Loans<SUP>(1)</SUP></B><HR size="1" noshade></TD>
</TR>



<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Allocated:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.38</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.13</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.03</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.55</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.00</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Real estate &#150; secured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46.86</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commercial and industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Consumer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.18</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unallocated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total allowance for loan
and lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">65.03</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" nowrap align="right">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Excludes mortgage loans held-for-sale.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Nonearning Assets</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premises, leasehold improvements and equipment, net of accumulated
depreciation and amortization, totaled $10.5&nbsp;million at December&nbsp;31, 2003 as
compared to $9.4&nbsp;million at December&nbsp;31, 2002 and $8.7&nbsp;million at December&nbsp;31,
2001. We have no definitive agreements regarding acquisition or disposition of
owned or leased facilities and, for the near-term future, we do not expect
significant changes in our total occupancy expense. However, the timing and
amount of capital expenditures and recoveries will likely be asynchronous. We
expect total net capital investment to be less than $&#091;&nbsp;&nbsp;&nbsp;&#093; million over the
next two years.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Deposits</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deposits are our primary source of funds. The following table sets forth,
for the periods indicated, the distribution of our average deposit account
balances and average cost of funds on each category of deposits:



<P align="center" style="font-size: 10pt">62
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="35"><B>Year Ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Balance</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Deposits</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><b>Balance</b><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Deposits</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Balance</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Deposits</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noninterest-bearing
demand deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">92,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10.09</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">73,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">12.03</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">60,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.43</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Money market deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">NOW deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.13</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Savings deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.70</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Time certificates of
deposit in
denominations of
$100,000 or more</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Brokered
certificates of
deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.06</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">20.81</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">918,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">608,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">420,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deposits as of December&nbsp;31, 2003, 2002 and 2001 were $984.5&nbsp;million,
$843.0&nbsp;million and $485.7&nbsp;million, respectively, representing an increase of
$141.5&nbsp;million, or 16.8%, in 2003 and $357.3&nbsp;million, or 73.6%, in 2002.
Average deposits for the years ended December&nbsp;31, 2003, 2002 and 2001 were
$918.8&nbsp;million, $608.3&nbsp;million and $420.5&nbsp;million, respectively. Thus, average
deposits grew by $310.5&nbsp;million, or 51.0%, in 2003, and by $187.9&nbsp;million, or
44.7%, in 2002. The dramatic increase in average deposits in 2003 is the
result of our December&nbsp;2002 acquisition of Banco Financiero. Our methodology
for calculating average deposits and the timing of the acquisition causes the
related increase to show up in our average deposits for 2003, instead of for
2002. We assumed $84.2&nbsp;million in deposits in connection with our acquisition
of Banco Financiero.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our core deposits increased by 27.0% in 2003 to $572.3&nbsp;million, following
an increase of 76.8% in 2002 to $450.5&nbsp;million from $254.8&nbsp;million in 2001. As
a result, the percentage of our core deposits to total deposits increased to
58.1% from 53.4% in 2002 and 52.5% in 2001. We attribute growth in our core
deposits both to our organic growth and also to the increasing number of
deposits from our expanding commercial lending customer base. The average rate
paid on time deposits in denominations of $100,000 or more was 3.7%, 4.3% and
5.7% for the years ended December&nbsp;31, 2003, 2002 and 2001, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the deposits we generate locally, we have also accepted
brokered deposits to augment retail deposits and to fund asset growth. In
order to take advantage of historically low funding costs, we increased
brokered deposits to $228.2&nbsp;million and $214.7&nbsp;million as of December&nbsp;31, 2003
and 2002, respectively, from $102.0&nbsp;million as of December&nbsp;31, 2001. Most of
our brokered deposits have maturities of one to seven years. Because brokered
deposits are generally more volatile and interest rate sensitive than other
sources of funds, management closely monitors growth in this category.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the amount and maturities of the time
deposits of $100,000 or more as of December&nbsp;31, 2003:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31, 2003</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B>(in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Three months or less</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">87,453</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Over three months through six months.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,989</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Over six months through 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,601</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Over 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,170</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">406,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">63
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><I>Other
Sources of Funds</I></b>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Securities
Sold Under Agreements to Repurchase</I>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To support our asset base, we sell securities subject to obligations to
repurchase to securities dealers and the FHLB. These repurchase transactions
generally have maturities of one month to less than five years. The following
table summarizes certain information with respect to securities under
agreements to repurchase for fiscal years 2003, 2002 and 2001:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="63%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Year Ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>(dollars in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">207,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">64,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,364</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average monthly aggregate balance
outstanding during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,823</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Maximum aggregate balance outstanding at
any month-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,804</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average interest rate for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.71</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.60</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.54</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average interest rate at year-end.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.43</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>FHLB Advances</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although deposits and repurchase agreements are the primary source of
funds for our lending and investment activities and for general business
purposes, we may obtain advances from the Federal Home Loan Bank of New York as
an alternative source of liquidity. The following table provides a summary of
FHLB advances for fiscal years 2003, 2002 and 2001:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>Year Ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>(dollars in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average balance during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,053</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Maximum amount outstanding at any
month-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,250</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average interest rate during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.30</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.73</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.11</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average interest rate at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.97</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Junior Subordinated Debentures; Trust Preferred Securities</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;19, 2002, Eurobank Statutory Trust II (&#147;Trust II&#148;) issued $20
million of floating rate Trust Preferred Capital Securities (the &#147;Trust II
Preferred Securities&#148;) due in 2032 with a liquidation amount of $1,000 per
security. Distributions payable on each capital security will be payable at an
annual rate equal to 4.7% beginning on (and including) the date of original
issuance and ending on (but excluding) March&nbsp;26, 2003, and at an annual rate
for each successive period equal to the three-month London Interbank Offered
Rate (LIBOR), plus 3.3% with a ceiling rate of 11.8%. The Trust II Preferred
Securities are fully and unconditionally guaranteed by EuroBancshares.
Following the issuance of the Trust II Preferred Securities by Trust II,
EuroBancshares issued $20.6&nbsp;million of floating rate Junior Subordinated
Deferrable Interest Debentures (the &#147;2002 Debentures&#148;) due in 2032 to Trust II.
The terms of the 2002 Debentures, which comprise substantially all of the
assets of Trust II, are identical to the terms of the Trust II Preferred
Securities. The 2002 Debentures are conditionally guaranteed by
EuroBancshares. Eurobank subsequently issued an unsecured promissory note to
EuroBancshares for the issued amount and at an annual rate equal to that being
paid on the Trust II Preferred Securities. See <I>&#147;Recent accounting
pronouncements,&#148; </I>below.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;18, 2001, Eurobank Statutory Trust I (&#147;Trust I&#148;) issued $25.0
million of floating rate Trust Preferred Capital Securities Series&nbsp;I (&#147;Trust I
Preferred Securities&#148;) due in 2031 with a liquidation amount of $1,000 per
security. Distributions payable on each Trust I Preferred Security will be
payable at an annual rate equal to


<P align="center" style="font-size: 10pt">64
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">5.6% beginning on (and including) the date of original issuance and ending
on (but excluding) March&nbsp;18, 2002, and at an annual rate for each successive
period equal to the three-month LIBOR, plus 3.6% with a ceiling rate of 12.5%.
The Trust I Preferred Securities are fully and unconditionally guaranteed by
EuroBancshares, which was a wholly owned subsidiary of Eurobank in 2001.
Following the issuance of the Trust I Preferred Securities, EuroBancshares
issued $25.8&nbsp;million of floating rate Junior Subordinated Deferrable Interest
Debentures (the &#147;2001 Debentures&#148;) to Trust I due in 2031. The terms of the
2001 Debentures, which comprise substantially all of the assets of Trust I, are
equal to the terms of the capital securities issued by Trust I. These trust
preferred securities are conditionally guaranteed by EuroBancshares. Eurobank
subsequently issued an unsecured promissory note to us for the issued amount
and at an annual rate equal to that being paid on the Trust Preferred Capital
Securities Series&nbsp;I due in 2031.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Capital Resources and Capital Adequacy Requirements</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to various regulatory capital requirements administered by
federal banking agencies. Failure to meet minimum capital requirements can
trigger regulatory actions that could have a material adverse effect on our
business, financial condition, results of operations, cash flows and/or future
prospects. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, we must meet specific capital guidelines that rely on
quantitative measures of our assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. Our capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We monitor compliance with bank regulatory capital requirements, focusing
primarily on the risk-based capital guidelines. Under the risk-based capital
method of capital measurement, the ratio computed is dependent on the amount
and composition of assets recorded on the balance sheet and the amount and
composition of off-balance sheet items, in addition to the level of capital.
Generally, Tier 1 capital includes common stockholders&#146; equity our Series&nbsp;A
Preferred Stock, our junior subordinated debentures (subject to certain
limitations) less goodwill. Total capital represents Tier 1 plus the allowance
for loan and lease loss (subject to certain limits).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past three years, our primary sources of capital have been
internally generated operating income through retained earnings and capital
derived from the issuance of the 2001 and 2002 Debentures. Specifically, in
the last year we have raised $20.9&nbsp;million in regulatory tier 1 capital and
$24.1 supplemental capital (regulatory tier 2 capital) through the issuance of
the Debentures. As of December&nbsp;31, 2003, 2002 and 2001 total stockholders&#146;
equity was $65.1&nbsp;million, $57.3&nbsp;million and $47.8&nbsp;million, respectively.
Increases in stockholders&#146; equity during this period are attributable primarily
to internally generated operating income and stock option exercises.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, we and Eurobank both qualified as
&#147;well-capitalized&#148; institutions under the regulatory framework for prompt
corrective action. The following table presents the regulatory standards for
well-capitalized institutions, compared to our capital ratios for Eurobank as
of the dates specified:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>To Be Well Capitalized Under</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For Minimum Capital Adequacy</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Prompt Corrective Action</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Actual</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Purposes</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Provision</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount Is</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio Is</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount Must Be</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio Must Be</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount Must Be</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio Must Be</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>As of December&nbsp;31, 2003:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total Capital (to Risk Weighted Assets)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">
EuroBancshares, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">117,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.60</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;$81,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#062;8.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;81,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;$101,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#062;10.00</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Tier 1 Capital (to Risk Weighted Assets)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>







<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">EuroBancshares, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;40,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;40,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;60,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;6.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Leverage (to average assets)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>







<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">EuroBancshares, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;49,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;49,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;50,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;5.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>As of December&nbsp;31, 2002:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total Capital (to Risk Weighted Assets)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">EuroBancshares, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">105,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">12.79</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;65,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#062;8.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">65
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>To Be Well Capitalized Under</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>For Minimum Capital Adequacy</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Prompt Corrective Action</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Actual</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Purposes</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Provision</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount Is</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio Is</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount Must Be</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio Must Be</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount Must Be</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio Must Be</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;65,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;$82,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#062;10.00</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Tier 1 Capital (to Risk Weighted Assets)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">EuroBancshares, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;32,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;32,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;49,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;6.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Leverage (to average assets)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">EuroBancshares, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;35,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;35,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;41,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;5.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>As of December&nbsp;31, 2001:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total Capital (to Risk Weighted Assets)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">EuroBancshares, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">75,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.26</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;$39,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#062;8.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;$49,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#062;10.00</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-10px">Tier 1 Capital (to Risk Weighted Assets)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">EuroBancshares, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;19,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;29,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;6.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Leverage (to average assets)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">EuroBancshares, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;22,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;24,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#062;5.00</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Liquidity Management</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintenance of adequate liquidity requires that sufficient resources be
available at all times to meet our cash flow requirements. Liquidity in a
banking institution is required primarily to provide for deposit withdrawals
and the credit needs of customers and to take advantage of investment
opportunities as they arise. Liquidity management involves our ability to
convert assets into cash or cash equivalents without incurring significant
loss, and to raise cash or maintain funds without incurring excessive
additional cost. For this purpose, we maintain a portion of our funds in cash
and cash equivalents, deposits in other financial institutions and loans and
securities available for sale. Our liquid assets as of December&nbsp;31, 2003, 2002
and 2001 totaled approximately $144.0&nbsp;million, $137.0&nbsp;million and $65.0
million, respectively. Our liquidity level measured as a percentage of net
cash, short-term and marketable assets to net deposits and short-term
liabilities was 15.2%, 16.9% and 14.3% as of December&nbsp;31, 2003, 2002 and 2001,
respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a secondary source of liquidity, we rely on advances from the FHLB to
supplement our supply of lendable funds and to meet deposit withdrawal
requirements. Advances from the FHLB are typically secured by qualified
residential and commercial mortgage loans, and investment securities. Advances
are made pursuant to several different programs. Each credit program has its
own interest rate and range of maturities. Depending on the program,
limitations on the amount of advances are based either on a fixed percentage of
an institution&#146;s net worth or on the FHLB&#146;s assessment of the institution&#146;s
creditworthiness. Other funding alternatives available are local and United
States conventional and brokered time deposits, unsecured lines of credit with
correspondent banks, borrowing lines with brokers and the Federal Reserve Bank
of New York. Our target liquidity ratio established in our Liquidity Policy of
liquid assets as a percentage of net deposits and short-term liabilities is
10.0%.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the normal influx of liquidity from core deposit growth,
together with repayments and maturities of loans and investments, we utilize
brokered and out-of-market certificates of deposit, FHLB borrowings and
broker-dealer repurchase agreements to meet our liquidity needs. The FHLB
borrowings are collateralized by first mortgage residential loans, selected
investment securities and FHLB stock. Pre-approved repurchase agreement
availability with major brokers and banks totaled $270.0&nbsp;million at December
31, 2003, subject to acceptable unpledged marketable securities available for
sale. In addition, Eurobank is able to borrow from the Federal Reserve Bank
using securities as collateral. Eurobank also maintains pre-approved overnight
borrowing lines at various correspondent banks, which provided additional
short-term borrowing capacity of $7.0&nbsp;million at December&nbsp;31, 2003.


<P align="center" style="font-size: 10pt">66
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003, asset growth was funded with growth in deposits and
borrowings. The deposit growth was distributed as follows: $19.3&nbsp;million in
demand deposits; $83.6&nbsp;million in savings accounts; $29.1&nbsp;million in time
deposits of which $13.5&nbsp;million was comprised of brokered deposits. The
increase in the level of borrowings was primarily attributable to securities
sold under agreements to repurchase of $143.4&nbsp;million. During 2003, cash
inflows from operating activities exceeded cash outflows by $7.2&nbsp;million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2002, asset growth was funded with growth in deposits and
borrowings. The deposit growth was distributed as follows: $101.4&nbsp;million in
demand deposits; $80.0&nbsp;million in savings accounts; $225.9&nbsp;million in time
deposits of which $112.7&nbsp;million was comprised of brokered deposits. The
increase in the level of borrowings was primarily attributable to securities
sold under agreements to repurchase of $36.7&nbsp;million and the issuance of $26.6
million of junior subordinated debentures. During 2002, cash inflows from
operating activities exceeded cash outflows by $9.7&nbsp;million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2001, asset growth was funded with growth in deposits and
borrowings. The deposit growth was distributed as follows: $17.1&nbsp;million in
demand deposits; $17.4&nbsp;million in savings accounts; $100.8&nbsp;million in time
deposits of which $42.3&nbsp;million was comprised of brokered deposits. The
increase in the level of borrowings was primarily attributable to notes payable
and the issuance of $29.0&nbsp;million of junior subordinated debentures. During
2001, cash outflows from operating activities exceeded cash inflows by $4.6
million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net cash outflows from investment activities for the years 2003, 2002
and 2001 were $279.3&nbsp;million, $349.3&nbsp;million and $140.9&nbsp;million, respectively.
The higher net investing cash outflows experienced in 2003 were primarily due
to growth in the investment securities portfolio, which provided additional
collateral in that year to support wholesale funding increases. In 2002 and
2001, the higher net investing outflow was attributable to growth of our loan
and lease portfolio.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net cash inflows from financing activities for the years 2003, 2002
and 2001 were $277.0&nbsp;million, $333.6&nbsp;million and $147.1&nbsp;million, respectively.
In 2003 and 2002, the net financing cash inflows were primarily provided by
deposit and repurchase agreements growth. In 2001, the net financing cash
inflows were primarily provided by deposit and trust preferred securities
growth.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Quantitative and Qualitative Disclosure About Market Risks</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest rate risk is the most significant market risk affecting us.
Other types of market risk, such as foreign currency risk and commodity price
risk, do not arise in the normal course of our business activities. Interest
rate risk can be defined as the exposure to a movement in interest rates that
could have an adverse effect on our net interest income or the market value of
our financial instruments. The ongoing monitoring and management of this risk
is an important component of our asset and liability management process, which
is governed by policies established by Eurobank&#146;s Board of Directors and
carried out by Eurobank&#146;s Asset/Liability Management Committee. The
Asset/Liability Management Committee&#146;s objectives are to manage our exposure to
interest rate risk over both the one year planning cycle and the longer term
strategic horizon and, at the same time, to provide a stable and steadily
increasing flow of net interest income. Interest rate risk management
activities include establishing guidelines for tenor and repricing
characteristics of new business flow, the maturity ladder of wholesale funding,
investment security purchase and sale strategies and mortgage loan sales, as
well as derivative financial instruments.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary measurement of interest rate risk is earnings at risk, which
is determined through computerized simulation modeling. The primary simulation
model assumes a static balance sheet, using the balances, rates, maturities and
repricing characteristics of all of the Bank&#146;s existing assets and liabilities,
including off-balance sheet financial instruments. Net interest income is
computed by the model assuming market rates remaining unchanged and compares
those results to other interest rate scenarios with changes in the magnitude,
timing and relationship between various interest rates. As of December&nbsp;31,
2003, we modeled rising ramp and declining interest rate simulations in 100
basis point increments over a 12-month period. The impact of imbedded options
in such products as callable and mortgage-backed securities, real estate
mortgage loans and callable borrowings were considered. Changes in net
interest income in the rising and declining rate scenarios are then measured
against the net interest income in the rates unchanged scenario. The
Asset/Liability Management Committee utilizes the results of the model to
quantify the estimated exposure of net interest income to sustained interest
rate changes.


<P align="center" style="font-size: 10pt">67
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;31, 2003 simulations, our models indicated an exposure in the
level of net interest income to rising rates for a 12-month period. The
hypothetical rate scenarios consider a change of 100 and 200 basis points
during a 12-month period. The decreasing rate scenarios have a floor of 200
basis points. This floor causes liabilities to have little cost reduction,
while assets do have a decrease in yields, causing a small loss in declining
rate simulations of 200 basis points. The net interest income at risk for year
one in the 100 basis point falling rate scenario was calculated at $518,000, or
4.4%, higher than the net interest income in the rates unchanged scenario, and
$879,000, or 2.2%, lower than the net interest income in the rates unchanged
scenario at the December&nbsp;31, 2003 simulation with a 200 basis point falling.
This exposure was well within our policy guidelines of 15.0%. The net interest
income for year one in the 100 basis point rising rate scenario was calculated
to be $520,000, or 1.3%, lower than the net interest income in the rates
unchanged scenario, and $1.0&nbsp;million, or 2.6%, lower than the net interest
income in the rate unchanged scenario at the December&nbsp;31, 2003 simulation with
a 200 basis point increase. Computation of prospective effects of hypothetical
interest rate changes are based on numerous assumptions, including relative
levels of market interest rates, loan and security prepayments, deposit
run-offs and pricing and reinvestment strategies and should not be relied upon
as indicative of actual results. Further, the computations do not contemplate
any actions we may take in response to changes in interest rates. We cannot
assure you that our actual net interest income would increase or decrease by
the amounts computed by the simulations. The following table indicates the
estimated impact on net interest income under various interest rate scenarios
as of December&nbsp;31, 2003:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Change in Future Net Interest Income</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>As of December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dollar Change</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage Change</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Change in interest rates</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(dollars in thousands)</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&#043;200 basis points over one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,042</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.62</TD>
    <TD nowrap>)%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&#043;100 basis points over one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(520</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.31</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">-100 basis points over one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.39</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">-200 basis points over one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(879</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.21</TD>
    <TD nowrap>)</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also monitor the repricing terms of our assets and liabilities through
gap matrix reports for the rates in unchanged, rising and falling interest rate
scenarios. The reports illustrate, at designated time frames, the dollar
amount of assets and liabilities maturing or repricing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, on a stand-alone basis, Eurobank&#146;s amounts
of interest-earning assets and interest-bearing liabilities outstanding at
December&nbsp;31, 2003, which we anticipate, based upon certain assumptions, to
reprice or mature in each of the future time periods shown. The projected
repricing of assets and liabilities anticipates prepayments and scheduled rate
adjustments, as well as contractual maturities under an interest rate unchanged
scenario within the selected time intervals. While we believe such assumptions
are reasonable, we cannot assure you that assumed repricing rates will
approximate our actual future deposit activity.



<P align="center" style="font-size: 10pt">68
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="31%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="27"><B>As of December 31, 2003</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="27"><B>Volumes Subject to Repricing Within</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>0-1</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2-180</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>181-365</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1-3</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Over 3</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Non-interest</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Days</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Days</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Days</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sensitive</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>(dollars in thousands)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Short-term investments and
federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39,808</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investment securities and
FHLB/ Federal Reserve Bank
stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">328,280</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">895,448</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Fixed and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,397</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">274,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">123,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">81,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">387,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">396,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">57,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,320,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Liabilities and Stockholders&#146;
Equity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest-bearing checking,
savings and money market
accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">48,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">258,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">104,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">412,104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Certificates of deposit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">572,445</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Borrowed funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264,616</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,694</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities and
stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">401,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">102,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">232,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">407,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">176,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,320,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Period gap</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">274,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(278,158</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(20,966</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">154,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(10,618</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">119,129</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cumulative gap</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,938</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(24,904</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Period gap to total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21.06</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.71</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.80</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cumulative gap to total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.30</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.89</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cumulative interest-earning
assets to cumulative
interest-bearing liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">99.02</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">95.06</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">117.60</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">110.41</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain shortcomings are inherent in the method of analysis presented in
the gap table. For example, although certain assets and liabilities may have
similar maturities or periods of repricing, they may react in different degrees
to changes in market interest rates. Additionally, certain assets, such as
adjustable-rate loans, have features that restrict changes in interest rates,
both on a short-term basis and over the life of the asset. More importantly,
changes in interest rates, prepayments and early withdrawal levels may deviate
significantly from those assumed in the calculations in the table. As a result
of these shortcomings, we focus more on earnings at risk simulation modeling
than on gap analysis. Even though the gap analysis reflects a ratio of
cumulative gap to total assets within acceptable limits, the earnings at risk
simulation modeling is considered by management to be more informative in
forecasting future income at risk.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finally, we also monitor core funding utilization in each interest rate
scenario as well as market value of equity. These measures are used to
evaluate long-term interest rate risk beyond the two-year planning horizon.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Aggregate Contractual Obligations</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table represents our on and off-balance sheet aggregate
contractual obligations, other than deposit liabilities, to make future
payments to third parties as of the date specified:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>As of December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>One Year To Three</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Over Three Years To</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Less than One Year</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Five Years</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Over Five Years</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(in thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">FHLB advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Junior subordinated debenture</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,393</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">54,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">69
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Off-balance Sheet Arrangements</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the ordinary course of business, we provide various forms of credit
lines to meet the financing needs of our customers. These commitments, which
have a term of less than one year, represent a credit risk and are not
represented in any form on our balance sheets.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, 2002, and 2001, we had commitments to extend
credit of $152.7&nbsp;million, $135.0&nbsp;million, and $103.0&nbsp;million, respectively.
These commitments included standby letters of credit of $2.7&nbsp;million, $2.7
million, and $1.9&nbsp;million, for 2003, 2002 and 2001, respectively, and
commercial letters of credit of $977,000, $1.3&nbsp;million, and $744,000 for the
same periods.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effect on our revenues, expenses, cash flows and liquidity of the
unused portions of these commitments cannot reasonably be predicted because
there is no guarantee that the lines of credit will be used. For more
information regarding our off-balance sheet arrangements, see <I>&#147;Note 24-
Financial Instruments with Off-Balance-Sheet Risk&#148; </I>to our consolidated
financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Recent Accounting Pronouncements</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, SFAS No.&nbsp;132 (revised), <I>Employers&#146; Disclosures about
Pensions and Other Postretirement Benefits</I>, was issued. SFAS No.&nbsp;132 (revised)
prescribes employers&#146; disclosures about pension plans and other postretirement
benefit plans; it does not change the measurement or recognition of those
plans. The statement retains and revises the disclosure requirements contained
in the original SFAS No.&nbsp;132. It also requires additional disclosures about
the assets, obligations, cash flows and net periodic benefit cost of
defined-benefit pension plans and other postretirement benefit plans. The
statement generally is effective for fiscal years ending after December&nbsp;15,
2003. The adoption of SFAS No.&nbsp;132 (revised)&nbsp;had no effect on our financial
statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, the Accounting Standards Executive Committee issued
Statement of Position 03 -3 (SOP 03-3), <I>Accounting for Certain Loans or Debt
Securities Acquired in a Transfer</I>. This statement addresses accounting for
differences between contractual cash flows and cash flows expected to be
collected from an investor&#146;s initial investment in loans or debt securities
acquired in a transfer if those differences are attributable, at least in part,
to credit quality. SOP 03-3 does not apply to loans originated by the entity.
SOP 03-3 limits the yield that may be accreted (accretable yield) to the excess
of the investor&#146;s estimate of undiscounted expected principal, interest, and
other cash flows (cash flows expected at acquisition to be collected) over the
investor&#146;s initial investment in the loan. SOP 03-3 requires that the excess of
contractual cash flows over cash flows expected to be collected (nonaccretable
difference) not be recognized as an adjustment of yield, loss accrual, or
valuation allowance. SOP 03-3 prohibits investors from displaying accretable
yield and nonaccretable difference in the balance sheet. Subsequent increases
in cash flows expected to be collected generally should be recognized
prospectively through adjustment of the loan&#146;s yield over its remaining life.
Decreases in cash flows expected to be collected should be recognized as
impairment. SOP 03-3 prohibits &#147;carrying over&#148; or creation of valuation
allowances in the initial accounting of all loans acquired in a transfer that
are within the scope of this statement. The prohibition of the valuation
allowance carryover applies to the purchase of an individual loan, a pool of
loans, a group of loans, and loans acquired in a purchase business combination.
SOP 03-3 is effective for loans acquired in fiscal years beginning after
December&nbsp;15, 2004. Early adoption is encouraged. We elected to defer the
adoption of SOP 03-3 until the year ending December&nbsp;31, 2005.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the fourth quarter of 2003, the Company adopted FASB&#146;s Emerging
Issues Task Force Issue No.&nbsp;03-1 &#147;The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments&#148; (EITF 03-1). EITF 03-1
provides new guidance regarding impairment accounting on debt and equity
securities carried at amounts higher than the securities&#146; fair values and
disclosure of additional information about unrealized losses. The initial
adoption of EITF 03-1 resulted in additional disclosures in our financial
statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS No.&nbsp;150, <I>Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity</I>, was issued in May&nbsp;2003. This
statement establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. The statement also includes required disclosures for financial
instruments within its scope. For us, the statement was effective for
instruments entered into or modified after May&nbsp;31, 2003 and otherwise will be
effective as of January&nbsp;1, 2004, except for mandatorily


<P align="center" style="font-size: 10pt">70
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">redeemable financial instruments. For certain mandatorily redeemable
financial instruments, the statement will be effective for us on January&nbsp;1,
2005. The effective date has been deferred indefinitely for certain other
types of mandatorily redeemable financial instruments. This statement did not
have a material impact on our financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2003, SFAS No.&nbsp;149, <I>Amendment of Statement 133 on Derivative
Instruments and Hedging Activities</I>, was issued. SFAS No.&nbsp;149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No.&nbsp;133, <I>Accounting for Derivative Instruments and Hedging Activities</I>. SFAS No.
149 (1)&nbsp;clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative discussed in paragraph 6(b)
of SFAS No.&nbsp;133, (2)&nbsp;clarifies when a derivative contains a financing
component, (3)&nbsp;amends the definition of an underlying to conform it to language
used in FIN No.&nbsp;45, <I>Guarantor&#146;s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others</I>, and (4)
amends certain other existing pronouncements. Those changes will result in more
consistent reporting of contracts as either derivatives or hybrid instruments.
SFAS No.&nbsp;149 is effective for contracts entered into or modified after June&nbsp;30,
2003, with certain exceptions, and for hedging relationships designated after
June&nbsp;30, 2003. In addition, except for certain situations, all provisions of
this statement are to be applied prospectively. Also, the provisions related to
forward purchases or sales of when-issued securities or other securities that
do not yet exist, should be applied to both existing contracts and new
contracts entered into after June&nbsp;30, 2003. The adoption of SFAS No.&nbsp;149 did
not have an impact on our financial condition or results of operations for the
year ended December&nbsp;31, 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2003, the FASB issued FIN No.&nbsp;46, <I>Consolidation of Variable
Interest Entities</I>. The FASB&#146;s stated intent in issuing FIN No.&nbsp;46 was to
clarify the application of Accounting Research Bulletin No.&nbsp;51, <I>Consolidated
Financial Statements</I>, to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN No.&nbsp;46
requires an enterprise to consolidate a variable interest entity (as defined in
FIN No.&nbsp;46) if that enterprise has a variable interest (or combination of
variable interests) that will absorb a majority of the entity&#146;s expected losses
if they occur, receive a majority of the entity&#146;s expected returns if they
occur, or both. In December&nbsp;2003, the FASB issued a revised FIN No.&nbsp;46 (FIN No.
46R), which attempts to clarify the guidance in the original interpretation.
FIN No.&nbsp;46 applies to variable interest entities created after January&nbsp;31,
2003. FIN No.&nbsp;46 also applies to all variable interest entities created prior
to February&nbsp;1, 2003 that are considered to be special-purpose entities (as
defined in FIN No.&nbsp;46R) as of December&nbsp;31, 2003. FIN No.&nbsp;46R must be applied to
all variable interest entities no later than the end of the first reporting
period that ends after March&nbsp;15, 2004. Certain variable interest entities that
are qualifying special purpose entities subject to the reporting requirements
for SFAS No.&nbsp;140, <I>Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities</I>, are not required to be consolidated under
the provisions of FIN No.&nbsp;46. At December&nbsp;31, 2003, we had two wholly owned
statutory trusts that issued trust preferred securities. Prior to our adoption
of FIN No.&nbsp;46R, the statutory trusts were consolidated subsidiaries. However,
effective December&nbsp;31, 2003 we adopted the provisions of FIN No.&nbsp;46R, requiring
the deconsolidation of these trusts.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2002, SFAS No.&nbsp;148, <I>Accounting for Stock-Based Compensation </I>-
<I>Transition and Disclosure, an amendment of FASB Statement No.&nbsp;123</I>, was issued.
This statement amends SFAS No.&nbsp;123, <I>Accounting for Stock-Based Compensation</I>, to
provide alternative methods of transition for a voluntary change to the fair
value method of accounting for stock-based employee compensation. In addition,
SFAS No.&nbsp;148 amends the disclosure requirements of SFAS No.&nbsp;123 to require
prominent disclosures in both annual and interim financial statements. We have
included disclosures required by this standard in the notes to our consolidated
financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2002, Financial Accounting Standards Board Interpretation No.
45 (FIN 45), <I>Guarantor&#146;s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness to Others</I>, an interpretation of
SFAS No.&nbsp;5, 57, and 107 and a rescission of FIN 34, was issued. This
interpretation enhances the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under guarantees
issued. The interpretation also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of
the Interpretation were applicable to guarantees issued or modified after
December&nbsp;31, 2002 and the


<P align="center" style="font-size: 10pt">71
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">disclosure requirements were effective for financial statements of interim
or annual periods ending after December&nbsp;15, 2002. This statement did not have
a material impact on our financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2002, SFAS No.&nbsp;146, <I>Accounting for Costs Associated with Exit or
Disposal Activities</I>, was issued. SFAS No.&nbsp;146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF)&nbsp;Issue No.&nbsp;94-3, <I>Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity</I>. The provisions of SFAS No.&nbsp;146 were effective for exit or
disposal activities initiated after December&nbsp;31, 2002, with early application
encouraged. The adoption of SFAS No.&nbsp;146 had no effect on our financial
statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2002, SFAS No.&nbsp;145, <I>Rescission of FASB Statements No.&nbsp;4, 44, and
64, Amendment of FASB Statement No.&nbsp;13, and Technical Corrections</I>, was issued.
SFAS No.&nbsp;145 amends existing guidance on reporting gains and losses on the
extinguishment of debt to prohibit the classification of the gain or loss as
extraordinary, as the use of such extinguishments have become part of the risk
management strategy of many companies. SFAS No.&nbsp;145 also amends SFAS No.&nbsp;13,
<I>Accounting for Leases</I>, to require sale-leaseback accounting for certain lease
modifications that have economic effects similar to sale-leaseback
transactions. The provisions of SFAS No.&nbsp;145 related to the rescission of SFAS
No.&nbsp;4, <I>Reporting Gains and Losses from Extinguishment of Debt</I>, were applied in
fiscal years beginning after May&nbsp;15, 2002. The provisions of SFAS No.&nbsp;145
related to SFAS No.&nbsp;13 were effective for transactions occurring after May&nbsp;15,
2002. The adoption of SFAS No.&nbsp;145 had no effect on our financial statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2001, Financial Accounting Standards Board SFAS No.&nbsp;143,
<I>Accounting for Asset Retirement Obligations</I>, was issued. SFAS No.&nbsp;143 requires
us to record the fair value of an asset retirement obligation as a liability in
the period in which we incur a legal obligation associated with the retirement
of tangible long-lived assets that result from the acquisition, construction,
development and/or normal use of the assets. We also would record a
corresponding asset that is depreciated over the life of the asset. Subsequent
to the initial measurement of the asset retirement obligation, the obligation
would be adjusted at the end of each period to reflect the passage of time and
changes in the estimated future cash flows underlying the obligation. We were
required to adopt SFAS No.&nbsp;143 on January&nbsp;1, 2003. The adoption of SFAS No.
143 had no effect on our financial statements.



<P align="center" style="font-size: 10pt">72
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="412"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>MANAGEMENT</B>



<P align="left" style="font-size: 10pt"><B>Executive Officers and Directors</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information concerning our directors and
executive officers as of May&nbsp;3, 2004.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Position Held with</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Age</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Position Held with Eurobank</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>EuroBancshares</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rafael Arrillaga-Torr&#233;ns, Jr., Esq.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Chairman of the
Board, President and Chief
Executive Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Class&nbsp;C Director,
Chairman of the
Board, President
and Chief Executive
Officer</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yadira R. Mercado
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President,
Chief Financial Officer
and Corporate Secretary
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice
President, Chief
Financial Officer
and Corporate
Secretary</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jorge E. Sep&#250;lveda-Estrada
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and
Treasurer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice
President and
Treasurer</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Pedro Feliciano Ben&#237;tez
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">62</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Vice Chairman
of the Board
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Class&nbsp;C Director
and Vice Chairman</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James I. Thomson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President,
Risk Management and Chief
Lending Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Luis S. Suau Hernandez
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President<BR>
San Juan-Metropolitan Area
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fausto Pe&#241;a Villegas
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President<BR>
Northern Region
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ricardo X. Pou Vendrell
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">34</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President<BR>
Southern Region
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Roberto Carreras Sosa
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President<BR>
Eastern Region
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jaime Noble Fern&#225;ndez
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">53</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President
EuroLease, a division of
Eurobank
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Juan Ram&#243;n G&#243;mez-Cu&#233;tara Aguilar
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director<SUP>(1)</SUP>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Class&nbsp;B Director<SUP>(1)</SUP></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Antonio R. Pav&#237;a Bibiloni
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Class&nbsp;B Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Pl&#225;cido Gonz&#225;lez C&#243;rdova
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">82</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Class&nbsp;C Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jorge Calder&#243;n Drowett
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">68</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Class&nbsp;A Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ricardo Levy Echeand&#237;a
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Class&nbsp;A Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Diana L&#243;pez-Feliciano, Esq.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Class&nbsp;A Director</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">William Torres Torres
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Class&nbsp;B Director</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Juan Ram&#243;n G&#243;mez-Cu&#233;tara Aguilar was elected as a director at our
April&nbsp;26, 2004 annual stockholders meeting. He has agreed to serve
as a director of both EuroBancshares and Eurobank pending approval
by the Commissioner of Financial Institutions of Puerto Rico.</TD>
</TR>

</TABLE>





<P align="center" style="font-size: 10pt">73
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Rafael Arrillaga-Torr&#233;ns, Jr. Esq. </I>Mr.&nbsp;Arrillaga has served as Chairman
of Eurobank&#146;s Board of Directors and President and Chief Executive Officer of
Eurobank since 1993. He also has served in those same capacities with
EuroBancshares since 2002. Before being named President and Chief Executive
Officer of Eurobank, Mr.&nbsp;Arrillaga practiced law from 1974 until 1993,
specializing in banking, tax and corporate law. Mr.&nbsp;Arrillaga was involved in
the organization of Eurobank, and has served as a director of Eurobank since
1979.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Yadira R. Mercado</I>. Ms.&nbsp;Mercado currently serves as our Executive Vice
President, Chief Financial Officer and Corporate Secretary, positions she has
held since 1993. She served as Senior Vice President of Finance and Operations
at Eurobank from 1991 to 1993. Prior to joining Eurobank in 1991, Ms.&nbsp;Mercado
held various executive officer positions with several banking institutions in
Puerto Rico.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Jorge E. Sep&#250;lveda-Estrada</I>. Mr.&nbsp;Sep&#250;lveda-Estrada has served as
Eurobank&#146;s Senior Vice President-Treasurer since 1993, overseeing Eurobank&#146;s
management and investment strategies, and has served in the same capacity with
EuroBancshares since 2002. He has over thirty years of banking experience,
including previous experience as a financial consultant, bank treasurer and
investment officer.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Pedro Feliciano Ben&#237;tez. </I>Mr.&nbsp;Feliciano has been a member of the Board of
Directors of Eurobank since 1999 and has served as a director and Vice Chairman
of the Board of EuroBancshares since 2002. Mr.&nbsp;Feliciano has served as
President of Las Piedras Construction Corp., a civil works construction
company, since he founded the company in 1970.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>James I. Thomson</I>. Mr.&nbsp;Thomson serves as Eurobank&#146;s Executive Vice
President, Risk Management and Chief Lending Officer, positions he has held
since 1999. Prior to joining Eurobank, Mr.&nbsp;Thomson worked for the Royal Bank
of Canada beginning in 1968 and last served as Puerto Rico&#146;s Regional Manager
from 1996 to 1999.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Luis S. Suau Hernandez</I>. Mr.&nbsp;Suau currently serves as Eurobank&#146;s Senior
Vice President for the San Juan-Metropolitan Region, a position he has held
since 2003. He previously served as Vice President and Manager of our San Juan
branch office from 1997 to 2003. Mr.&nbsp;Suau has over 30&nbsp;years of experience in
the banking industry.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Fausto Pe&#241;a Villegas</I>. Mr.&nbsp;Pe&#241;a currently serves as Eurobank&#146;s Senior Vice
President for the Northern Region, a position he has held since 2001. He
previously served as Assistant Vice President for Banco Santander de Puerto
Rico from 1997 to 2001. Mr.&nbsp;Pe&#241;a has over 25&nbsp;years of experience in the
banking industry, including officer positions with Banco Central Hispano Puerto
Rico and Banco Santander de Puerto Rico.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ricardo X. Pou Vendrell. </I>Mr.&nbsp;Pou currently serves as Eurobank&#146;s Senior
Vice President for the Southern Region, a position he has held since 2003.
Previously, Mr.&nbsp;Pou served as President of Banco Financiero de Puerto Rico from
2001 through 2002. In 2002, Eurobank acquired Banco Financiero. Prior to
working at Banco Financiero, Mr.&nbsp;Pou received his MBA from the University of
Wisconsin-Madison in May of 2001. Mr.&nbsp;Pou is also certified public accountant
and a certified valuation analyst.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Roberto Carreras Sosa</I>. Mr.&nbsp;Carreras is Eurobank&#146;s Senior Vice President
for the Eastern Region, a position he has held since 2002. Mr.&nbsp;Carreras has
over 25&nbsp;years of banking experience including positions with the Banco Popular
de Puerto Rico from 1997 to 2001 and Roig Commercial Bank from 1988 to 1997.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Jaime Noble Fern&#225;ndez. </I>Mr.&nbsp;Noble currently serves as Eurobank&#146;s Senior
Vice President of EuroLease, a division of Eurobank, a position he has held
since 2000. In 1999, he was a consultant to Eurobank. Prior to joining
Eurobank, Mr.&nbsp;Noble served as Vice President of First Leasing, a division of
Firstbank of Puerto Rico, from 1998 to 2000 and as President of ELBON Leasing
Co., Inc. from 1995 to 1998. Mr.&nbsp;Noble has 29&nbsp;years of experience in the
leasing business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Juan Ram&#243;n G&#243;mez-Cu&#233;tara Aguilar</I>. Mr.&nbsp;G&#243;mez-Cu&#233;tara was appointed to our
Board to fill the vacancy left by the resignation of his father, Juan Ram&#243;n
G&#243;mez-Cu&#233;tara Fern&#225;ndez in January&nbsp;2004 and was elected to our Board at our
annual stockholders meeting in April&nbsp;2004. Mr.&nbsp;G&#243;mez-Cu&#233;tara was also
appointed to serve on the Board of Eurobank. He has agreed to serve on our
Board pending regulatory approval from the Commissioner of Financial
Institutions of Puerto Rico. Mr.&nbsp;G&#243;mez-Cu&#233;tara is currently the Deputy General
Manager of Risi, S.A., a


<P align="center" style="font-size: 10pt">74
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">Spanish company involved in the manufacture and processing of snack foods,
and he has served in that capacity since 2003. Prior to joining Risi, he was
an auditor with PricewaterhouseCoopers in Madrid, Spain from 2001 to 2003. Mr.
G&#243;mez-Cu&#233;tara received his degree in business administration from the
Universidad CEU San Pablo in Madrid, Spain in 2001.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Antonio R. Pav&#237;a Bibiloni</I>. Mr.&nbsp;Pav&#237;a has been a member of the Board of
Directors of Eurobank since 1998 and has served as a director of EuroBancshares
since 2002. Mr.&nbsp;Pav&#237;a has held a number of senior executive and management
positions in various financial institutions. He currently serves as President
of Bartolo, Inc., a large gasoline station operations company, and has held
this position since 1996.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Pl&#225;cido Gonz&#225;lez C&#243;rdova. </I>Mr.&nbsp;Gonz&#225;lez has been a member of the Board of
Directors of Eurobank since 1997 and has served as a director of EuroBancshares
since 2002. Prior to joining Eurobank&#146;s Board of Directors, Mr.&nbsp;Gonz&#225;lez was
a founder and director of Banco de Comercio, a full service commercial bank in
Puerto Rico that was acquired by Eurobank in 1997.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Jorge Calder&#243;n Drowett</I>. Mr.&nbsp;Calder&#243;n has been a member of the Board of
Directors of Eurobank since 1997 and has served as a director of EuroBancshares
since 2002. Mr.&nbsp;Calder&#243;n currently serves as President of Calder&#243;n &#038;
Asociados, Inc., a property and management developer, and has served in that
position since 1998. Previously, he served as Vice President of Finance for
San Juan Cement Company, Inc. from 1974 until 1996. He is also a certified
public accountant.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ricardo Levy Echeand&#237;a</I>. Mr.&nbsp;Levy has been a member of our Board of
Directors and a member of the Board of Directors of Eurobank since 2002.
Currently, he is President of Francisco Levy Hijos, Inc., a general contractor
and developer, and has served in that capacity since 2002. From 1999 until
2002, Mr.&nbsp;Echeand&#237;a served as Executive Vice President and Treasurer of
Francisco Levy Hijos, Inc.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Diana L&#243;pez-Feliciano, Esq</I>. Ms.&nbsp;L&#243;pez-Feliciano has been a member of the
Board of Directors of Eurobank since 2001 and has served as a director of
EuroBancshares since 2002. Ms.&nbsp;L&#243;pez-Feliciano is an attorney in private
practice and has been an assistant professor of environmental law at the
Eugenio Maria de Hofstra Law School since 1999. She has also been a professor
of environmental law at the University of Puerto Rico School of Civil
Engineering since 2002.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>William Torres Torres</I>. Mr.&nbsp;Torres has been a member of the Board of
Directors of Eurobank since 1999 and has served as a director of EuroBancshares
since 2002. Mr.&nbsp;Torres, a certified public accountant, is the managing partner
of Torres CPA Group, the accounting firm he founded in 1981.


<P align="left" style="font-size: 10pt"><B>Composition of the Board</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation provides that the
terms of office of the members of our Board of Directors be divided into three
classes, Class&nbsp;A, Class&nbsp;B and Class&nbsp;C, each of the members of which will serve
for a staggered three-year term. The terms of the current Class&nbsp;A, B and C
directors are set to expire at the annual meeting of stockholders in 2006,
2007, and 2005, respectively. Our amended and restated bylaws authorize our
Board of Directors to fix the number of directors at not less than seven nor
more than 11. The Board of Directors currently has eight members and one
director-elect, Mr.&nbsp;G&#243;mez-Cu&#233;tara.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors of Eurobank are elected by EuroBancshares, as the sole
stockholder of Eurobank, each year and they hold office for a term of one year
or until their successors are chosen and qualified. All of our directors are
also currently directors of Eurobank.


<P align="left" style="font-size: 10pt"><B>Corporate Governance Reforms</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After our registration statement, of which this prospectus is a part, is
declared effective by the SEC and our common stock is approved for quotation on
the Nasdaq National Market, we will become subject to a host of new corporate
governance and related requirements under the Sarbanes-Oxley Act of 2002
(&#147;Sarbanes-Oxley&#148;), the SEC&#146;s rules implementing Sarbanes-Oxley and the enhanced corporate
governance listing standards of The Nasdaq Stock Market, Inc.


<P align="center" style="font-size: 10pt">75
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sarbanes-Oxley, which was enacted on July&nbsp;30, 2002 to address questionable
corporate and accounting practices, imposes on public companies a variety of
new requirements, prohibitions and disclosure obligations, including, but not
limited to:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certifications by the chief executive officer and chief
financial officer as to the accuracy and adequacy of periodic
reports filed with the SEC;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>implementation and evaluation of the company&#146;s systems of
disclosure controls and procedures and internal control over
financial reporting;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>auditing related restrictions, including prohibition on
auditors providing certain non-audit services to public companies,
mandatory audit partner rotation and restrictions on hiring
employees of former auditors;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>independence requirements and increased responsibilities for
the audit committee, including responsibility for the engagement of
the company&#146;s auditor, pre-approval of all services provided by the
auditor, establishment of procedures for addressing
accounting-related complaints and company disclosure of whether any
member of the audit committee qualifies as an &#147;audit committee
financial expert&#148;;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disclosure of whether the company has a code of ethics
applicable to the chief executive officer and senior financial
officers; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prohibition on the extension of personal loans to executive
officers and directors (subject to certain exemptions).</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, The Nasdaq Stock Market, Inc. implemented a number of
additional listing requirements concerning director independence, board
nominations, executive compensation and related corporate governance matters.


<P align="left" style="font-size: 10pt"><B>Corporate Governance Principles and Board Matters</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are committed to having sound corporate governance principles, both at
the holding company level and at Eurobank. Such principles are essential to
running our business efficiently and to maintaining our integrity in the
marketplace. We have adopted a set of Corporate Governance Guidelines that
embodies these principles. EuroBancshares and Eurobank have also adopted a
Code of Business Conduct and Ethics that applies to all officers, directors,
employees and consultants, in accordance with the applicable Nasdaq rules. In
addition, our Chief Executive Officer and all senior financial officers,
including the Chief Financial Officer, are bound by a separate Code of Ethics
for the Chief Executive Officer and Senior Financial Officers that complies
with Item&nbsp;406 of Regulation&nbsp;S-K of the Securities Exchange Act of 1934 (the
&#147;Exchange Act&#148;) and with the applicable Nasdaq rules. Our Corporate Governance
Guidelines, Code of Business Conduct and Ethics and Code of Ethics for the
Chief Executive Officer and Senior Financial Officers will be posted on our
Internet website under the Investor Relations page as soon as practicable.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Director Compensation</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Meetings of our Board of Directors are held regularly each quarter.
Directors are not compensated for attending meetings of the Board of Directors
of EuroBancshares. Meetings of the Board of Directors of Eurobank are held
regularly each month. Directors receive fees of $1,250 per meeting for
attendance at a meeting of the Board of Directors of Eurobank. The Board of
Directors of Eurobank also has several committees, and the directors receive
$400 for attending each committee meeting or special meeting of the Board of
Directors. Directors who are employees or officers of Eurobank do not receive
fees for attending Board of Directors or committee meetings.


<P align="center" style="font-size: 10pt">76
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Board Independence</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has determined that each of our current directors,
except Messrs.&nbsp;Arrillaga, Feliciano and Torres, is independent under the
applicable Nasdaq rules. Mr.&nbsp;Arrillaga is an executive officer of both
EuroBancshares and Eurobank. Mr.&nbsp;Torres is the owner of certain real estate of
which portions are leased to Eurobank. During the fiscal year 2003, a
corporation controlled by Mr.&nbsp;Torres received lease payments from us totaling
$142,000. Another corporation controlled equally by Mr.&nbsp;Torres and Mr.
Feliciano received lease payments from the Bank in the amount of $96,000 for
the years 2001, 2002 and 2003. For additional information, see the section of
this prospectus captioned <I>&#147;Certain Relationships and Related Transactions.&#148;</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Director Qualifications</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our directors should have the highest professional and
personal ethics and values, consistent with our longstanding values and
standards. They should have broad experience at the policy-making level in
business, government or banking. They should be committed to enhancing
stockholder value and should have sufficient time to carry out their duties and
to provide insight and practical wisdom based on experience. Their service on
other boards of public companies should be limited to a number that permits
them, given their individual circumstances, to perform responsibly all director
duties for us. Each director must represent the interests of all stockholders.
When considering potential director candidates, the Board also considers the
candidate&#146;s character, judgment, diversity, age, skills, including financial
literacy and experience in the context of our needs and the needs of the Board
of Directors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Independent Director Meetings</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;15, 2004, the independent members of our Board of Directors
resolved that, in the future, they will meet regularly, separately from the
full Board of Directors and outside the presence of our management in executive
session.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Stockholder Communications with our Board of Directors</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has established a process for stockholders to
communicate with the Board of Directors or with individual directors.
Stockholders who wish to communicate with our Board of Directors or with
individual directors should direct written correspondence to our Corporate
Secretary at our principal executive offices located at 270 Mu&#241;oz Rivera
Avenue, San Juan, Puerto Rico 00918. Any such communication must contain:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a representation that the stockholder is a holder of record
of our capital stock;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the name and address, as they appear on our books, of the
stockholder sending such communication; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the class and number of shares of our capital stock that are
beneficially owned by such stockholder.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Corporate Secretary will forward such communications to our Board of
Directors or the specified individual director to whom the communication is
directed unless such communication is unduly hostile, threatening, illegal or
similarly inappropriate, in which case the Corporate Secretary has the
authority to discard the communication or to take appropriate legal action
regarding such communication.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Board Structure and Committee Composition</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this prospectus, our Board has nine directors and the
following committees: Audit; Compensation; Nominating; Compliance and Strategic
Planning. In addition, Eurobank has the following committees: Credit; Trust;
and Asset/Liability Management.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The membership during the last fiscal year and the function of each of the
committees are described below. Our Board of Directors meets at least
quarterly and the Board of Directors of Eurobank meets at least once each
month. During the fiscal year 2003, our Board held nine meetings and the
Eurobank Board held 12 meetings. Each director attended at least 75% of the
total of all Board and applicable committee meetings. Directors are encouraged
to attend annual meetings of our stockholders. All directors attended the last
annual meeting of our stockholders.


<P align="center" style="font-size: 10pt">77
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Committees of EuroBancshares</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Audit Committee</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has established an Audit Committee to assist the
Board in fulfilling its responsibilities for general oversight of the integrity
of our consolidated financial statements, compliance with legal and regulatory
requirements, the independent auditors&#146; qualifications and independence, the
performance of independent auditors and our internal audit function, and risk
assessment and risk management. The duties of the Audit Committee include:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>appointing, evaluating and determining the compensation of our independent auditors;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing and approving the scope of the annual audit, the audit fee and the financial statements;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing disclosure controls and procedures, internal
control over financial reporting, the internal audit function and
corporate policies with respect to financial information;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing other risks that may have a significant impact on our financial statements;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>preparing the Audit Committee report for inclusion in the annual proxy statement;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>establishing procedures for the receipt, retention and
treatment of complaints regarding accounting and auditing matters;
and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evaluating annually the Audit Committee charter and the
committee&#146;s performance.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee works closely with management as well as our
independent auditors. The Audit Committee has the authority to obtain advice
and assistance from, and receive appropriate funding from us for, outside
legal, accounting or other advisors as the Audit Committee deems necessary to
carry out its duties.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has adopted a written charter for the Audit
Committee meeting applicable standards of the SEC and Nasdaq. The members of
the Audit Committee are Jorge Calder&#243;n Drowett, Antonio R. Pav&#237;a Bibiloni and
Diana L&#243;pez-Feliciano. Mr.&nbsp;Calder&#243;n serves as Chairman of the Audit Committee.
The Audit Committee meets regularly and held 10 meetings during fiscal year
2003. The Board of Directors has determined that the Audit Committee satisfies
the independence and other composition requirements of the SEC and Nasdaq. Our
Board has determined that Mr.&nbsp;Calder&#243;n qualifies as an &#147;audit committee
financial expert&#148; under Item 401(h) of Regulation&nbsp;S-K under the Exchange Act,
and has the requisite accounting or related financial expertise required by
applicable Nasdaq rules.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Compensation Committee</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Compensation Committee discharges the Board&#146;s responsibilities
relating to compensation of our Chief Executive Officer, other executive
officers and directors; produces an annual report on executive compensation for
inclusion in our annual proxy statement; and provides general oversight of
compensation structure, including our equity compensation plans and benefit
programs. Other specific duties and responsibilities of the Compensation
Committee include:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing and approving objectives relevant to executive
officer compensation;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evaluating performance and determining the compensation of
our Chief Executive Officer and other executive officers in
accordance with those objectives (salary revisions for all of our
executive officers and employees are made every 12&nbsp;months);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approving employment agreements for executive officers;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approving and amending our stock option plans (subject to stockholder approval, if required);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approving any changes to nonequity-based benefit plans
involving a material financial commitment by us or Eurobank,</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recommending to the Board the compensation for our directors and Eurobank&#146;s directors;</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">78
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evaluating human resources and compensation strategies; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evaluating annually the Compensation Committee charter and the Committee&#146;s performance.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has adopted a written charter for our Compensation
Committee. The Compensation Committee is composed of three directors, Pedro
Feliciano Ben&#237;tez, Pl&#225;cido Gonz&#225;lez C&#243;rdova and Ricardo Levy Echeand&#237;a, each of
whom the Board has determined is independent under applicable rules and
regulations of the SEC, Nasdaq and the Internal Revenue Service. Mr.&nbsp;Feliciano
serves as the Committee&#146;s Chairman. The Compensation Committee held two
meetings during the fiscal year 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Nominating and Governance Committee</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board has established a Nominating and Governance Committee for the
purpose of reviewing all Board-recommended and stockholder-recommended
nominees, determining each nominee&#146;s qualifications and making a recommendation
to the full Board as to which persons should be our Board&#146;s nominees. Our
Board has adopted a written charter for the Nominating and Governance
Committee. This Committee is composed of three directors, Pedro Feliciano
Ben&#237;tez, Pl&#225;cido Gonz&#225;lez C&#243;rdova and Ricardo Levy Echeand&#237;a, each of whom the
Board has determined is independent under the Nasdaq rules. The duties and
responsibilities of the Nominating and Governance Committee include:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>identifying and recommending to our Board individuals
qualified to become members of our Board and to fill vacant Board
positions;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recommending to our Board the director nominees for the next annual meeting of stockholders;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recommending to our Board director committee assignments;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing and evaluating succession planning for our Chief
Executive Officer and other executive officers;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>monitoring the continuing education program for our
directors;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>developing and recommending an annual self-evaluation process
for our Board and its committees; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evaluating annually the Nominating and Governance Committee
charter and the Committee&#146;s performance.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors believes that it is necessary that the majority of
our Board of Directors be comprised of independent directors and that it is
desirable to have at least one audit committee financial expert serving on the
Audit Committee. The Nominating and Governance Committee considers these
requirements when recommending Board nominees. Our Nominating and Governance
Committee utilizes a variety of methods for identifying and evaluating nominees
for director. Our Nominating and Governance Committee will regularly assess
the appropriate size of the Board, and whether any vacancies on the Board are
expected due to retirement or other circumstances. When considering potential
director candidates, the Nominating and Governance Committee also considers the
candidate&#146;s character, judgment, age, skills, including financial literacy, and
experience in the context of our needs, the needs of Eurobank and the existing
directors. While the Nominating and Governance Committee has the authority to
do so, we have not, as of the date of this prospectus, paid any third party to
assist in identifying and evaluating Board nominees.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has established a procedure whereby our
stockholders can nominate potential director candidates. The Nominating and
Governance Committee will consider director candidates recommended by our
stockholders in a similar manner as those recommended by members of management
or other directors, provided the stockholder submitting such nomination has
complied with procedures set forth in our amended and restated bylaws. No
candidate for election to our Board has been recommended within the preceding
year by a beneficial owner of 5% or more of our common stock.


<P align="center" style="font-size: 10pt">79
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Compliance Committee</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compliance Committee reviews the compliance of EuroBancshares and
Eurobank with laws and regulations applicable to bank holding companies and
their subsidiary banks. The members of the Compliance Committee throughout
2003 and as of the date of this prospectus were William Torres Torres, Jorge
Calder&#243;n Drowett, Antonio Pav&#237;a Bibiloni and Rafael Arrillaga-Torr&#233;ns, Jr. Mr.
Torres serves as the Chairman of the Compliance Committee. The Compliance
Committee generally meets at least quarterly. The Compliance Committee held
three meetings during 2003. For additional information, see the section of
this prospectus captioned <I>&#147;Supervision and Regulation.&#148;</I>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Strategic Planning Committee</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board has established a Strategic Planning Committee that is
responsible for delineating our future strategy and business goals. In
addition, it provides general guidance in the development of our strategic
plan. The Strategic Planning Committee also advised our Board of Directors in
its selection of an underwriter for this offering. The members of the
Strategic Planning Committee are William Torres Torres, Antonio Pavi&#225; Bibiloni,
Jorge Calder&#243;n Drowett, Rafael Arrillaga-Torr&#233;ns, Jr. and Yadira R. Mercado.
Mr.&nbsp;Torres serves as the Chairman of the Strategic Planning Committee. During
2003, the Strategic Planning Committee held three meetings.


<P align="left" style="font-size: 10pt"><B>Committees of Eurobank</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Credit Committees</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors&#146; Credit Committee is responsible for Eurobank&#146;s
commercial lending policies and procedures. The Credit Committee also approves
loans from $2.0&nbsp;million to $3.5&nbsp;million, and recommends to the full Board of
Directors loans in excess of $3.5&nbsp;million. Loans in excess of $3.5&nbsp;million are
approved by the full Board of Directors. The members of the Credit Committee
are Rafael Arrillaga-Torr&#233;ns, Jr., Ricardo Levy Echeand&#237;a, Jorge Calder&#243;n
Drowett, Antonio Pav&#237;a Bibiloni and William Torres Torres. Mr.&nbsp;Pav&#237;a serves as
Chairman of the Credit Committee. The Credit Committee meets as often as
necessary, and usually on a bi-weekly basis. In practice, a significant number
of loans in excess of $2.0&nbsp;million are reviewed and approved by the full Board
of Directors of Eurobank. In addition, the Board has delegated to the
executive credit committee lending authority to approve loans between $1.0
million and $2.0&nbsp;million. Messrs.&nbsp;Arrillaga, Thomson, and Suau, together with
Arturo Somohano serve on this committee. This executive credit committee meets
on a daily basis and any three members can review and approve any particular
loan proposal. Further, the President and Chief Lending Officer, jointly, can
approve loans up to $1.0&nbsp;million. Below these threshold levels executives and
managers have been delegated individual lending authority at various levels.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Trust Committee</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors&#146; Trust Committee is responsible for overseeing all
aspects of Eurobank&#146;s trust operations. The Trust Committee is comprised of
Rafael Arrillaga-Torr&#233;ns, Jr., Antonio Pav&#237;a Bibiloni, William Torres Torres
and Ricardo Levy Echeand&#237;a, with Mr.&nbsp;Torres serving as its Chairman. Our Trust
Committee meets as often as necessary, but generally meets quarterly. In 2003,
the Trust Committee held three meetings.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Asset/Liability Management Committee</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eurobank&#146;s Asset/Liability Management Committee is comprised of officers
of Eurobank and includes no members of our Board of Directors. The
Asset/Liability Management Committee meets as necessary, and is primarily
responsible for:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>development and control over the implementation of liquidity
risk and market risk management policies;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review of interest rate and exchange rate movement,
forecasts, and the development of Eurobank&#146;s strategy under specific
market conditions; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>continued improvement of the overall asset/liability
structure of Eurobank.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">80
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In practice, the Asset/Liability Management Committee members meet
informally several times each month and conduct one formal committee meeting
quarterly.


<P align="left" style="font-size: 10pt"><B>Compensation Committee Interlocks and Insider Participation</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of our executive officers serves as a member of the board of
directors or compensation committee, or other committee serving an equivalent
function, of any other entity that has one or more of its executive officers
serving as a member of our Board of Directors or Compensation Committee. None
of the current members of our Compensation Committee has ever been an employee
of ours or any of our subsidiaries.


<P align="left" style="font-size: 10pt"><B>Executive Compensation</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Summary of Cash and Certain Other Compensation</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth all compensation received during the three
years ended December&nbsp;31, 2003 by our Chief Executive Officer and our three
other most highly compensated executives whose total compensation exceeded
$100,000 in such fiscal year. These four officers are referred to as the named
executive officers in this prospectus.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Long-term</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Annual Compensation</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other Annual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Principal Position</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Salary<SUP>(1)</SUP></B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Bonus</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation<SUP>(2)</SUP></B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Rafael Arrillaga-Torr&#233;ns, Jr., Esq.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Chairman of the Board,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">325,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">150,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,625</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">and President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Yadira R. Mercado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Executive Vice President,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">85,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Chief Financial Officer and</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Corporate Secretary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">James I. Thomson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Executive Vice President,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">182,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Risk Management and Chief</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,225</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Lending Officer of Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Jaime Noble Fern&#225;ndez</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Senior Vice President,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">182,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">65,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">EuroLease, a division of</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Amounts shown do not include amounts expended by Eurobank pursuant to plans (including group life and health) that do not
discriminate in scope, terms or operation in favor of the executive officer and that are generally available to all salaried
employees.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Does not include the value of perquisites or other personal benefits because the amount of such benefits does not exceed the
lesser of $50,000 or 10% of total amount of annual salary and bonus of any named individual.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Stock Option Grants in 2003</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information concerning individual grants of
stock options during calendar year 2003 to each of the named executive
officers. Unless otherwise indicated, the exercise prices represent the fair
market value of the common stock on the grant date.


<P align="center" style="font-size: 10pt">81
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amounts shown as potential realizable value represent hypothetical
gains that could be achieved for the respective options if exercised at the end
of the option term. These amounts represent certain assumed rates of
appreciation in the value of our common stock. The 5% and 10% assumed annual
rates of compounded stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of the future price of our common stock. The potential realizable
value is calculated based on the five year term of the option at its time of
grant. It is calculated based on the assumption that our common stock
appreciates at the indicated annual rate compounded annually for the entire
term of the option and that the option is exercised and sold on the last day of
its term for the appreciated stock price. Actual gains, if any, on stock
option exercises depend on the future performance of the our common stock. The
amounts reflected in the table may not necessarily be achieved.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Potential Realizable</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Value of Assumed</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Annual Rates of Stock</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Price Appreciation for</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Granted to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Option Term</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Employees in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Granted</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fiscal 2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Share</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Date</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>5%</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>10%</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Rafael Arrillaga-Torr&#233;ns, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.71</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/15/2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">319,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">402,628</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Yadira R. Mercado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">10.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/15/2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289,892</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">James I. Thomson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/15/2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,628</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,051</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Jaime Noble Fern&#225;ndez</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/15/2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201,314</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Year End 2003 Option Values</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information about stock options exercised in
2003 and options held as of December&nbsp;31, 2003 by each of the named executive
officers. Actual gains on exercise, if any, will depend on the value of our
common stock on the date on which the shares are sold.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="37%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Number of Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Underlying Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Value of Unexercised</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Options at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>In-The-Money Options at</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Acquired</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>December 31, 2003<SUP>(1)</SUP></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>December 31, 2003<SUP>(1)(2)</SUP></B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>on</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Realized</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercisable</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unexercisable</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercisable</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unexercisable</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Rafael Arrillaga-Torr&#233;ns, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">428,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Yadira R. Mercado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">293,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">James I. Thomson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">189,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Jaime Noble Fern&#225;ndez</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">223,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">&#147;Exercisable&#148; refers to those options which were both exercisable and
vested while &#147;Unexercisable&#148; refers to those options which were
unvested.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Value is determined by subtracting the exercise price from the fair
market value of our common stock as of December&nbsp;31, 2003 as determined
by the Board of Directors to be $16.25 and multiplying by the number of
shares underlying the options.</TD>
</TR>

</TABLE>



<P align="left" style="font-size: 10pt"><B>Stock Option Plan</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1997, Eurobank&#146;s Board of Directors adopted a long-term incentive
compensation program in the form of a stock option plan (the &#147;1997 Stock Option
Plan&#148;). Both executive officers and directors were eligible to participate in
the 1997 Stock Option Plan. Under the 1997 Stock Option Plan, a maximum number
of 550,000 shares could be issued upon the exercise of stock options granted
under the plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, our Board of Directors adopted a long-term incentive compensation
plan (the &#147;2002 Stock Option Plan&#148;) that became effective when we became a
holding company for Eurobank. At that time, all of the Eurobank options
granted under the 1997 Stock Option Plan were assumed by EuroBancshares under
the 2002 Stock Option Plan and became options to purchase shares of
EuroBancshares common stock. Under the 2002 Stock Option Plan, a maximum of
750,000 shares of common stock may be issued upon the exercise of options
granted under the plan.


<P align="center" style="font-size: 10pt">82
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">As of March&nbsp;15, 2004, all outstanding options were 100% vested and 578,432
shares of common stock were issuable in connection with the exercise of
outstanding options. Of those shares issuable under outstanding options,
&#091;241,432&#093; shares were subject to options originally granted under the 1997
Stock Option Plan and &#091;337,000&#093; shares were subject to options granted under
the 2002 Stock Option Plan. In addition, &#091;50,000&#093; shares of common stock have
been issued pursuant to the exercise of options granted under the 2002 Stock
Option Plan. Thus, as of March&nbsp;15, 2004, &#091;363,000&#093; shares of our common stock
remained available for option grants under the 2002 Stock Option Plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2002 Stock Option Plan is intended to provide our directors, executive
officers and employees the opportunity to acquire a proprietary interest in the
success of EuroBancshares by granting stock options to such directors,
executive officers and employees. Specifically, the plan is intended to
advance the interests of EuroBancshares by (1)&nbsp;enabling us to attract and
retain the best available individuals for positions of substantial
responsibility; (2)&nbsp;providing additional incentive to such persons by affording
them an opportunity for equity participation in our business; and (3)&nbsp;rewarding
directors, executive officers and employees for their contributions to our
business.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2002 Stock Option Plan is administered by our Compensation Committee.
The Compensation Committee has authority with respect to the stock option plan
to:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adopt, amend and rescind administrative and interpretive rules relating to the plan;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accelerate the time of exercisability of any stock option that has been granted;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>construe the terms of the plan and any related agreement
(including those terms governing eligibility); and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>make all other determinations and perform all other acts
necessary or advisable for administering the plan, including the
delegation of such ministerial acts and responsibilities as the
Compensation Committee deems appropriate.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both &#147;Incentive Stock Options&#148; and &#147;Nonstatutory Options&#148; may be granted
under the 2002 Stock Option Plan from time to time. Incentive Stock Options
are stock options intended to satisfy the requirements of Section&nbsp;1046 of the
Puerto Rico Internal Revenue Code. Nonstatutory Options are stock options that
do not satisfy the requirements of Section&nbsp;1046 of the Puerto Rico Internal
Revenue Code.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our 2002 Stock Option Plan, the aggregate fair market value
(determined as of the date an option is granted) of the shares with respect to
which Incentive Stock Options are exercisable for the first time by any
optionee during any calendar year may not exceed $100,000. Shares acquired
upon the exercise of Nonstatutory Options may not be sold for a period of one
year after such options are exercised.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The option price to be paid upon exercise of an Incentive Stock Option
will not be less than the greater of: (1)&nbsp;the par value per share of our
common stock; or (2)&nbsp;100% of the fair market value per share of our common
stock on the date of the grant of the Incentive Stock Option. The option price
to be paid upon exercise of a Nonstatutory Option will be determined by the
Compensation Committee at the time of grant.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each option (including Incentive Stock Options and Nonstatutory Options)
granted under the 2002 Stock Option Plan expires five years after the date the
option is granted, unless a shorter period is determined by the Compensation
Committee. Each option may be exercised upon such terms and conditions as the
Compensation Committee determines. In making any determination as to whom
options shall be granted, and as to the number of shares to be covered by such
options, the Compensation Committee considers the duties of the respective
employees, their present and potential contributions to our success,
profitability and growth, and such other factors as the Compensation Committee
deems relevant in connection with accomplishing the purposes of our 2002 Stock
Option Plan.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As allowed by SFAS No.&nbsp;123, <I>Accounting for Stock-Based Compensation</I>, and
as amended by SFAS No.&nbsp;148, Accounting for Stock-Based Compensation &#150;
Transition and Disclosure, an amendment of Financial Accounting Standards Board
Statement No.&nbsp;123, we have elected to continue to measure cost for our stock
compensation plan


<P align="center" style="font-size: 10pt">83
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">using the intrinsic value method prescribed by Accounting Principles Board
(APB)&nbsp;Opinion No.&nbsp;25, Accounting for Stock Issued to Employees. Under the
intrinsic value method, compensation cost is the excess, if any, of the quoted
market price of the stock at the grant date or other measurement date over the
amount an employee must pay to acquire the stock. Entities choosing to
continue applying APB Opinion No.&nbsp;25 on employee stock options granted on or
after January&nbsp;1996 must provide pro forma disclosures of the consolidated net
income, as if the fair value method of accounting had been applied. Under this
method, compensation cost is measured at the grant date based on the fair value
of the employee stock option and is recognized ratably over the service period
of the option, which is usually the vesting period.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS No.&nbsp;123 established accounting and disclosure requirements using a
fair value based method of accounting for stock-based employee compensation
plans. The per share fair value of stock options granted during 2003, 2002,
and 2001 was $1.27, $1.60, and $1.68 on the date of grant using the
Black-Scholes option pricing model (excluding a volatility assumption) with the
following weighted average assumptions used for grants in 2003, 2002, and 2001,
respectively: no dividend yield for 2003, 2002, and 2001; risk-free interest
rates of 2.8% for 2003, 4.0% for 2002, and 6.0% for 2001; and expected lives of
five years.


<P align="left" style="font-size: 10pt"><B>Severance Payment Agreements</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1999, we entered into a Severance Payment Agreement with Ms.&nbsp;Yadira R.
Mercado our Executive Vice President, Chief Financial Officer and Corporate
Secretary. On each anniversary of the date of commencement of the Severance
Payment Agreement, the term is automatically extended for an additional
one-year period unless we notify Ms.&nbsp;Mercado not less than 90&nbsp;days prior to an
anniversary date of the agreement, advising her that such agreement will not be
extended. Alternatively, Ms.&nbsp;Mercado&#146;s Severance Payment Agreement will
terminate on the second anniversary of an event constituting a &#147;change in
control.&#148; The Severance Payment Agreement provides for a severance payment to
Ms.&nbsp;Mercado in connection with either (1)&nbsp;an involuntary termination of her
employment after a &#147;change in control&#148; of EuroBancshares, or (2)&nbsp;following
&#147;constructive termination&#148; of her employment subsequent to a &#147;change in
control&#148; of EuroBancshares.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of the Severance Payment Agreement, &#147;constructive
termination&#148; generally includes a material change in the status, authority,
duties, responsibilities, compensation, perquisites, conditions of employment,
or location of employment of the employee from those that existed before the
change in control, or in the event of the employee&#146;s disability. Any claim or
controversy arising out of or relating to the Severance Payment Agreement will
be resolved by arbitration under the Commercial Arbitration Rules of the
American Arbitration Association.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of the Severance Payment Agreement, a &#147;change in control&#148; is
deemed to have occurred if:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any entity, person or group of persons acting in concert
becomes the beneficial owner (within the meaning of Section 13(d) of
the Exchange Act), directly or indirectly, of securities of
EuroBancshares representing more than 25% of the combined voting
power of EuroBancshares or any successor;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effective date of a merger or consolidation of
EuroBancshares with one or more other corporations or banks as a
result of which the holders of our outstanding voting stock
immediately prior to the merger hold less than 66% of the combined
voting power of the surviving or resulting corporation or bank;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effective date of a transfer of all or substantially all
of the property of EuroBancshares to any individual or entity, other
than to an entity of which we own at least 80% of the combined
voting power; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>as a result of, or in connection with, any cash, tender or
exchange offer after a merger, contested election, or other business
combination, or any combination of the foregoing, the services of
the employee are no longer required in his or her present capacity.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To illustrate the potential impact of the Severance Payment Agreement, if
employment during 2004 were terminated under the circumstances set forth in the
Severance Payment Agreement following a change in control, or for &#147;good
reason,&#148; the amount payable to Ms.&nbsp;Mercado, based upon compensation earned
during 2003, would be approximately $540,000.


<P align="center" style="font-size: 10pt">84
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Employment Agreements</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than the Severance Payments Agreement described above, we do not
have any other employment agreements with any of our named executive officers.
All of our named executive officers serve at the pleasure of our Board of
Directors. We do not maintain any &#147;key-man&#148; life insurance policies on any of
our executive officers. If any of these individuals leaves his or her
respective position, this could have a material adverse effect on our business,
financial condition, results of operations, cash flows and/or future prospects.


<P align="left" style="font-size: 10pt"><B>Health and Insurance Benefits</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our full-time officers and employees are provided hospitalization and
major medical insurance. We pay a substantial part of the premiums for these
coverages. All insurance coverage under these plans is provided under group
plans on generally the same basis to all full-time employees. In addition, we
maintain term life insurance, which provides benefits to all employees who have
completed three or more months of full-time employment with us. The terms of
our policy provide benefits equal to three times the employee&#146;s annual base
earnings (exclusive of overtime pay or bonuses) up to a maximum of $300,000.


<P align="left" style="font-size: 10pt"><B>Eurobank Master Trust Retirement Plan Program for Employees</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2000, Eurobank adopted the Eurobank Master Trust
Retirement Plan Program, a defined contribution plan under Section 1165(e) of
the Puerto Rico Internal Revenue Code, covering all full-time employees of
EuroBancshares who have completed three months of service and are 18&nbsp;years of
age or older. We give each prospective eligible employee written notice of his
or her eligibility to participate in the plan in sufficient time to enable each
of them to participate in the plan. Under the provisions of the plan,
employees may contribute up to 10% of their compensation each year after
deducting social security, up to a specific maximum established by law. We
match each employee&#146;s contribution up to 3% of their base compensation that
they contribute to the plan. Participants become vested in our contributions
plus actual earnings on such contributions after three years of service.


<P align="left" style="font-size: 10pt"><B>Restricted Stock Grants</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;26, 2004, our Board voted and agreed to issue 1,850 shares of our
common stock (valued at $16.25 per share) to certain of our officers and
employees in consideration for prior service to us. These stock grants were
effected pursuant to the terms of certain Restricted Stock Purchase Agreements
between us and the officers and employees. Under the terms of these Restricted
Stock Purchase Agreements the stock remains unvested until the 5th anniversary
of the date of the grant. In the event the restricted stock grantee leaves
prior to the 5th anniversary, the restricted stock grantee forfeits all right,
title and interest in the restricted stock. The Restricted Stock Purchase
Agreement also provides for the payment of a one-time cash bonus pursuant to
which we will withhold applicable taxes due as a result of the restricted stock
grant.

<DIV align="left">
<A name="413"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Section&nbsp;402 of the Sarbanes-Oxley Act of 2002, it is now unlawful
for any issuer to extend, renew or arrange for the extension of credit in the
form of a personal loan to or for any director or executive officer of that
issuer. This prohibition does not apply to loans that were made on or prior to
July&nbsp;30, 2002, or certain types of loans described in Section&nbsp;402 that are:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>made available by the issuer in the ordinary course of the issuer&#146;s consumer credit business;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>of a type generally made available by such issuer to the public; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>made by the issuer on market terms, or terms that are no more
favorable than those offered by the issuer to the general public.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;402 also does not apply to loans by an insured depository
institution, if the loan is subject to the insider lending restrictions of
Section 22(h) of the Federal Reserve Act or the Federal Reserve&#146;s Regulation&nbsp;O.


<P align="center" style="font-size: 10pt">85
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our officers, directors and principal stockholders and their
affiliates have had transactions with the Bank, including borrowings and
investments in certificates of deposit. Our management believes that all such
loans and investments have been and will continue to be made in the ordinary
course of business of Eurobank on substantially the same terms, including
interest rates paid and collateral required, as those prevailing at the time
for comparable transactions with unaffiliated persons, and do not involve more
than the normal risk of collectibles or present other unfavorable features.
Therefore, we believe that all of these transactions comply with Section&nbsp;402 of
the Sarbanes-Oxley Act or have been made pursuant to a valid exception from
Section&nbsp;402 of the Sarbanes-Oxley Act. As of December&nbsp;31, 2003, the aggregate
amount of all loans which individually exceed $60,000 to our officers and
directors, members of their immediate families and the firms and corporations
in which they have at least a 100% beneficial interest was approximately $3.5
million.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Two of our directors, William Torres Torres and Pedro Feliciano Ben&#237;tez
are principals in corporations that own certain real estate of which portions
are leased to Eurobank. During the fiscal year 2003, a corporation controlled
by Mr.&nbsp;Torres received lease payments from Eurobank totaling $142,000. Another
corporation controlled equally by Mr.&nbsp;Torres and Mr.&nbsp;Feliciano received lease
payments in the amount of $96,000 for the years 2001, 2002 and 2003. We
believe that the terms of the leases between Eurobank and the corporations
controlled by Mr.&nbsp;Torres and Mr.&nbsp;Feliciano are on an arm&#146;s-length basis. In
addition, we paid $45,000 in 2001 and $49,000 in 2002 to the accounting firm in
which Mr.&nbsp;Torres is a principal for certain accounting services provided to
Eurobank.

<DIV align="left">
<A name="414"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>PRINCIPAL AND SELLING STOCKHOLDERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding beneficial ownership
of our common stock as of May&nbsp;12, 2004 by (1)&nbsp;each stockholder known by us to be
the beneficial owner of more than 5% of the outstanding shares of our common
stock, (2)&nbsp;each of our directors, (3)&nbsp;each of our named executive officers and
(4)&nbsp;all of our directors and named executive officers as a group, and (5)&nbsp;each
selling stockholder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beneficial ownership is determined according to the rules of the SEC and
generally includes any shares over which a person possesses sole or shared
voting or investment power and options that are currently exercisable or
exercisable within 60&nbsp;days. Each director, officer or 5% or more stockholder,
as the case may be, has furnished to us information with respect to beneficial
ownership. Except as otherwise indicated in the footnotes to this table, we
believe that the beneficial owners of common stock listed below, based on
information each of them has provided to us, have sole investment and voting
power with respect to their shares.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table lists applicable percentage ownership based on 7,425,554 shares
of common stock outstanding as of May&nbsp;12, 2004, and also lists applicable
percentage ownership based on 7,425,554 shares of common stock outstanding
after the completion of this offering. Shares of common stock subject to
options currently exercisable or exercisable within 60&nbsp;days of
May&nbsp;12, 2004 are
deemed outstanding for the purpose of calculating the percentage ownership of
the person holding these options, but are not treated as outstanding for the
purpose of calculating the percentage ownership of any other person. Unless
otherwise noted, the address for each stockholder listed below is: c/o
EuroBancshares, Inc., 270 Mu&#241;oz Rivera Avenue, San Juan, Puerto Rico 00918.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares Beneficially Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares to be Beneficially</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Prior to the Offering</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares<br>Being</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Owned After the Offering</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name of Beneficial Owners</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Offered</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Greater than 5% stockholders and
selling stockholders:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Juan Ram&#243;n G&#243;mez-Cu&#233;tara Fern&#225;ndez<SUP>(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">554,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.46</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Andr&#233;s Llorente 1-3A</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Alcal&#225; de Hen&#225;res</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Madrid, Spain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Dionisio Trigo-Gonzalez</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.29</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Mimosa Street #14</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Sta. Maria</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">San Juan, Puerto Rico</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">86
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares Beneficially Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares to be Beneficially</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Prior to the Offering</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares<BR>Being</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Owned After the Offering</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name of Beneficial Owners</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Offered</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Ruben Jordan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">PH 2204 Pasas Cond.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">San Juan, Puerto Rico</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Parques de Atracciones, S.A.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.19</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Taquigrafo Garrigia #97 2-9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Barcelona, Spain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Directors and Named Executive Officers:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Rafael Arrillaga-Torr&#233;ns, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">299,483</TD>
    <TD nowrap><SUP>&nbsp;</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.99</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Yadira R. Mercado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">77,031</TD>
    <TD nowrap><SUP>(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.03</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">James I. Thomson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">38,403</TD>
    <TD nowrap><SUP>(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Jaime Noble Fern&#225;ndez</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">54,900</TD>
    <TD nowrap><SUP>(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Pedro Feliciano Ben&#237;tez</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2,606,793</TD>
    <TD nowrap><SUP>(6)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">34.84</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Jorge Calder&#243;n Drowett</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.08</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Pl&#225;cido Gonz&#225;lez C&#243;rdova</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">865,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.57</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Juan Ram&#243;n G&#243;mez-Cu&#233;tara Aguilar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD nowrap><SUP>(8)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#150;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Ricardo Levy Echeand&#237;a</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">458,324</TD>
    <TD nowrap><SUP>(9)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.15</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Antonio R. Pav&#237;a Bibiloni</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">62,403</TD>
    <TD nowrap><SUP>(10)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">William Torres Torres</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">221,300</TD>
    <TD nowrap><SUP>(11)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.96</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Diana L&#243;pez-Feliciano</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">49,244</TD>
    <TD nowrap><SUP>(12)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">All directors and executive officers
as a group (12 persons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4,813,733</TD>
    <TD nowrap><SUP>(13)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">61.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Represents less than 1% of total shares outstanding.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(1)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Juan Ram&#243;n G&#243;mez-Cu&#233;tara Fern&#225;ndez is the father of director Juan
Ram&#243;n G&#243;mez-Cu&#233;tara Aguilar.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(2)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 25,000 shares of common stock held by Mr.&nbsp;Arrillaga&#146;s wife
and 82,625 stock options that are presently exercisable.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(3)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 62,250 stock options that are presently exercisable.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(4)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 38,403 stock options that are presently exercisable.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(5)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 49,900 stock options that are presently exercisable.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(6)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 57,625 stock options that are presently exercisable.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(7)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 15,524.33 shares of our common stock held by a corporation
controlled by Mr.&nbsp;Gonz&#225;lez and 59,013 stock options that are presently
exercisable. Does not include 5,259 shares owned by Mr.&nbsp;Gonz&#225;lez&#146;s
daughter. Mr.&nbsp;Gonz&#225;lez disclaims voting and investment powers over
the shares owned by his daughter.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(8)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">A foreign corporation wholly owned by Mr.&nbsp;G&#243;mez-Cu&#233;tara Aguilar&#146;s
father owns 465,568 shares of our common stock. In addition, his
father personally owns 57,625 shares of our common stock. Mr.
G&#243;mez-Cu&#233;tara Aguilar disclaims voting and investment powers with
respect to shares owned by the corporation and his father.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(9)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">A corporation, controlled by Mr.&nbsp;Levy&#146;s family, which employs Mr.
Levy as an executive officer, owns 216,123 shares of our common stock.
Mr.&nbsp;Levy&#146;s brother and the family of his late brother own 127,113
shares. Mr.&nbsp;Levy disclaims voting and investment powers over this
latter 127,113 shares. In addition, the estate of Mr.&nbsp;Levy&#146;s late
father owns 146,436 shares. Because of Mr.&nbsp;Levy&#146;s voting power over
the shares of his late father and those owned by the corporation,
these have been included as controlled by Mr.&nbsp;Levy for purposes of the
above table. Includes 25,000 stock options that are presently
exercisable.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">87
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(10)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 59,013 stock options that are presently exercisable.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(11)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 57,625 stock options that are presently exercisable.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(12)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 35,281 stock options that are presently exercisable.</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right">(13)</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">Includes 465,932 stock options that are presently exercisable.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="415"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SUPERVISION AND REGULATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This following is a summary description of the relevant laws, rules and
regulations governing banks and bank and financial holding companies. The
descriptions of, and references to, the statutes and regulations below are
brief summaries and do not purport to be complete. The descriptions are
qualified in their entirety by reference to the specific statutes and
regulations discussed.


<P align="left" style="font-size: 10pt"><B>General</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The supervision and regulation of bank holding companies and their
subsidiaries are intended primarily for the protection of depositors, the
deposit insurance funds of the FDIC and the banking system as a whole, and not
for the protection of the bank holding company stockholders or creditors. The
banking agencies have broad enforcement power over bank holding companies and
banks, including the power to impose substantial fines and other penalties for
violations of laws and regulations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Various legislation is from time to time introduced in Congress and Puerto
Rico&#146;s legislature, including proposals to overhaul the bank regulatory system,
expand the powers of depository institutions and limit the investments that
depository institutions may make with insured funds. Such legislation may
change applicable statutes and the operating environment of EuroBancshares and
Eurobank in substantial and unpredictable ways. We cannot determine the
ultimate effect that future legislation or implementing regulations would have
upon the financial condition and results of operations of EuroBancshares or
Eurobank, or any of their subsidiaries.


<P align="left" style="font-size: 10pt"><B>EuroBancshares</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EuroBancshares is a financial holding company registered under the Bank
Holding Company Act, and is subject to supervision, regulation and examination
by the Federal Reserve Board. The Bank Holding Company Act and other federal
laws subject bank holding companies to particular restrictions on the types of
activities in which they may engage, and to a range of supervisory requirements
and activities, including regulatory enforcement actions for violations of laws
and regulations.


<P align="left" style="font-size: 10pt"><B><I>Regulatory Restrictions on Dividends; Source of Strength</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EuroBancshares is regarded as a legal entity separate and distinct from
its other subsidiaries. The principal source of our revenue is dividends
received from Eurobank. Various federal and state statutory provisions limit
the amount of dividends Eurobank can pay to EuroBancshares without regulatory
approval. It is the policy of the Federal Reserve Board that bank holding
companies should pay cash dividends on common stock only out of income
available over the past year and only if prospective earnings retention is
consistent with the organization&#146;s expected future needs and financial
condition. The policy provides that bank holding companies should not maintain
a level of cash dividends that undermines the bank holding company&#146;s ability to
serve as a source of strength to its banking subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Federal Reserve Board policy, a bank holding company is expected to
act as a source of financial strength to each of its banking subsidiaries and
commit resources to their support. Such support may be required at times when,
absent this Federal Reserve Board policy, a holding company may not be inclined
to provide it. As discussed below, a bank holding company, in certain
circumstances, could be required to guarantee the capital plan of an
undercapitalized banking subsidiary.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of a bank holding company&#146;s bankruptcy under Chapter&nbsp;11 of
the United States Bankruptcy Code, the trustee will be deemed to have assumed,
and is required to cure immediately, any deficit under any commitment


<P align="center" style="font-size: 10pt">88
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">by the debtor holding company to any of the federal banking agencies to
maintain the capital of an insured depository institution, and any claim for
breach of such obligation will generally have priority over most other
unsecured claims.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Activities &#147;Closely Related&#148; to Banking</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bank Holding Company Act prohibits a bank holding company, with
certain limited exceptions, from acquiring direct or indirect ownership or
control of any voting shares of any company which is not a bank or from
engaging in any activities other than those of banking, managing or controlling
banks and certain other subsidiaries, or furnishing services to or performing
services for its subsidiaries. One principal exception to these prohibitions
allows the acquisition of interests in companies whose activities are found by
the Federal Reserve Board, by order or regulation, to be so closely related to
banking or managing or controlling banks, as to be a proper incident thereto.
These activities include, among other things, numerous services and functions
performed in connection with lending, investing, and financial counseling and
tax planning. In approving acquisitions by bank holding companies of companies
engaged in banking-related activities, the Federal Reserve Board considers a
number of factors, and weighs the expected benefits to the public (such as
greater convenience and increased competition or gains in efficiency) against
the risks of possible adverse effects (such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices). The Federal Reserve Board is also empowered to
differentiate between activities commenced <I>de novo </I>and activities commenced
through acquisition of a going concern.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Gramm-Leach Bliley Act; Financial Holding Companies</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Gramm-Leach-Bliley Financial Modernization Act of 1999, revised and
expanded the provisions of the Bank Holding Company Act by including a new
section that permits a bank holding company to elect to become a financial
holding company to engage in a full range of activities that are &#147;financial in
nature.&#148; The qualification requirements and the process for a bank holding
company that elects to be treated as a financial holding company require that
all of the subsidiary banks controlled by the bank holding company at the time
of election to become a financial holding company must be and remain at all
times &#147;well-capitalized&#148; and &#147;well managed.&#148; EuroBancshares made an election
to become a financial holding company on September&nbsp;20, 2002.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Gramm-Leach-Bliley Act further requires that, in the event that the
bank holding company elects to become a financial holding company, the election
must be made by filing a written declaration with the appropriate Federal
Reserve Bank that:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>states that the bank holding company elects to become a
financial holding company;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provides the name and head office address of the bank holding
company and each depository institution controlled by the bank
holding company;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certifies that each depository institution controlled by the
bank holding company is &#147;well-capitalized&#148; as of the date the bank
holding company submits its declaration;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provides the capital ratios for all relevant capital measures
as of the close of the previous quarter for each depository
institution controlled by the bank holding company; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certifies that each depository institution controlled by the
bank holding company is &#147;well managed&#148; as of the date the bank
holding company submits its declaration.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The bank holding company must have also achieved at least a rating of
&#147;satisfactory record of meeting community credit needs&#148; under the Community
Reinvestment Act during the institution&#146;s most recent examination.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial holding companies may engage, directly or indirectly, in any activity that is determined to be:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>financial in nature;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>incidental to such financial activity; or</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">89
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>complementary to a financial activity provided it &#147;does not
pose a substantial risk to the safety and soundness of depository
institutions or the financial system generally.&#148;</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Gramm-Leach-Bliley Act specifically provides that the following
activities have been determined to be &#147;financial in nature&#148;: lending, trust
and other banking activities; insurance activities; financial or economic
advisory services; securitization of assets; securities underwriting and
dealing; existing bank holding company domestic activities; existing bank
holding company foreign activities and merchant banking activities. In
addition, the Gramm-Leach-Bliley Act specifically gives the Federal Reserve
Board the authority, by regulation or order, to expand the list of &#147;financial&#148;
or &#147;incidental&#148; activities, but requires consultation with the United States
Treasury Department, and gives the Federal Reserve Board authority to allow a
financial holding company to engage in any activity that is &#147;complementary&#148; to
a financial activity and does not &#147;pose a substantial risk to the safety and
soundness of depository institutions or the financial system generally.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Privacy Policies</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Gramm-Leach-Bliley Act, all financial institutions are required
to adopt privacy policies, restrict the sharing of nonpublic customer data with
nonaffiliated parties and establish procedures and practices to protect
customer data from unauthorized access. EuroBancshares and its subsidiaries
have established policies and procedures to assure our compliance with all
privacy provisions of the Gramm-Leach-Bliley Act.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Safe and Sound Banking Practices</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank holding companies are not permitted to engage in unsafe and unsound
banking practices. The Federal Reserve Board&#146;s Regulation&nbsp;Y, for example,
generally requires a holding company to give the Federal Reserve Board prior
notice of any redemption or repurchase of its own equity securities, if the
consideration to be paid, together with the consideration paid for any
repurchases or redemptions in the preceding year, is equal to 10% or more of
the company&#146;s consolidated net worth. The Federal Reserve Board may oppose the
transaction if it believes that the transaction would constitute an unsafe or
unsound practice or would violate any law or regulation. Depending upon the
circumstances, the Federal Reserve Board could take the position that paying a
dividend would constitute an unsafe or unsound banking practice.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Federal Reserve Board has broad authority to prohibit activities of
bank holding companies and their nonbanking subsidiaries which represent unsafe
and unsound banking practices or which constitute violations of laws or
regulations, and can assess civil money penalties for certain activities
conducted on a knowing and reckless basis, if those activities caused a
substantial loss to a depository institution. The penalties can be as high as
$1&nbsp;million for each day the activity continues.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Annual Reporting; Examinations</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are required to file annual reports with the Federal Reserve Board, and
such additional information as the Federal Reserve Board may require pursuant
to the Bank Holding Company Act. The Federal Reserve Board may examine a bank
holding company or any of its subsidiaries, and charge the company for the cost
of such the examination.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Capital Adequacy Requirements</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Federal Reserve Board has adopted a system using risk-based capital
guidelines to evaluate the capital adequacy of bank holding companies having
$150.0&nbsp;million or more in assets on a consolidated basis. EuroBancshares
currently has consolidated assets in excess of $150.0&nbsp;million is therefore
subject to the Federal Reserve Board&#146;s capital adequacy guidelines.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the guidelines, specific categories of assets are assigned different
risk weights, based generally on the perceived credit risk of the asset. These
risk weights are multiplied by corresponding asset balances to determine a
&#147;risk-weighted&#148; asset base. The guidelines require a minimum total risk-based
capital ratio of 8.0% (of which at least 4.0% is required to consist of Tier 1
capital elements). Total capital is the sum of Tier 1 and Tier 2 capital. To
be considered &#147;well-capitalized,&#148; a bank holding company must maintain, on a
consolidated basis, (i)&nbsp;a Tier 1 risk-


<P align="center" style="font-size: 10pt">90
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">based capital ratio of at least 6.0%, and (ii)&nbsp;a total risk-based capital
ratio of 10.0% or greater. As of December&nbsp;31, 2003, our Tier 1 risk-based
capital ratio was 8.30% and its total risk-based capital ratio was 11.6%.
Thus, EuroBancshares is considered &#147;well-capitalized&#148; for regulatory purposes.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the risk-based capital guidelines, the Federal Reserve
Board uses a leverage ratio as an additional tool to evaluate the capital
adequacy of bank holding companies. The leverage ratio is a company&#146;s Tier 1
capital divided by its average total consolidated assets. Certain highly-rated
bank holding companies may maintain a minimum leverage ratio of 3.0%, but other
bank holding companies are required to maintain a leverage ratio of at least
4.0%. As of December&nbsp;31, 2003, our leverage ratio was 6.8%.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The federal banking agencies&#146; risk-based and leverage ratios are minimum
supervisory ratios generally applicable to banking organizations that meet
certain specified criteria. The federal bank regulatory agencies may set
capital requirements for a particular banking organization that are higher than
the minimum ratios when circumstances warrant. Federal Reserve Board
guidelines also provide that banking organizations experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions,
substantially above the minimum supervisory levels, without significant
reliance on intangible assets.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Imposition of Liability for Undercapitalized Subsidiaries</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank regulators are required to take &#147;prompt corrective action&#148; to resolve
problems associated with insured depository institutions whose capital declines
below certain levels. In the event an institution becomes &#147;undercapitalized,&#148;
it must submit a capital restoration plan. The capital restoration plan will
not be accepted by the regulators unless each company having control of the
undercapitalized institution guarantees the subsidiary&#146;s compliance with the
capital restoration plan up to a certain specified amount. Any such guarantee
from a depository institution&#146;s holding company is entitled to a priority of
payment in bankruptcy.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate liability of the holding company of an undercapitalized bank
is limited to the lesser of 5% of the institution&#146;s assets at the time it
became undercapitalized or the amount necessary to cause the institution to be
&#147;adequately capitalized.&#148; The bank regulators have greater power in situations
where an institution becomes &#147;significantly&#148; or &#147;critically&#148; undercapitalized
or fails to submit a capital restoration plan. For example, a bank holding
company controlling such an institution can be required to obtain prior Federal
Reserve Board approval of proposed dividends, or might be required to consent
to a consolidation or to divest the troubled institution or other affiliates.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Acquisitions by Bank Holding Companies</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve Board before it may acquire all, or
substantially all, of the assets of any bank, or ownership or control of any
voting shares of any bank, if after such acquisition it would own or control,
directly or indirectly, more than 5% of the voting shares of such bank. In
approving bank acquisitions by bank holding companies, the Federal Reserve
Board is required to consider the financial and managerial resources and future
prospects of the bank holding company and the banks concerned, the convenience
and needs of the communities to be served, and various competitive factors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Control Acquisitions</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Change in Bank Control Act prohibits a person or group of persons from
acquiring &#147;control&#148; of a bank holding company unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of 10% or
more of a class of voting stock of a bank holding company with a class of
securities registered under Section&nbsp;12 of the Exchange Act would, under the
circumstances set forth in the presumption, constitute acquisition of control.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, any company is required to obtain the approval of the Federal
Reserve Board under the Bank Holding Company Act before acquiring 25% (5% in
the case of an acquiror that is a bank holding company) or more of the
outstanding common stock of the company, or otherwise obtaining control or a
&#147;controlling influence&#148; over the company.


<P align="center" style="font-size: 10pt">91
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Cross-guarantees</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Federal Deposit Insurance Act, or FDIA, a depository institution
(which definition includes both banks and savings associations), the deposits
of which are insured by the FDIC, can be held liable for any loss incurred by,
or reasonably expected to be incurred by, the FDIC in connection with (1)&nbsp;the
default of a commonly controlled FDIC-insured depository institution or (2)&nbsp;any
assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution &#147;in danger of default.&#148; &#147;Default&#148; is defined generally
as the appointment of a conservator or a receiver and &#147;in danger of default&#148; is
defined generally as the existence of certain conditions indicating that
default is likely to occur in the absence of regulatory assistance. In some
circumstances (depending upon the amount of the loss or anticipated loss
suffered by the FDIC), cross-guarantee liability may result in the ultimate
failure or insolvency of one or more insured depository institutions in a
holding company structure. Any obligation or liability owed by a subsidiary
bank to its parent company is subordinated to the subsidiary bank&#146;s
cross-guarantee liability with respect to commonly controlled insured
depository institutions. Eurobank is currently the only FDIC-insured
depository institution subsidiary of EuroBancshares.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because EuroBancshares is a legal entity separate and distinct from
Eurobank, its right to participate in the distribution of assets of any
subsidiary upon the subsidiary&#146;s liquidation or reorganization will be subject
to the prior claims of the subsidiary&#146;s creditors. In the event of a
liquidation or other resolution of Eurobank, the claims of depositors and other
general or subordinated creditors of Eurobank would be entitled to a priority
of payment over the claims of holders of any obligation of Eurobank to its
shareholders, including any depository institution holding company (such as
EuroBancshares) or any shareholder or creditor of such holding company.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>USA Patriot Act</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;26, 2001, President Bush signed into law comprehensive
anti-terrorism legislation known as the USA Patriot Act. Title III of the USA
Patriot Act requires financial institutions to help prevent, detect and deter
international money laundering and the financing of terrorism. The
effectiveness of a financial institution in combating money laundering
activities is a factor to be considered in any application submitted by the
financial institution under the Bank Merger Act or the Bank Holding Company
Act, which acts apply to Eurobank and EuroBancshares, respectively.
EuroBancshares and its subsidiaries, including Eurobank, have adopted systems
and procedures to comply with the USA Patriot Act and regulations adopted
thereunder by the Secretary of the Treasury.


<P align="left" style="font-size: 10pt"><B>Eurobank</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eurobank is subject to extensive regulation and examination by the
Commissioner of Financial Institutions of Puerto Rico and the FDIC, which
insures its deposits to the maximum extent permitted by law, and is subject to
certain Federal Reserve Board regulations of transactions with its affiliates.
The federal and Puerto Rico laws and regulations which are applicable to
Eurobank, regulate, among other things, the scope of its business, its
investments, its reserves against deposits, the timing of the availability of
deposited funds and the nature and amount of and collateral for certain loans.
In addition to the impact of such regulations, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Transactions with Affiliates</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are various statutory and regulatory limitations, including those
set forth in sections 23A and 23B of the Federal Reserve Act and Regulation&nbsp;W,
governing the extent to which Eurobank will be able to purchase assets from or
securities of or otherwise finance or transfer funds to EuroBancshares or its
nonbanking subsidiaries. Among other restrictions, such transfers by Eurobank
to EuroBancshares or any of its nonbanking subsidiaries generally will be
limited to 10.0% of Eurobank&#146;s capital and surplus and, with respect to
EuroBancshares and all such nonbanking subsidiaries, to an aggregate of 20.0%
of Eurobank&#146;s subsidiary&#146;s capital and surplus. Furthermore, loans and
extensions of credit are required to be secured in specified amounts and are
required to be on terms and conditions consistent with safe and sound banking
practices.



<P align="center" style="font-size: 10pt">92
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, any transaction by a bank with an affiliate and any sale of
assets or provision of services to an affiliate generally must be on terms that
are substantially the same, or at least as favorable, to the bank as those
prevailing at the time for comparable transactions with nonaffiliated
companies.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Loans to Insiders</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sections&nbsp;22(g) and (h)&nbsp;of the Federal Reserve Act and its implementing
regulation, Regulation&nbsp;O, place restrictions on loans by a bank to executive
officers, directors, and principal stockholders. Under Section&nbsp;22(h), loans to
a director, an executive officer and to a greater than 10% stockholder of a
bank and certain of their related interests, or insiders, and insiders of
affiliates, may not exceed, together with all other outstanding loans to such
person and related interests, the bank&#146;s loans-to-one-borrower limit (generally
equal to 15% of the institution&#146;s unimpaired capital and surplus). Section
22(h) also requires that loans to insiders and to insiders of affiliates be
made on terms substantially the same as offered in comparable transactions to
other persons, unless the loans are made pursuant to a benefit or compensation
program that (i)&nbsp;is widely available to employees of the bank and (ii)&nbsp;does not
give preference to insiders over other employees of the bank. Section 22(h)
also requires prior Board of Directors approval for certain loans, and the
aggregate amount of extensions of credit by a bank to all insiders cannot
exceed the institution&#146;s unimpaired capital and surplus. Furthermore, Section
22(g) places additional restrictions on loans to executive officers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Dividends</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ability of Eurobank to pay dividends on its common stock is restricted
by the Puerto Rico Banking Act of 1933, as amended, the FDIA and FDIC
regulations. In general terms, the Puerto Rico Banking Act provides that when
the expenditures of a bank are greater than receipts, the excess of
expenditures over receipts shall be charged against the undistributed profits
of the bank and the balance, if any, shall be charged against the required
reserve fund of the bank. If there is no sufficient reserve fund to cover such
balance in whole or in part, the outstanding amount shall be charged against
the bank&#146;s capital account. The Puerto Rico Banking Act provides that until
said capital has been restored to its original amount and the reserve fund to
20% of the original capital, the bank may not declare any dividends. In
general terms, the FDIA and the FDIC regulations restrict the payment of
dividends when a bank is undercapitalized, when a bank has failed to pay
insurance assessments, or when there are safety and soundness concerns
regarding a bank.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The payment of dividends by Eurobank may also be affected by other
regulatory requirements and policies, such as maintenance of adequate capital.
If, in the opinion of the regulatory authority, a depository institution under
its jurisdiction is engaged in, or is about to engage in, an unsafe or unsound
practice (that, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such depository institution cease and
desist from such practice. The Federal Reserve Board has issued a policy
statement that provides that insured banks and bank holding companies should
generally pay dividends only out of operating earnings for the current and
preceding two years. In addition, all insured depository institutions are
subject to the capital-based limitations required by the Federal Deposit
Insurance Corporation Improvement Act of 1991.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>FDIC Capital Requirements</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eurobank is also subject to certain restrictions on the payment of
dividends as a result of the requirement that it maintain adequate levels of
capital in accordance with guidelines promulgated from time to time by
applicable regulators.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FDIC and the Commissioner of Financial Institutions of Puerto Rico
monitor the capital adequacy of Eurobank by using a combination of risk-based
guidelines and leverage ratios. The agencies consider the bank&#146;s capital
levels when taking action on various types of applications and when conducting
supervisory activities related to the safety and soundness of individual banks
and the banking system.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the risk-based capital guidelines, a risk weight factor of 0% to
100% is assigned to each category of assets based generally on the perceived
credit risk of the asset class. The risk weights are then multiplied by the


<P align="center" style="font-size: 10pt">93
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">corresponding asset balances to determine a &#147;risk-weighted&#148; asset base.
At least half of the risk-based capital must consist of core (Tier 1) capital,
which is comprised of:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>common stockholders&#146; equity (includes common stock and any
related surplus, undivided profits, disclosed capital reserves that
represent a segregation of undivided profits, and foreign currency
translation adjustments; less net unrealized losses on marketable
equity securities);</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certain noncumulative perpetual preferred stock and related
surplus; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>minority interests in the equity capital accounts of
consolidated subsidiaries, and excludes goodwill and various
intangible assets.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The remainder, supplementary (Tier 2) capital, may consist of


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>allowance for loan and lease losses, up to a maximum of 1.25% of risk-weighted assets;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certain perpetual preferred stock and related surplus;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>hybrid capital instruments;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>perpetual debt;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>mandatory convertible debt securities;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>term subordinated debt;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>intermediate-term preferred stock; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certain unrealized holding gains on equity securities.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Total risk-based capital&#148; is determined by combining core capital and
supplementary capital.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the regulatory capital guidelines, Eurobank must maintain a total
risk-based capital to risk-weighted assets ratio of at least 8.0%, a Tier 1
capital to risk-weighted assets ratio of at least 4.0%, and a Tier 1 capital to
adjusted total assets ratio of at least 4.0% (3.0% for banks receiving the
highest examination rating) to be considered adequately capitalized. See
discussion in the section below captioned &#147;<I>The FDIC Improvement Act</I>.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>FIRREA</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Financial Institutions Reform, Recovery and Enforcement Act of 1989,
or FIRREA, includes various provisions that affect or may affect Eurobank.
Among other matters, FIRREA generally permits bank holding companies to acquire
healthy thrifts as well as failed or failing thrifts. FIRREA removed certain
cross-marketing prohibitions previously applicable to thrift and bank
subsidiaries of a common holding company. Furthermore, a multi-bank holding
company may now be required to indemnify the federal deposit insurance fund
against losses it incurs with respect to such company&#146;s affiliated banks, which
in effect makes a bank holding company&#146;s equity investments in healthy bank
subsidiaries available to the FDIC to assist such company&#146;s failing or failed
bank subsidiaries.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, pursuant to FIRREA, any depository institution that has been
chartered less than two years, is not in compliance with the minimum capital
requirements of its primary federal banking regulator, or is otherwise in a
troubled condition must notify its primary federal banking regulator of the
proposed addition of any person to the Board of Directors or the employment of
any person as a senior executive officer of the institution at least 30&nbsp;days
before such addition or employment becomes effective. During such 30-day
period, the applicable federal banking regulatory agency may disapprove of the
addition of employment of such director or officer. Eurobank is not subject to
any such requirements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FIRREA also expanded and increased civil and criminal penalties available
for use by the appropriate regulatory agency against certain
&#147;institution-affiliated parties&#148; primarily including (i)&nbsp;management, employees
and agents of a financial institution, as well as (ii)&nbsp;independent contractors
such as attorneys and accountants and others


<P align="center" style="font-size: 10pt">94
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">who participate in the conduct of the financial institution&#146;s affairs and
who caused or are likely to cause more than minimum financial loss to or a
significant adverse affect on the institution, who knowingly or recklessly
violate a law or regulation, breach a fiduciary duty or engage in unsafe or
unsound practices. Such practices can include the failure of an institution to
timely file required reports or the submission of inaccurate reports.
Furthermore, FIRREA authorizes the appropriate banking agency to issue cease
and desist orders that may, among other things, require affirmative action to
correct any harm resulting from a violation or practice, including restitution,
reimbursement, indemnifications or guarantees against loss. A financial
institution may also be ordered to restrict its growth, dispose of certain
assets or take other action as determined by the ordering agency to be
appropriate.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The FDIC Improvement Act</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Federal Deposit Insurance Corporation Improvement Act of 1991, or
FDICIA, made a number of reforms addressing the safety and soundness of the
deposit insurance system, supervision of domestic and foreign depository
institutions, and improvement of accounting standards. This statute also
limited deposit insurance coverage, implemented changes in consumer protection
laws and provided for least-cost resolution and prompt regulatory action with
regard to troubled institutions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FDICIA requires every bank with total assets in excess of $500&nbsp;million to
have an annual independent audit made of the bank&#146;s financial statements by a
certified public accountant to verify that the financial statements of the bank
are presented in accordance with generally accepted accounting principles and
comply with such other disclosure requirements as prescribed by the FDIC.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FDICIA also places certain restrictions on activities of banks depending
on their level of capital. FDICIA divides banks into five different
categories, depending on their level of capital. Under regulations adopted by
the FDIC, a bank is deemed to be &#147;well-capitalized&#148; if it has a total
Risk-Based Capital Ratio of 10.0% or more, a Tier 1 Capital Ratio of 6.0% or
more and a Leverage Ratio of 5.0% or more, and the bank is not subject to an
order or capital directive to meet and maintain a certain capital level. Under
such regulations, a bank is deemed to be &#147;adequately capitalized&#148; if it has a
total Risk-Based Capital Ratio of 8.0% or more, a Tier 1 Capital Ratio of 4.0%
or more and a Leverage Ratio of 4.0% or more (unless it receives the highest
composite rating at its most recent examination and is not experiencing or
anticipating significant growth, in which instance it must maintain a Leverage
Ratio of 3.0% or more). Under such regulations, a bank is deemed to be
&#147;undercapitalized&#148; if it has a total Risk-Based Capital Ratio of less than
8.0%, a Tier 1 Capital Ratio of less than 4.0% or a Leverage Ratio of less than
4.0%. Under such regulations, a bank is deemed to be &#147;significantly
undercapitalized&#148; if it has a Risk-Based Capital Ratio of less than 6.0%, a
Tier 1 Capital Ratio of less than 3.0% and a Leverage Ratio of less than 3.0%.
Under such regulations, a bank is deemed to be &#147;critically undercapitalized&#148; if
it has a Leverage Ratio of less than or equal to 2.0%. In addition, the FDIC
has the ability to downgrade a bank&#146;s classification (but not to &#147;critically
undercapitalized&#148;) based on other considerations even if the bank meets the
capital guidelines. According to these guidelines, currently and on a pro
forma basis after the offering, Eurobank will be classified as
&#147;well-capitalized&#148; as of December&nbsp;31, 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, if a state non-member bank is classified as undercapitalized,
the bank is required to submit a capital restoration plan to the FDIC.
Pursuant to FDICIA, an undercapitalized bank is prohibited from increasing its
assets, engaging in a new line of business, acquiring any interest in any
company or insured depository institution, or opening or acquiring a new branch
office, except under certain circumstances, including the acceptance by the
FDIC of a capital restoration plan for the bank.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, if a state non-member bank is classified as undercapitalized,
the FDIC may take certain actions to correct the capital position of the bank;
if a bank is classified as significantly undercapitalized or critically
undercapitalized, the FDIC would be required to take one or more prompt
corrective actions. These actions would include, among other things,
requiring: sales of new securities to bolster capital; improvements in
management; limits on interest rates paid; prohibitions on transactions with
affiliates; termination of certain risky activities and restrictions on
compensation paid to executive officers. If a bank is classified as critically
undercapitalized, FDICIA requires the bank to be placed into conservatorship or
receivership within ninety days, unless the FDIC determines that other action
would better achieve the purposes of FDICIA regarding prompt corrective action
with respect to undercapitalized banks.


<P align="center" style="font-size: 10pt">95
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The capital classification of a bank affects the frequency of examinations
of the bank and impacts the ability of the bank to engage in certain activities
and affects the deposit insurance premiums paid by such bank. Under FDICIA,
the FDIC is required to conduct a full-scope, on-site examination of every bank
at least once every twelve months. An exception to this rule is made, however,
that provides that banks (i)&nbsp;with assets of less than $100&nbsp;million, (ii)&nbsp;are
categorized as &#147;well-capitalized,&#148; (iii)&nbsp;were found to be well managed and its
composite rating was outstanding and (iv)&nbsp;has not been subject to a change in
control during the last twelve months, need only be examined by the FDIC once
every eighteen months.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Brokered Deposits</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under FDICIA, banks may be restricted in their ability to accept brokered
deposits, depending on their capital classification. &#147;Well-capitalized&#148; banks
are permitted to accept brokered deposits, but all banks that are not
well-capitalized are not permitted to accept such deposits. The FDIC may, on a
case-by-case basis, permit banks that are adequately capitalized to accept
brokered deposits if the FDIC determines that acceptance of such deposits would
not constitute an unsafe or unsound banking practice with respect to the bank.
Deposits obtained from financial intermediaries, so-called &#147;brokered deposits,&#148;
represented approximately 23.2% of Eurobank&#146;s total deposits as of December&nbsp;31,
2003. As previously mentioned, Eurobank is currently well-capitalized and
therefore is not subject to any limitations with respect to its brokered
deposits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Federal Limitations on Activities and Investments</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The equity investments and activities as a principal of FDIC-insured
state-chartered banks such as Eurobank are generally limited to those that are
permissible for national banks. Under regulations dealing with equity
investments, an insured state bank generally may not directly or indirectly
acquire or retain any equity investment of a type, or in an amount, that is not
permissible for a national bank.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>FDIC Deposit Insurance Assessments</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, under FDICIA, the FDIC is authorized to assess insurance
premiums on a bank&#146;s deposits at a variable rate depending on the probability
that the deposit insurance fund will incur a loss with respect to the bank.
(Under prior law, the deposit insurance assessment was a flat rate, regardless
of the likelihood of loss.) In this regard, the FDIC has issued regulations
that provide for a transitional risk-based deposit assessment that determines
the deposit insurance assessment rates on the basis of the bank&#146;s capital
classification and supervisory evaluations. Each of these categories have
three subcategories, resulting in nine assessment risk classifications. The
three subcategories with respect to capital are &#147;well-capitalized,&#148; &#147;adequately
capitalized&#148; and &#147;less than adequately capitalized&#148; (which would include
&#147;undercapitalized,&#148; &#147;significantly undercapitalized&#148; and &#147;critically
undercapitalized&#148; banks). The three subcategories with respect to supervisory
concerns are &#147;healthy,&#148; &#147;supervisory concern&#148; and &#147;substantial supervisory
concern.&#148; A bank is deemed &#147;healthy&#148; if it is financially sound with only a
few minor weaknesses. A bank is deemed subject to &#147;supervisory concern&#148; if it
has weaknesses that, if not corrected, could result in significant
deterioration of the bank and increased risk to the Bank Insurance Fund, or
BIF. A bank is deemed subject to &#147;substantial supervisory concern&#148; if it poses
a substantial probability of loss to the BIF.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;30, 1996, the Deposit Insurance Funds Act of 1996, or DIFA, was
enacted and signed into law as part of the Economic Growth and Regulatory
Paperwork Reduction Act of 1996. DIFA established the framework for the
eventual merger of the BIF and the Savings Association Insurance Fund, or SAIF,
into a single Deposit Insurance Fund. It repealed the statutory minimum
premium and, under implementing FDIC regulations promulgated in 1997, premiums
assessed by both the BIF and the SAIF are to be assessed using the matrix
described above at a rates between 0 cents and 27 cents per $100 of deposits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DIFA also separated, effective January&nbsp;1, 1997, the Financing Corporation,
or FICO, assessment to service the interest on its bond obligations from the
BIF and SAIF assessments. The amount assessed on individual institutions by
the FICO will be in addition to the amount, if any, paid for deposit insurance
according to the FDIC&#146;s risk-related assessment rate schedules. The FICO rate
may be adjusted quarterly to reflect changes in assessment bases for the BIF
and the SAIF. Accordingly, Eurobank may be subject to two separate premiums
(for servicing interest on bond obligations and for the BIF/SAIF insurance), if
such premiums are assessed.


<P align="center" style="font-size: 10pt">96
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FDIC may terminate the deposit insurance of any insured depository
institution, including Eurobank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution at the time of the termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined
by the FDIC. Management is aware of no existing circumstances which would
result in termination of Eurobank&#146;s deposit insurance.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Community Reinvestment Act</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Community Reinvestment Act, or CRA, as implemented by the
Congress in 1977, a financial institution has a continuing and affirmative
obligation, consistent with its safe and sound operation, to help meet the
credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution&#146;s
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires federal examiners, in connection with the examination of a financial
institution, to assess the institution&#146;s record of meeting the credit needs of
its community and to take such record into account in its evaluation of certain
applications by such institution. The CRA also requires all institutions to
make public disclosure of their CRA ratings. EuroBancshares has a Compliance
Committee, which oversees the planning of products, and services offered to the
community, especially those aimed to serve low and moderate income communities.
The FDIC rated Eurobank as &#147;satisfactory&#148; in meeting community credit needs
under the CRA at its most recent examination for CRA performance.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Consumer Laws and Regulations</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the laws and regulations discussed herein, Eurobank is also
subject to certain consumer laws and regulations that are designed to protect
consumers in transactions with banks. While the list set forth herein is not
exhaustive, these laws and regulations include the Truth in Lending Act, the
Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds
Availability Act, the Equal Credit Opportunity Act, and the Fair Housing Act,
among others. These laws and regulations mandate certain disclosure
requirements and regulate the manner in which financial institutions must deal
with customers when taking deposits or making loans to such customers.
Eurobank must comply with the applicable provisions of these consumer
protection laws and regulations as part of its ongoing customer relations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Interstate Branching</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective June&nbsp;1, 1997, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 amended the FDIA and certain other statutes to permit
state and national banks with different home states to merge across state
lines, with approval of the appropriate federal banking agency, unless the home
state of a participating bank had passed legislation prior to May&nbsp;31, 1997
expressly prohibiting interstate mergers. Under the Riegle-Neal Act
amendments, once a state or national bank has established branches in a state,
that bank may establish and acquire additional branches at any location in the
state at which any bank involved in the interstate merger transaction could
have established or acquired branches under applicable federal or state law.
If a state opts out of interstate branching within the specified time period,
no bank in any other state may establish a branch in the state which has opted
out, whether through an acquisition or de novo.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of the Riegle-Neal Act&#146;s amendments to the FDIA, Eurobank is
treated as a state bank and is subject to the same restrictions on interstate
branching as other state banks. However, for purposes of the IBE Act, Eurobank
is considered to be a foreign bank and may branch interstate by merger or de
novo to the same extent as a domestic bank in Eurobank&#146;s home state. It is not
yet possible to determine how these statutes will be harmonized, with respect
either to which federal agency will approve interstate transactions or to which
&#147;home state&#148; determination rules will apply.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eurobank currently does not have any branches outside Puerto Rico, nor
will the acquisition of BankTrust result in any branches outside of Puerto
Rico.


<P align="center" style="font-size: 10pt">97
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Federal Home Loan Bank System</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FHLB system, of which Eurobank is a member, consists of 12 regional
FHLBs governed and regulated by the Federal Housing Finance Board. The FHLBs
serve as reserve or credit facilities for member institutions within their
assigned regions. They are funded primarily from proceeds derived from the
sale of consolidated obligations of the FHLB system. They make loans (<I>i.e</I>.,
advances) to members in accordance with policies and procedures established by
the FHLB and the boards of directors of each regional FHLB.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a system member, Eurobank is entitled to borrow from the FHLB of New
York, or FHLB-NY, and is required to own capital stock in the FHLB-NY in an
amount equal to the greater of 1% of the aggregate of the unpaid principal of
its home mortgage loans, home purchase contracts, and similar obligations at
the beginning of each fiscal year, which for this purpose is deemed to be not
less than 30% of assets or 5% of the total amount of advances by the FHLB-NY to
Eurobank. Eurobank is in compliance with the stock ownership rules described
above with respect to such advances, commitments and letters of credit and home
mortgage loans and similar obligations. All loans, advances and other
extensions of credit made by the FHLB-NY to Eurobank are secured by a portion
of the its mortgage loan portfolio, certain other investments and the capital
stock of the FHLB-NY held by Eurobank.


<P align="left" style="font-size: 10pt"><B>Mortgage Banking Operations</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eurobank is subject to the rules and regulations of FHA, VA, FNMA, FHLMC
and GNMA with respect to originating, processing, selling and servicing
mortgage loans and the issuance and sale of mortgage-backed securities. Those
rules and regulations, among other things, prohibit discrimination and
establish underwriting guidelines which include provisions for inspections and
appraisals, require credit reports on prospective borrowers and fix maximum
loan amounts and, with respect to VA loans, fix maximum interest rates.
Mortgage origination activities are subject to, among others, the Equal Credit
Opportunity Act, Federal Truth-in-Lending Act and the Real Estate Settlement
Procedures Act and the regulations promulgated thereunder which, among other
things, prohibit discrimination and require the disclosure of certain basic
information to mortgagors concerning credit terms and settlement costs.
Eurobank is also subject to regulation by the Commissioner of Financial
Institutions of Puerto Rico, with respect to, among other things, the
establishment of maximum origination fees on certain types of mortgage loan
products.


<P align="left" style="font-size: 10pt"><B>Puerto Rico Regulation</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a commercial bank organized under the laws of Puerto Rico, Eurobank is
subject to the supervision, examination and regulation of the Commissioner of
Financial Institutions of Puerto Rico, pursuant to the Puerto Rico Banking Act
of 1933, as amended. Certain of those activities are described in this
<I>&#147;Regulation and Supervision&#148; </I>section above.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Puerto Rico Banking Law</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;12 of the Puerto Rico Banking Law requires the prior approval of
the Commissioner of Financial Institutions of Puerto Rico with respect to a
transfer of capital stock of a bank that results in a change of control of the
bank. Under Section&nbsp;12, a change of control is presumed to occur if a person
or group of persons acting in concert, directly or indirectly, acquire more
than 5.0% of the outstanding voting capital stock of the bank. The
Commissioner of Financial Institutions of Puerto Rico has interpreted the
restrictions of Section&nbsp;12 as applying to acquisitions of voting securities of
entities controlling a bank, such as a bank holding company. Under the Puerto
Rico Banking Law, the determination of the Commissioner of Financial
Institutions of Puerto Rico whether to approve a change of control filing is
final and non-appealable.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16 of the Puerto Rico Banking Law requires every bank to maintain
a legal reserve which shall not be less than 20% of its demand liabilities,
except government deposits (federal, state and municipal) which are secured by
actual collateral. The reserve is required to be composed of any of the
following securities or combination thereof: (1)&nbsp;legal tender of the United
States; (2)&nbsp;checks on banks or trust companies located in any part of Puerto
Rico, to be presented for collection during the day following that on which
they are received; (3)&nbsp;money deposited in other banks or depository
institutions, subject to immediate collection; (4)&nbsp;federal funds sold to any
Federal Reserve Bank and securities purchased under agreement to resell
executed by the bank with such funds that are subject to be


<P align="center" style="font-size: 10pt">98
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">repaid to the bank on or before the close of the next business day and (5)
any other asset that the Commissioner of Financial Institutions of Puerto Rico
determines from time to time.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;17 of the Puerto Rico Banking Law permits Puerto Rico commercial
banks to make unsecured loans to any one person, firm, partnership or
corporation, up to an aggregate amount of 15.0% the sum of (i)&nbsp;paid-in capital;
(ii)&nbsp;reserve fund of the commercial bank; (iii)&nbsp;50.0% of the commercial bank&#146;s
retained earnings and (iv)&nbsp;any other components that the Commissioner of
Financial Institutions of Puerto Rico may determine from time to time. As of
December&nbsp;31, 2003, the legal lending limit for Eurobank under this provision
was approximately $10.0&nbsp;million. If such loans are secured by collateral worth
at least 25.0% more than the amount of the loan, the aggregate maximum amount
may reach one-third of the sum of Eurobank&#146;s paid-in capital, reserve fund,
retained earnings and any other components that the Commissioner of Financial
Institutions of Puerto Rico may determine from time to time. As of December
31, 2003, the legal lending limit for Eurobank under this provision was
approximately $22.0&nbsp;million. There are no restrictions under Section&nbsp;17 of the
Puerto Rico Banking Law on the amount of loans which are fully secured by
bonds, securities and other evidences of indebtedness of the Government of the
United States, of the Commonwealth of Puerto Rico, or by bonds, not in default,
of authorities, instrumentalities or dependencies of the Commonwealth of Puerto
Rico or its municipalities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;17 of the Puerto Rico Banking Law also prohibits Puerto Rico
commercial banks from making loans secured by their own stock and from
purchasing their own stock, unless such purchase is necessary to prevent losses
because of a debt previously contracted in good faith. The stock so purchased
by the Puerto Rico commercial bank must be sold by the bank in a public or
private sale within one year from the date of purchase.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;27 of the Puerto Rico Banking Law also requires that at least
10.0% of the yearly net income of a Puerto Rico commercial bank be credited to
a reserve fund until the amount deposited to the credit of the reserve fund is
equal to 100.0% of total paid-in capital (common and preferred) of the
commercial bank. As of December&nbsp;31, 2003, Eurobank had $2.3&nbsp;million in its
reserve fund.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;27 of the Puerto Rico Banking Law also provides that when the
expenditures of a Puerto Rico commercial bank are greater than receipts, the
excess of the expenditures over receipts shall be charged against the
undistributed profits of the bank, and the balance, if any, shall be charged
against the reserve fund, as a reduction thereof. If there is no reserve fund
sufficient to cover such balance in whole or in part, the outstanding amount
shall be charged against the capital account and no dividends shall be declared
until said capital has been restored to its original amount and the reserve
fund to 20% of the original capital of the bank.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;14 of the Puerto Rico Banking Law authorizes Eurobank to conduct
certain financial and related activities directly or through subsidiaries,
including lease financing of personal property, operating small loans companies
and mortgage loans activities. Eurobank is in the process of organizing an IBE
subsidiary, EBS Overseas.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Puerto Rico Usury Law</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rate of interest that Eurobank may charge on real estate and other
types of loans to individuals in Puerto Rico is subject to Puerto Rico&#146;s usury
law. That law is administered by the Finance Board, which consists of the
Secretaries of the Treasury, Commerce and Consumer Affairs Departments, the
Commissioner of Financial Institutions of Puerto Rico, the President of the
Planning Board, the President of the Government Development Bank for Puerto
Rico, the Secretary of Economic Development and Commerce Department and a
representative of the private financial industry. The Finance Board
promulgates regulations which specify maximum rates on various types of loans
to individuals and revises those regulations periodically as general interest
rates change.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Among the most important regulations enforced on interest rates are
Regulations 5722, 5782 and 6070. Pursuant to Regulation&nbsp;5782, there is no
limitation on interest rates that may be charged on small personal loans. The
same rule applies to retail installment sale contracts and credit card loans as
provided by Regulation&nbsp;6070. The rates on these loans are established as a
result of the market and competition.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest rates that may be charged on personal loans, personal lines of
credit, cash advances on credit cards, commercial loans or commercial lines of
credit and residential and commercial mortgage loans are not restricted by


<P align="center" style="font-size: 10pt">99
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">Regulation&nbsp;5722. The rates on these loans are established as a result of
the market and competition. Regulation&nbsp;5722 does establish restrictions on
prepayment penalties and late charges for all loans, except commercial loans.


<P align="left" style="font-size: 10pt"><B>International Banking Center Regulatory Act</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have an IBE that operates as a division of Eurobank under the name
Eurobank International, and are in the process of organizing a new IBE that
will operate as a subsidiary of Eurobank under the name EBS Overseas. We
intend to transfer substantially all of the assets of Eurobank International to
EBS Overseas. We also have an IBE that operates as a division of Eurobank
under the name BT International. We acquired this IBE in connection with the
acquisition of BankTrust. Due to statutory limitations on the amount of assets
that can be transferred to subsidiary IBEs while still preserving tax benefits,
we will continue to operate the acquired IBE as a division of Eurobank and will
not immediately transfer its assets to our subsidiary IBE, EBS Overseas.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The business and operations of our IBEs are subject to supervision and
regulation by the Commissioner of Financial Institutions of Puerto Rico. Under
the IBE Act, no sale, encumbrance, assignment, merger, exchange or transfer of
shares, interest or participation in the capital of an IBE may be initiated
without the prior approval of the Commissioner of Financial Institutions of
Puerto Rico, if by such transaction a person would acquire, directly or
indirectly, control of 10% or more of any class of stock, interest or
participation in the capital of the IBE. The IBE Act and the regulations
issued thereunder by the Commissioner of Financial Institutions of Puerto Rico
limit the business activities that may be carried out by an IBE. Such
activities are limited in part to persons and assets located outside of Puerto
Rico. The IBE Act provides further that every IBE must have not less than
$300,000 of unencumbered assets or acceptable financial guarantees.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the IBE Act and the IBE regulations, our IBEs must maintain
books and records of all their transactions in the ordinary course of business.
The IBEs are also required to submit to the Commissioner of Financial
Institutions of Puerto Rico quarterly and annual reports of their financial
condition and results of operations, including annual audited financial
statements.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The IBE Act empowers the Commissioner of Financial Institutions of Puerto
Rico to revoke or suspend, after notice and hearing, a license issued
thereunder if, among other things, the IBE fails to comply with the IBE Act,
the IBE regulations or the terms of its license, or if the Commissioner of
Financial Institutions of Puerto Rico finds that the business or affairs of the
IBE are conducted in a manner that is not consistent with the public interest.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IBEs generally are exempt from taxation under United States federal law
and Puerto Rico law. Recently, the Legislature of Puerto Rico and the Governor
of Puerto Rico approved a law amending the IBE Act. This law imposes income
taxes at normal statutory rates on each IBE that operates as a unit of a bank,
if the IBE&#146;s net income generated after December&nbsp;31, 2003 exceeds 40% of the
bank&#146;s net income in the taxable year commenced on July&nbsp;1, 2003, 30% of the
bank&#146;s net income in the taxable year commencing on July&nbsp;1, 2004, and 20% of
the bank&#146;s net income in the taxable year commencing on July&nbsp;1, 2005, and
thereafter. It does not impose income taxation on an IBE that operates as a
subsidiary of a bank. Thus, only BT International, which operates as a
division of Eurobank rather than a subsidiary, is impacted by the new law.
However, we cannot give you any assurance that the IBE Act will not be modified
in the future in a manner to reduce the tax benefits available to EBS Overseas.
A reduction of such tax benefits may reduce our earnings.


<P align="left" style="font-size: 10pt"><B>EuroSeguros, Inc.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EuroSeguros is a wholly owned subsidiary of EuroBancshares and is
registered as a corporate agent and general agency with the Office of the
Commissioner of Insurance of the Commonwealth of Puerto Rico. EuroSeguros is
subject to regulation by the Commissioner of Insurance relating to, among other
things, licensing of employees, sales practices, charging of commissions and
obligations to customers.


<P align="left" style="font-size: 10pt"><B>Future legislation and economic policy</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management of EuroBancshares and Eurobank cannot predict what other
legislation or economic and monetary policies of the various regulatory
authorities might be enacted or adopted or what other regulations might be
adopted


<P align="center" style="font-size: 10pt">100
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">or the effects thereof. Future legislation and policies and the effects
thereof might have a significant influence on overall growth and distribution
of loans, investments and deposits and affect interest rates charged on loans
or paid from time and savings deposits. Such legislation and policies have had
a significant effect on the operating results of commercial banks in the past
and are expected to continue to do so in the future.

<DIV align="left">
<A name="416"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>DESCRIPTION OF EUROBANCSHARES CAPITAL STOCK</B>



<P align="left" style="font-size: 10pt"><B>General</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary describes the material terms of our capital stock
and is subject to, and qualified in its entirety by, applicable law and the
provisions of our amended and restated certificate of incorporation and amended
and restated bylaws. We have filed these organizational documents as exhibits
to the registration statement of which this prospectus is a part.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our authorized capital stock consists of 170,000,000 shares, of which
150,000,000 shares are common stock, par value $0.01 per share, and 20,000,000
shares are preferred stock, par value $0.01 per share. As of May&nbsp;3, 2004, we
had &#091;&nbsp;&nbsp;&nbsp;&#093; shares of common stock outstanding and 429,507 shares of Series
A Preferred Stock outstanding. After giving effect to this offering, we will
have &#091;&nbsp;&nbsp;&nbsp;&#093; shares of common stock outstanding (plus any shares issued upon
the exercise of the underwriters&#146; over-allotment option) and 429,507 shares of
Series&nbsp;A Preferred Stock outstanding.


<P align="left" style="font-size: 10pt"><B>Common Stock</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our outstanding shares of common stock are, and the shares of common stock
to be issued in this offering will be, validly issued, fully paid and
non-assessable. Subject to the rights of holders of preferred stock that may
be issued, the holders of outstanding shares of our common stock are entitled
to receive dividends out of assets legally available therefor at such times and
in such amounts as our Board of Directors may from time to time determine. Our
shares of common stock are neither redeemable nor convertible, and the holders
of common stock have no preemptive or subscription rights to purchase any of
our securities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon our liquidation, dissolution or winding up, the holders of our common
stock are entitled to receive, pro rata, our assets which are legally available
for distribution, after payment of all debts and other liabilities and subject
to the prior rights of any holders of preferred stock then outstanding
(including holders of Series&nbsp;A Preferred Stock and our junior subordinated
debentures described below). Each outstanding share of common stock is
entitled to one vote on all matters submitted to a vote of stockholders. There
is no cumulative voting in the election of directors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors may approve for issuance, without approval of the
holders of common stock, preferred stock that has voting, dividend or
liquidation rights superior to that of our common stock and which may adversely
affect the rights of holders of common stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
power of the holders of common stock and could have the effect of delaying,
deferring or preventing a change in our control.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of our common stock are entitled to receive such dividends as
are declared by our Board of Directors. We have not paid cash dividends
historically, nor do we anticipate paying any cash dividends in the foreseeable
future. Any future determination relating to dividend policy will be made at
the discretion of our Board of Directors and will depend on a number of
factors, including our future earnings, capital requirements, financial
condition, future prospects and such other factors as the Board of Directors
may deem relevant.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Various banking laws applicable to the Bank limit the payment of
dividends, management fees and other distributions by the Bank to us, and may
therefore limit our ability to pay dividends on our common stock. In addition,
we generally are unable to declare and pay dividends on our common stock if
there are any accrued and unpaid dividends on our Series&nbsp;A Preferred Stock for
the preceding 12&nbsp;months. For further discussion on this matter, see the
section of this prospectus captioned <I>&#147;Supervision and Regulation.&#148;</I>


<P align="center" style="font-size: 10pt">101
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Preferred Stock</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation authorizes our Board
of Directors to issue preferred stock in classes or series, and to establish
the designations, preferences, qualifications, limitations or restrictions of
any class or series with respect to the rate and nature of dividends, the price
and terms and conditions on which shares may be redeemed, the terms and
conditions for conversion or exchange into any other class or series of the
stock, voting rights and other terms. Pursuant to this authority, on March&nbsp;15,
2004, in connection with our acquisition of BankTrust, our Board of Directors
designated a series of 600,000 shares of Series&nbsp;A Preferred Stock to be issued
to certain stockholders of BankTrust in exchange for their shares of BankTrust
preferred stock in the acquisition. On May&nbsp;3, 2004, we issued 429,507 shares
of our Series&nbsp;A Preferred Stock. The rights, preferences, privileges,
qualifications, restrictions and limitations of the Series&nbsp;A Preferred Stock
are described in the Certificate of Designation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares of outstanding Series&nbsp;A Preferred Stock are validly issued,
fully paid and nonassessable. The rights of holders of Series&nbsp;A Preferred
Stock could be subject to, and may be adversely affected by, the rights of
holders of any additional series of preferred stock that may be issued in the
future and that may rank prior to, or on a parity with, the Series&nbsp;A Preferred
Stock as to dividends or distributions of assets. However, any such issuance
is subject to the approval of the holders of at least two&#150;thirds of the
aggregate liquidation preference of the outstanding shares of the Series&nbsp;A
Preferred Stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares of Series&nbsp;A Preferred Stock are not convertible into, or
exchangeable for, shares of common stock, any other class or classes of capital
stock or any other security, or any other series of any class or classes of our
capital stock or any other security. The shares of Series&nbsp;A Preferred Stock do
not contain a sinking fund provision, and have no preemptive rights. We treat
the Series&nbsp;A Preferred Stock as Tier 1 Capital for purposes of the risk-based
capital guidelines of the Federal Reserve. The shares of Series&nbsp;A Preferred
stock are subject to redemption under the circumstances described under
"<I>Redemption at Our Option</I>&#148; below.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since we are a holding company, our right, and hence the rights of our
creditors and stockholders, to participate in any distribution of assets of any
subsidiary upon our liquidation or reorganization or otherwise is necessarily
subject to the prior claims of creditors of such subsidiary, including
depositors in the case of the Bank, except to the extent that our claims as a
creditor of the subsidiary may be recognized.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Dividend Rights</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of shares of our Series&nbsp;A Preferred Stock are entitled to receive
when, as and if declared by our Board of Directors, out of funds legally
available therefor, monthly noncumulative cash dividends payable on the last
day of each calendar month at a rate per annum equal to 6.825%. The Board of
Directors is not obligated or required to declare or pay dividends on the
Series&nbsp;A Preferred Stock, even if we have funds available for the payment of
such dividends. If our Board of Directors does not declare a dividend with
regard to the Series&nbsp;A Preferred Stock for a given dividend period, we have no
obligation to pay the dividend accrued for such dividend period or to pay any
interest thereon, whether or not dividends are declared in any future dividend
period.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;So long as any shares of Series&nbsp;A Preferred Stock remain outstanding, we
are not permitted to


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>declare, set apart or pay any dividend or make any other
distribution of assets (other than dividends paid or other
distributions made on stock ranking junior to the Series&nbsp;A Preferred
Stock) on, shares of common stock or of any other class of our stock
ranking junior to the Series&nbsp;A Preferred Stock; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>redeem, purchase, set apart or otherwise acquire (except upon
conversion or exchange for stock ranking junior to the Series&nbsp;A
Preferred Stock) shares of common stock or of any other class of our
stock ranking junior to the Series&nbsp;A Preferred Stock;</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">unless (1)&nbsp;all accrued and unpaid dividends on the Series&nbsp;A Preferred Stock for
the twelve monthly dividend periods ending on the immediately preceding
dividend payment date shall have been paid or are paid contemporaneously, and
the full monthly dividend on the Series&nbsp;A Preferred Stock for the then-current
month has been or is contemporaneously declared and paid or declared and set
apart for payment; and (2)&nbsp;we have not defaulted in the payment of the
redemption price of any shares of Series&nbsp;A Preferred Stock called for
redemption.


<P align="center" style="font-size: 10pt">102
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Redemption at Our Option</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares of Series&nbsp;A Preferred Stock are redeemable at our option (with the
consent of the Board of Governors of the Federal Reserve System), in whole or
in part, at any time or from time to time on not less than 30, nor more than
60, days&#146; written notice, at a redemption price of $25.00 per share, plus
accrued but unpaid dividends from the dividend payment date immediately
preceding the payment date (without any cumulation for unpaid dividends for
prior dividend periods on the Series&nbsp;A Preferred Stock) to the date fixed for
redemption.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Voting Rights</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as described below and as required by applicable laws, holders of
the Series&nbsp;A Preferred Stock have no special voting rights, and their consent
is not required for taking any corporate action.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any amendment, alteration or repeal of the rights, preferences and
privileges of the Series&nbsp;A Preferred Stock by way of amendment of the
certificate of incorporation, whether by merger or otherwise (including,
without limitation, the authorization or issuance of any shares ranking, as to
dividend rights or rights on liquidation, winding up and dissolution, senior to
the Series&nbsp;A Preferred Stock) that would materially and adversely affect the
powers, preferences or special rights of the Series&nbsp;A Preferred Stock shall not
be effective (unless otherwise required by applicable law) except with the
consent in writing of the holders of at least two-thirds of the outstanding
aggregate liquidation preference of the outstanding shares of the Series&nbsp;A
Preferred Stock, or with the sanction of a special resolution passed at a
separate general meeting by the holders of at least two-thirds of the aggregate
liquidation preference of the outstanding shares of such preferred stock.
Notwithstanding the foregoing, we may, without the consent or sanction of the
holders of the Series&nbsp;A Preferred Stock, authorize and issue shares of capital
stock ranking, as to dividend rights and rights on liquidation, winding up and
dissolution, on a parity with or junior to the Series&nbsp;A Preferred Stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we do not pay monthly dividends for 18 consecutive months, the holders
of the Series&nbsp;A Preferred Stock will be entitled to appoint two members of our
Board of Directors; any director so appointed shall vacate board membership if,
following the 18-month failure to pay dividends, we shall have resumed the
payment of dividends in full on the Series&nbsp;A Preferred Stock and each such
other series of stock for 12 consecutive monthly dividend periods.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Liquidation Rights</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of our voluntary or involuntary liquidation, dissolution or
winding up, the holders of shares of Series&nbsp;A Preferred Stock will be entitled
to receive out of our assets available for distribution to stockholders, before
any distribution of assets is made to the holders of shares of common stock or
any other class or series of our stock ranking junior to the shares of Series&nbsp;A
Preferred Stock as to such a distribution, an amount equal to $25.00 per share,
plus an amount equal to dividends declared and unpaid for the then-current
dividend period up to the date of liquidation (without accumulation of accrued
and unpaid dividends for prior dividend periods) to the date fixed for payment
of such distribution. If, upon our voluntary or involuntary liquidation,
dissolution or winding up, the amounts payable with respect to the Series&nbsp;A
Preferred Stock and any other shares of our capital stock ranking as to such
distribution on a parity with the Series&nbsp;A Preferred Stock are not paid in
full, the holders of all such shares will share ratably in any such
distribution of our assets in proportion to the full liquidation preferences to
which they are entitled. After payment of the full amount of the liquidation
preference to which they would otherwise be entitled, the holders of shares of
Series&nbsp;A Preferred Stock will be entitled to no other payments. A
consolidation or merger of us with or into any other corporation or the sale,
lease or conveyance of any or all of our assets will not be regarded as a
liquidation, dissolution or winding up of our business.


<P align="left" style="font-size: 10pt"><B>Junior Subordinated Debentures; Trust Preferred Securities</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;19, 2002 we issued $20.0&nbsp;million of Trust II Preferred
Securities through a special purpose trust subsidiary, Trust II, which is
wholly owned by us. Dividend payments on Trust II Preferred Securities are
funded by interest payments we make on the 2002 Debentures issued to Trust II.
The Trust II Preferred Securities mature 30&nbsp;years after the issuance date and
have a five-year call provision, except under limited circumstances where the
security may be called earlier. Trust II pays interest quarterly at a rate
equal to three-month LIBOR plus a margin of


<P align="center" style="font-size: 10pt">103
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">325 basis points. At March&nbsp;31, 2004, the interest rate being paid on the
2001 and 2002 Trust II Preferred Securities (and related 2002 Debentures) was
4.40% and the annual interest payments amounted to $904,000, based on the
applicable interest rate at that date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;18, 2001 we issued $25.0&nbsp;million of Trust I Preferred
Securities through a special purpose trust subsidiary, Trust I, which is wholly
owned by us. Dividend payments on the Trust I Preferred Securities are funded
by interest payments we make on the 2001 Debentures issued to Trust I. The
Trust I Preferred Securities mature 30&nbsp;years after the issuance date and have a
five-year call provision, except under limited circumstances where the security
may be called earlier. Trust I pays interest quarterly at a rate equal to
three-month LIBOR plus a margin of 360 basis points. At March&nbsp;31, 2004, the
interest rate being paid on the Trust I Preferred Securities (and related 2001
Debentures) was 4.70% and the annual interest payments amounted to $1.2
million, based on the applicable interest rate at that date.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The interest payments on the 2002 and 2001 Trust Preferred Securities and
related 2002 and 2001 Debentures are currently expected to be funded by
dividends paid to us by Eurobank. Our principal and interest payments on the
2002 and 2001 Debentures are in a senior position to the liquidation rights of
holders of our common stock. For additional information regarding the Junior
Subordinated Debentures and the Trust Preferred Securities, see the section of
this prospectus captioned &#147;<I>Management&#146;s Discussion and Analysis &#150; Junior
Subordinated Debentures; Trust Preferred Securities</I>.&#148;


<P align="left" style="font-size: 10pt"><B>Limitation of Liability and Indemnification Matters</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation provides that the
personal liability of our directors in cases of monetary claims for damages
resulting from the breach of their fiduciary duties as directors shall be
eliminated, provided that such provision does not eliminate or limit the
liability of the director for: (1)&nbsp;any breach of the duty of loyalty of the
director to us, or our stockholders; (2)&nbsp;acts or omissions not in good faith,
or which involve intentional misconduct or knowing violations of law; (3)
unlawful payments of dividends or purchase and redemption of our stock; or (4)
any transaction where the director derives an improper personal benefit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation also provides for indemnification of
agents including directors, officers and employees to the maximum extent
allowed by Puerto Rico law. Our certificate of incorporation requires
indemnification of any person who was or is a party, or is threatened to be
made a party, to any imminent, pending or resolved action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent if the Board of
Directors (or other committee or entity empowered to make such a determination)
formally determines that he acted in good faith and in a manner reasonably
deemed consistent with, or not opposed to, our best interests. With respect to
any criminal action or proceeding, the Board of Directors (or other committee
or entity empowered to make such a determination) must formally determine that
he had no reasonable cause to believe his conduct was unlawful. In the case of
any action, suit or proceeding by or in the right of the Company, no
indemnification shall be made if such person is determined to be liable to us,
unless and only to the extent that the court in which such proceeding was
brought determines upon application that such person is fairly and reasonably
entitled to indemnity. To the extent that a director, officer, employee or
agent has prevailed in defense of any such action, suit or proceeding, he shall
be indemnified against expenses (including attorneys&#146; fees) actually and
reasonably incurred by him. The indemnification provided by our certificate of
incorporation is not exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, bylaw, agreement, vote of
uninvolved stockholders, directors or otherwise.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation also provides that we may purchase and
maintain insurance covering our directors, officers, employees and agents
against any liability asserted against any of them and incurred by any of them,
whether or not we would have the power to indemnify them against such liability
under the provisions of our certificate of incorporation and applicable law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or controlling persons pursuant
to the provisions described above, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.


<P align="center" style="font-size: 10pt">104
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Certain Anti-takeover Provisions of our Certificate of Incorporation and Bylaws</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation and bylaws contain
provisions that may prevent, discourage or delay any change in the control of
EuroBancshares and may make it more difficult to remove a member of the Board
of Directors or management. These provisions include:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Blank Check Preferred Stock</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has the authority to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to effect a change in control or takeover.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Staggered Board of Directors</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation provides that our
Board of Directors will be divided into three classes of approximately equal
numbers of directors, with the term of office of one class expiring each year
over a three-year period. Classification of directors has the effect of making
it more difficult for stockholders to change the composition of our Board. At
least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in the majority of the Board. Such a delay may
help ensure that our directors, if confronted by a holder attempting to force a
proxy contest, a tender or exchange offer or other extraordinary corporate
transaction, would have sufficient time to review the proposal as well as any
available alternatives to the proposal and to act in what they believe to be
the best interests of the stockholders.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of EuroBancshares even though such a transaction
could be beneficial to our stockholders. The classification of our Board also
increases the likelihood the incumbent directors will retain their positions.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Director Removal and Vacancies</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to our amended and restated bylaws, vacancies in our Board of
Directors may be filled only by the affirmative vote of a majority of the
directors then in office.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Supermajority Vote; Fair Price Requirement</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation contains a
&#147;supermajority vote; fair price requirement&#148; provision. This provision limits
our ability to enter into certain business combinations with a control person.
With limited exceptions, to approve such a combination, the provision requires
a vote of not less than 80% of the total votes entitled to be cast in an
election of our directors and that are not attributable to shares owned by a
control person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The term &#147;control person&#148; generally includes any of our stockholders who,
together with their &#147;affiliates&#148; and &#147;associates&#148; (as defined in our amended
and restated certificate of incorporation), beneficially owns in the aggregate
10% or more of our outstanding shares of our common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A &#147;business combination&#148; is defined to include:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any merger or consolidation of EuroBancshares with or into a
control person, or any merger or consolidation of a control person
with or into EuroBancshares, or one of our subsidiaries;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any sale or other disposition of all or any substantial part
of our assets or the assets of one of our subsidiaries to a control
person, or any sale or other disposition of all, or any substantial
part of, the assets of a control person to us or to one of our
subsidiaries;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the issuance of any of our securities or the securities of
one of our subsidiaries to a control person, or our acquisition or
the acquisition by one of our subsidiaries of the securities of a
control person;</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">105
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any reclassification of our common stock, or any
recapitalization involving our common stock within five years after
a control person becomes a control person; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any agreement, contract or other arrangement providing for
any of the transactions listed above.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding the foregoing, there are certain exceptions when a
business combination with a control person would not be subject to the
supermajority vote requirement, including:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>when our Board of Directors by at least a two-thirds vote has
expressly approved and recommended the business combination to our
stockholders;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>when the business combination is solely between
EuroBancshares and another corporation, 50% or more of the voting
stock of which is owned by us and none of which is owned by a
control person, and where each holder of our common stock receives
the same type of consideration in proportion to his holdings;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>when the business combination is solely between
EuroBancshares and another corporation and, following the business
combination, those stockholders owning all of our voting stock
immediately prior to the business combination own greater than 50%
of the voting stock of the entity that survives the business
combination; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a business combination wherein all of the following
conditions are satisfied:</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the per share consideration to be received in the
business combination is not less than the higher of (1)&nbsp;the
highest per share price paid by the control person in acquiring
any of its holdings of our common stock, or (2)&nbsp;the highest per
share market price for our common stock in the three months
preceding the date of the proxy statement for the business
combination;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>after becoming a control person and prior to the
consummation of the business combination, the control person has
not (1)&nbsp;acquired any newly issued shares of our common stock
from us (with certain limited exceptions), (2)&nbsp;received any
benefit (except proportionately as a stockholder) of any loans
or any other financial assistance or tax credits from us, or
(iii)&nbsp;made any changes to our business or equity capital
structure; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a proxy statement, responsive to the requirements of
the Exchange Act, as amended, is mailed to all of our public
stockholders of record for the purposes of soliciting
stockholder approval of the business combination.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Evaluation of Business Combinations</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to our amended and restated certificate of incorporation, our
Board of Directors, when evaluating any offer of another party to


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>purchase or exchange any securities or property for any of
our outstanding equity securities,</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>engage in any business combination (as defined above with
respect to the &#147;supermajority vote; fair price&#148; provision), or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>purchase or otherwise acquire all or substantially all of our
properties and assets,</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">may in its sole discretion, in connection with the exercise of its judgment in
determining what is in our best interests and the best interests of our
stockholders, give due consideration not only to the price or other
consideration being offered but also to all other relevant factors, including
(without limitation): the financial and managerial resources and future
prospects of the other party, the possible side effects on our business and our
subsidiaries and on our employees, customers, suppliers and creditors (as well
as those of our subsidiaries), and the effects on the communities in which our
facilities are located. In evaluating any such offer, our Board of Directors
shall be deemed to be performing their duly authorized duties and acting in our
best interests.


<P align="left" style="font-size: 10pt"><B>Transfer Agent and Registrar</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for our common stock and Series&nbsp;A
Preferred Stock is
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>.


<P align="center" style="font-size: 10pt">106
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="417"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>TAXATION</B>



<P align="left" style="font-size: 10pt"><B>General</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the opinion of Acosta Ramirez C.S.P., our Puerto Rico tax counsel, the
following discussion summarizes the material Puerto Rico tax considerations
relating to the purchase, ownership and disposition of our common stock offered
under this prospectus. In the opinion of Jenkens &#038; Gilchrist, a Professional
Corporation, our United States tax counsel, the following discussion summarizes
the material United States federal income and estate tax considerations
relating to purchase, ownership and disposition of our common stock offered
under this prospectus. The opinions are based on various assumptions,
including assumptions regarding the accuracy of factual representations made by
us and are subject to limitations. This discussion does not intend to describe
all of the tax considerations that may be relevant to a particular investor in
light of that person&#146;s particular circumstances and does not describe any tax
consequences arising under the laws of any state, locality or taxing
jurisdiction other than Puerto Rico and the United States.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This discussion is for general purposes only and is based on the tax laws
of Puerto Rico and the United States as in effect on the date of this
prospectus, as well as regulations, administrative pronouncements and judicial
decisions available on or before such date and now in effect. All of the
foregoing are subject to change, which change could apply retroactively and
could affect the continued validity of this discussion. A prospective investor
should be aware that an opinion of counsel represents only such counsel&#146;s best
legal judgment and that it is not binding on the Puerto Rico Treasury
Department, any municipality or agency of Puerto Rico, the United States
Internal Revenue Service or the courts. Accordingly, there can be no assurance
that the opinions set forth herein, if challenged, would be sustained.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>You should consult your own tax advisor as to the application to your
particular situation of the tax considerations discussed below, as well as the
application of any state, local, foreign or other tax.</B>


<P align="left" style="font-size: 10pt"><B>Puerto Rico Taxation</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion does not intend to cover all aspects of Puerto
Rico taxation that may be relevant to a purchaser of our common stock in light
of the purchaser&#146;s particular circumstances, or to purchasers subject to
special rules of taxation, such as life insurance companies, &#147;Special
Partnerships,&#148; &#147;Subchapter N Corporations,&#148; registered investment companies,
and certain pension trusts.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of the discussion below, and the discussion under <I>&#147;United
States Taxation,&#148; </I>a &#147;Puerto Rico corporation&#148; is a corporation organized under
the laws of Puerto Rico. For purposes of the discussion below, a &#147;foreign
corporation&#148; is a corporation organized under the laws of a jurisdiction other
than Puerto Rico. Corporations organized under the laws of the United States
or any of the states of the United States are considered &#147;foreign corporations&#148;
for Puerto Rico income tax purposes.


<P align="left" style="font-size: 10pt"><B>Ownership and Disposition of Common Stock</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of Dividends</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General</I>. Distributions of cash or other property made by us on our common
stock will be treated as dividends to the extent that we have current or
accumulated earnings and profits. To the extent that a distribution exceeds
our current and accumulated earnings and profits, the distribution will be
applied against and reduce the adjusted tax basis of the common stock in the
hands of the holder. The excess of any distribution of this type over the
adjusted tax basis will be treated as gain on the sale or exchange of the
common stock and will be subject to income tax as described below.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion regarding the income taxation of dividends on our
common stock received by individuals not residents of Puerto Rico and foreign
corporations not engaged in a trade or business in Puerto Rico assumes that
dividends will constitute income from sources within Puerto Rico. Generally, a
dividend declared by a Puerto Rico corporation will constitute income from
sources within Puerto Rico unless the corporation derived less than 20% of its
gross income from sources within Puerto Rico for the three taxable years
preceding the year of the


<P align="center" style="font-size: 10pt">107
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">declaration. We have represented that we derive more than 20% of our
gross income from Puerto Rico sources on an annual basis since our
incorporation in 1996.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Individual Residents of Puerto Rico and Puerto Rico Corporations</I>. In
general, stockholders who are individuals and are residents of Puerto Rico will
be subject to a 10% income tax on dividends paid on our common stock. This tax
is generally required to be withheld by us on dividends paid on our common
stock. An individual may elect for this withholding not to apply. In that
case he or she will be required to include the amount of the dividend as
ordinary income and will be subject to income tax thereon at the normal income
tax rates, which may be up to 33%.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Puerto Rico corporations that are stockholders will be subject to income
tax on dividends paid on our common stock at the normal corporate income tax
rates, subject to the dividend received deduction discussed below. No
withholding will be imposed on dividends paid to Puerto Rico corporations on
our common stock. The dividend received deduction will be equal to 85% of the
dividend received, but the deduction may not exceed 85% of the corporation&#146;s
net taxable income. Based on the applicable maximum Puerto Rico normal
corporate income tax rate of 39%, the maximum effective income tax rate on
these dividends will be 5.85% after accounting for the dividend received
deduction.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a practical matter, dividends on our common stock held in &#147;street name&#148;
through foreign financial institutions or other securities intermediaries not
engaged in trade or business in Puerto Rico will generally be subject to a 10%
withholding tax imposed on foreign corporations. See &#147;<I>Foreign Corporations</I>.&#148;
Accordingly, individuals resident of Puerto Rico who desire to file an election
out of the applicable 10% withholding tax should have their shares of common
stock issued and registered in their own name. Similarly, Puerto Rico
corporations that own any shares of common stock and wish to avoid the
withholding imposed on foreign corporations should have their shares issued and
registered in their own name in order to ensure that no withholding is made on
dividends.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>United States Citizens Not Residents of Puerto Rico</I>. Dividends paid on
our common stock to a United States citizen who is not a resident of Puerto
Rico will be subject to the 10% Puerto Rico income tax, which will be withheld
by us. These individuals may elect for the 10% Puerto Rico income tax and
withholding not to apply, and in that case he or she will be required to
include the amount of the dividend as ordinary income and will be subject to
income tax thereon at the normal income tax rates, which may be up to 33%.
Notwithstanding the making of this election, a separate 10% withholding tax
will be required on the amount of the dividend unless the individual timely
files with us or its agent a withholding exemption certificate to the effect
that the individual&#146;s gross income from sources within Puerto Rico during the
taxable year does not exceed $1,300 if single or $3,000 if married.
Withholding exemption certificates will only be accepted by us or its agent
from individuals who have the shares of common stock registered in their names.
Individuals who hold shares of common stock in &#147;street name&#148; will not be
eligible to file with us or its agent withholding exemption certificates.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Individuals Not Citizens of the United States and Not Residents of Puerto
Rico</I>. Dividends paid on our common stock to any individual who is not a
citizen of the United States and who is not a resident of Puerto Rico will
generally be subject to a 10% Puerto Rico income tax which will be withheld at
source by us.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Foreign Corporations</I>. The income taxation of dividends paid on our common
stock to a foreign corporation will depend on whether or not the corporation is
engaged in a trade or business in Puerto Rico in the taxable year of the
dividend.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A foreign corporation that is engaged in a trade or business in Puerto
Rico will be subject to the normal corporate income tax rates applicable to
Puerto Rico corporations on their net income that is effectively connected with
the active conduct of a trade or business in Puerto Rico. This income will
include all net income from sources within Puerto Rico and certain items of net
income from sources outside Puerto Rico that are effectively connected with the
active conduct of a trade or business in Puerto Rico. Net income from sources
within Puerto Rico will include dividends on the common stock. A foreign
corporation that is engaged in a trade or business in Puerto Rico will be
entitled to claim the 85% dividend received deduction discussed above in
connection with Puerto Rico corporations.


<P align="center" style="font-size: 10pt">108
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, foreign corporations that are engaged in a trade or business
in Puerto Rico are also subject to a 10% branch profits tax. However,
dividends on our common stock received by these corporations will be excluded
from the computation of the branch profits tax liability of these corporations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A foreign corporation that is not engaged in a trade or business in Puerto
Rico will be subject to a 10% withholding tax on dividends received on our
common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Partnerships</I>. Partnerships are generally taxed in the same manner as
corporations. Accordingly, the preceding discussion with respect to Puerto
Rico and foreign corporations is equally applicable in the case of most Puerto
Rico and foreign partnerships, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of Gains Upon Sales or Exchanges other than Redemptions</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General</I>. The sale or exchange of our common stock will give rise to gain
or loss equal to the difference between the amount realized on the sale or
exchange and the tax basis of the common stock in the hands of the holder. Any
gain or loss that is required to be recognized will be a capital gain or loss
if the common stock is held as a capital asset by the holder and will be a
long-term capital gain or loss if the stockholders&#146; holding period of the
common stock exceeds six months. The deductibility of capital losses is
subject to limitations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Individual Residents of Puerto Rico and Puerto Rico Corporations</I>. Gain on
the sale or exchange of our common stock by an individual resident of Puerto
Rico or a Puerto Rico corporation will generally be required to be recognized
as gross income and will be subject to income tax. If the stockholder is an
individual and the gain is a long-term capital gain, the gain will be taxable
at a maximum rate of 10%. If the stockholder is a Puerto Rico corporation and
the gain is a long-term capital gain, the gain will qualify for an alternative
tax rate of 12.5%.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>United States Citizens Not Residents of Puerto Rico</I>. A United States
citizen who is not a resident of Puerto Rico will not be subject to Puerto Rico
income tax on the sale or exchange of our common stock if the gain resulting
therefrom constitutes income from sources outside Puerto Rico. Generally, gain
on the sale or exchange of common stock will be considered to be income from
sources outside Puerto Rico if all rights, title and interest in or to the
common stock are transferred outside Puerto Rico, and if the delivery or
surrender of the instruments that evidence the common stock is made to an
office of a paying or exchange agent located outside Puerto Rico. If the gain
resulting from the sale or exchange constitutes income from sources within
Puerto Rico, an amount equal to 10% of the payments received will be withheld
at the source; and if the gain constitutes a long-term capital gain, it will be
subject to a tax at a maximum rate of 10%. The amount of tax withheld at
source will be creditable against the stockholder&#146;s Puerto Rico income tax
liability.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Individuals Not Citizens of the United States and Not Residents of Puerto
Rico</I>. An individual who is not a citizen of the United States and who is not a
resident of Puerto Rico will be subject to the rules described above under
"<I>United States Citizens Not Residents of Puerto Rico</I>.&#148; However, if the gain
resulting from the sale or exchange of common stock constitutes income from
sources within Puerto Rico, an amount equal to 25% of the payments received
will be withheld at the source; provided, that if the gain resulting from the
sale or exchange represents a net capital gain, the individual will generally
be subject to tax on this gain at a fixed rate of 29%. The amount of tax
withheld at source will be creditable against the stockholder&#146;s Puerto Rico
income tax liability.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Foreign Corporations</I>. A foreign corporation that is engaged in a trade or
business in Puerto Rico will generally be subject to Puerto Rico corporate
income tax on any gain realized on the sale or exchange of our common stock if
the gain is (1)&nbsp;from sources within Puerto Rico or (2)&nbsp;from sources outside
Puerto Rico and effectively connected with a trade or business in Puerto Rico.
Any such gain will qualify for an alternative tax of 12.5% if it qualifies as a
long-term capital gain.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, foreign corporations that are engaged in a trade or business
in Puerto Rico will also be subject to a 10% branch profits tax. In the
computation of this tax, any gain realized by these corporations on the sale or
exchange of common stock and that is subject to Puerto Rico income tax will be
taken into account. However, a deduction will be allowed in the computation
for any income tax paid on the gain realized on the sale or exchange.


<P align="center" style="font-size: 10pt">109
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A foreign corporation that is not engaged in a trade or business in Puerto
Rico will generally be subject to a corporate income tax rate of 29% on any
capital gain realized on the sale or exchange of our common stock if the gain
is from sources within Puerto Rico. Gain on the sale or exchange of common
stock will generally not be considered to be from sources within Puerto Rico if
all rights, title and interest in or to the common stock are transferred
outside Puerto Rico, and if the delivery or surrender of the instruments that
evidence the common stock is made to an office of a paying or exchange agent
located outside Puerto Rico. If the payments received resulting from the sale
or exchange constitutes income from sources within Puerto Rico, an amount equal
to 25% of the payments received will be withheld at the source and be
creditable against the stockholder&#146;s Puerto Rico income tax liability. In the
case of such foreign corporation, no income tax will be imposed if the gain
constitutes income from sources outside Puerto Rico.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Partnerships</I>. Partnerships are generally taxed as corporations.
Accordingly, the discussion with respect to Puerto Rico and foreign
corporations is equally applicable to most Puerto Rico and foreign
partnerships, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of Redemptions</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A redemption of shares of our common stock for cash will be treated as a
distribution taxable as a dividend to the extent of our current or accumulated
earnings and profits if it is &#147;essentially equivalent to a dividend.&#148; Under
regulations issued by the Department of the Treasury of Puerto Rico (1)&nbsp;a
redemption of stock that completely terminates a stockholder&#146;s interest in a
corporation does not constitute a dividend, and (2)&nbsp;certain pro rata
redemptions among all the stockholders will be treated as a dividend. In
situations not described by these regulations, the Department of the Treasury
of Puerto Rico will generally follow principles applied by the United States
Internal Revenue Service under the United States Internal Revenue Code of 1986,
in determining whether a distribution is essentially equivalent to a dividend.
The Department of the Treasury of Puerto Rico, however, is not bound by
Internal Revenue Service determinations on this issue and is free to adopt a
different rule.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the redemption of our common stock is not treated as a dividend, it
will generally generate gain or loss that will be measured as provided above
under &#147;<I>Taxation of Gains upon Sales or Exchanges (Not including Redemptions)</I>&#148;
for a sale or exchange of common stock. Gain on the redemption of our common
stock will generally be recognized and will be subject to income tax. If the
holder of the common stock is an individual resident of Puerto Rico and the
gain is a long-term capital gain, the gain will be taxable at a maximum rate of
10%. If the stockholder is a Puerto Rico corporation and the gain is a
long-term capital gain, the gain will qualify for the alternative tax rate of
12.5%.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the stockholder is an individual who is not a resident of Puerto Rico
or a foreign corporation or foreign partnership, any gain realized by the
holder on the redemption of our common stock that is not taxable as a dividend
may be subject to Puerto Rico income tax if the gain constitutes income from
sources within Puerto Rico or is effectively connected with a trade or business
conducted by the holder in Puerto Rico. The Puerto Rico income tax law does
not clearly provide a source of income rule for a gain of this nature. As a
result thereof, these prospective stockholders should be aware that a gain
realized from a redemption of our common stock may be subject to Puerto Rico
income tax.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Estate and Gift Taxation</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer of our common stock by inheritance by an individual who is a
resident of Puerto Rico at the time of his or her death will not be subject to
estate tax if the individual is a citizen of the United States who acquired his
or her citizenship solely by reason of birth or residence in Puerto Rico. The
transfer of our common stock by gift by an individual who is a resident of
Puerto Rico at the time of the gift will not be subject to gift tax. Other
individuals should consult their own tax advisors in order to determine the
appropriate treatment for Puerto Rico estate and gift tax purposes of the
transfer of our common stock by death or gift.


<P align="center" style="font-size: 10pt">110
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Municipal License Taxation</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Individuals and corporations that are not engaged in a trade or business
in Puerto Rico will not be subject to municipal license tax on dividends paid
on our common stock or on any gain realized on the sale, exchange or redemption
of such common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A corporation or partnership, Puerto Rico or foreign, that is engaged in a
trade or business in Puerto Rico will generally be subject to municipal license
tax on dividends paid on our common stock and on the gain realized on the sale,
exchange or redemption of such common stock if the dividends or gain are
attributable to that trade or business. The municipal license tax is imposed
on the volume of business of the taxpayer, and the tax rates range from a
maximum of 1.5% for financial businesses to a maximum of 0.5% for other
businesses.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Property Taxation</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock will not be subject to Puerto Rico property tax.


<P align="left" style="font-size: 10pt"><B>United States Taxation</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion is limited to the United States federal tax
consequences of the ownership and disposition of our common stock by U.S.
Holders, as defined below, and Puerto Rico corporations. This discussion is
based on the existing United States Internal Revenue Code of 1986, as amended
(the &#147;Code&#148;) and regulations (temporary, final and proposed) of the United
States Department of the Treasury promulgated thereunder, administrative
pronouncements and judicial decisions, all of which are subject to change, even
with retroactive effect. This discussion deals only with common stock, offered
pursuant to this prospectus, that is held by initial purchasers as capital
assets within the meaning of Section&nbsp;1221 of the Code. It does not discuss all
of the tax consequences that may be relevant to a purchaser in light of that
person&#146;s particular circumstances or to purchasers subject to special rules,
such as entities that are taxed under the Code as partnerships, &#147;Subchapter S
Corporations,&#148; life insurance companies, tax exempt entities, dealers in
securities, financial institutions, or to persons that hold our common stock as
part of a straddle, hedge or conversion transaction, are subject to the United
States alternative minimum tax, or whose functional currency is not the United
States dollar.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As used herein, the term &#147;U.S. Holder&#148; means a beneficial owner of common
stock that does not own directly, indirectly, constructively or by attribution,
10% or more of the vote or value of our stock and is for United States federal
income tax purposes:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a citizen or resident of the United States;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a corporation organized under the laws of the United States,
any state of the United States or the District of Columbia;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an estate the income of which is subject to United States
federal income taxation regardless of its source; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a trust if (A)&nbsp;a court within the United States is able to
exercise primary supervision over its administration and one or more
United States Persons (as such term is defined in the Code) have
authority to control all substantial decisions of the trust, or (B)
the trust was in existence on August&nbsp;20, 1996, and validly elected
to continue to be treated as a United States domestic trust.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The term &#147;U.S. Holder&#148; does not include individual Puerto Rico residents
who are not citizens or residents of the United States nor does it include
Puerto Rico corporations. As used herein, the term &#147;Puerto Rico U.S. Holder&#148;
means an individual U.S. Holder who is a bona fide resident of Puerto Rico
during the entire taxable year (or, in certain cases, a portion thereof),
within the meaning of Section&nbsp;933 of the Code.


<P align="center" style="font-size: 10pt">111
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt"><B>Ownership and Disposition of the Common Stock</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of Dividends</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General</I>. Under the source of income rules of the Code, dividends on our
common stock generally will constitute gross income from sources outside the
United States if less than 25% of our gross income on an ongoing basis is
effectively connected with a trade or business in the United States. Since our
incorporation, we have derived most of our gross income from the banking
business of our wholly owned subsidiary Eurobank in Puerto Rico and have not
derived in any taxable year, nor do we expect to derive in the future, 25% or
more of our gross income as income that is effectively connected with a trade
or business in the United States. Accordingly, dividends on our common stock
distributed will constitute gross income from sources outside the United States
so long as we continue to meet the gross income test described above.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>U.S. Holders other than Puerto Rico U.S. Holders</I>. Subject to the
discussion under &#147;<I>Passive Foreign Investment Company Rules</I>&#148; and &#147;<I>Foreign
Personal Holding Company Rules</I>&#148; below, distributions made by us with respect to
our common stock, including the amount of any Puerto Rico taxes withheld on the
distribution, will be includable in the gross income of a U.S. Holder, other
than a Puerto Rico U.S. Holder, as foreign source dividend income to the extent
the distributions are paid out of our current or accumulated earnings and
profits as determined under United States federal income tax principles. These
dividends will not be eligible for the dividends received deduction generally
allowed to U.S. Holders that are corporations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under recently enacted United States federal income tax legislation,
&#147;qualified dividend income&#148; received by certain non-corporate U.S. Holders
(including individuals) in taxable years beginning after December&nbsp;31, 2002, and
beginning before January&nbsp;1, 2009, generally will be subject to United States
federal income tax at a maximum rate of 15%. Dividends in respect of our
common stock may constitute &#147;qualified dividend income&#148; for this purpose
provided that we are not a &#147;foreign personal holding company&#148; or a &#147;passive
foreign investment company&#148; (both, as described below) and certain other
requirements, including the length of your holding period for such stock, are
satisfied. You should consult your own tax advisors regarding the availability
of this preferential rate in your particular circumstances. To the extent, if
any, that the amount of any of our distributions exceeds our current and
accumulated earnings and profits as determined under United States federal
income tax principles, such excess will be treated first as a tax-free return
of the U.S. Holder&#146;s tax basis in the common stock and thereafter as capital
gain.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to certain conditions and limitations contained in the Code, any
Puerto Rico income tax imposed on dividends distributed by us in accordance
with Puerto Rico law will be eligible for credit against the U.S. Holder&#146;s
United States federal income tax liability. See &#147;<I>Puerto Rico Taxation &#150;
Ownership and Disposition of Common Stock &#150; Taxation of Dividends</I>&#148; above. For
purposes of calculating a U.S. Holder&#146;s United States foreign tax credit
limitation, dividends distributed by us will generally constitute foreign
source &#147;passive income&#148; or, in the case of certain U.S. Holders (those
predominantly engaged in the active conduct of a banking, insurance, financing
or similar business), foreign source &#147;financial services income.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Puerto Rico U.S. Holders</I>. In general, and subject to the discussion under
"<I>Passive Foreign Investment Company Rules</I>&#148; and &#147;<I>Foreign Personal Holding
Company Rules</I>&#148; below, distributions of dividends made by us on our common stock
to a Puerto Rico U.S. Holder will constitute gross income from sources within
Puerto Rico, will not be includable in the stockholder&#146;s gross income and will
be exempt from United States federal income taxation. In addition, for United
States federal income tax purposes, no deduction or credit will be allowed that
is allocable to or chargeable against amounts so excluded from the Puerto Rico
U.S. Holder&#146;s gross income.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Puerto Rico Corporations</I>. In general, distributions of dividends made by
us on our common stock to a Puerto Rico corporation will not, in the hands of
the Puerto Rico corporation, be subject to United States income tax if the
dividends are not effectively connected with a United States trade or business
of the Puerto Rico corporation and the Puerto Rico corporation is not treated
as a domestic corporation of the United States for purposes of the Code. The
Code provides special rules that could change the tax consequences discussed
above for Puerto Rico corporations that are &#147;Controlled Foreign Corporations,&#148;
&#147;Personal Holding Companies,&#148; &#147;Foreign Personal Holding Companies,&#148; or &#147;Passive
Foreign Investment Companies.&#148; See additional discussion below under <I>&#147;Passive
Foreign Investment Company Rules </I>&#148; and <I>&#147;Foreign Personal Holding Company Rules</I>.&#148;



<P align="center" style="font-size: 10pt">112
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of Sales or Exchanges</I></B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>U.S. Holders other than Puerto Rico U.S. Holders</I>. A U.S. Holder, other
than a Puerto Rico U.S. Holder, will recognize gain or loss on the sale or
other disposition of our common stock, including redemptions treated as sales
or exchanges of our common stock under the Code, in an amount equal to the
difference between the amount realized on the sale or other disposition and the
U.S. Holder&#146;s adjusted tax basis in the common stock. Subject to the
discussion under &#147;<I>Passive Foreign Investment Company Rules</I>&#148; and &#147;<I>Foreign
Personal Holding Company Rules&#148; </I>below, the gain or loss will be a capital gain
or loss, and will be long-term capital gain or loss if the U.S. Holder&#146;s
holding period for the common stock is more than one year. Certain
noncorporate U.S. Holders (including individuals) may be eligible for
preferential rates of United States federal income tax with respect to their
long-term capital gains. The deductibility of capital losses is subject to
limitations under the Code. U.S. Holders should consult their own tax advisors
concerning the treatment of capital gains and losses. Redemptions of our
common stock that are not treated as sales or exchanges for United States
federal income tax purposes will generally be subject to income tax as
dividends to the extent of our current and accumulated earnings and profits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain recognized by a U.S. Holder on the sale or other disposition of our
common stock generally will be treated as United States source income.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Puerto Rico U.S. Holders</I>. In general, and subject to the discussion under
"<I>Passive Foreign Investment Company Rules</I>&#148; and &#147;<I>Foreign Personal Holding
Company Rules</I>&#148; below, gain from the sale or exchange of our common stock,
including redemptions treated as sales or exchanges of the common stock under
the Code, by a Puerto Rico U.S. Holder that is a nonresident of the United
States for purposes of Section&nbsp;865(g)(1) of the Code will constitute gross
income from sources within Puerto Rico, will not be includable in the
stockholder&#146;s gross income and will be exempt from United States federal income
taxation. Also, no deduction or credit will be allowed that is allocable to or
chargeable against amounts so excluded from the Puerto Rico U.S. Holder&#146;s gross
income. Redemptions of the common stock that are not treated as sales or
exchanges under the Code will generally be treated as dividends to the extent
of our current and accumulated earnings and profits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Puerto Rico Corporations</I>. In general, any gain derived by a Puerto Rico
corporation from the sale or exchange of our common stock will not, in the
hands of the Puerto Rico corporation, be subject to United States income tax if
the gain is not effectively connected with a United States trade or business of
the Puerto Rico corporation and the Puerto Rico corporation is not treated as a
domestic corporation of the United States for purposes of the Code. The Code
provides special rules that could change the tax consequences discussed above
for Puerto Rico corporations that are &#147;Controlled Foreign Corporations,&#148;
&#147;Personal Holding Companies,&#148; &#147;Foreign Personal Holding Companies,&#148; or &#147;Passive
Foreign Investment Companies.&#148; See additional discussion below under <I>&#147;Passive
Foreign Investment Company Rules </I>&#148; and <I>&#147;Foreign Personal Holding Company Rules</I>.
&#148; Redemptions of the common stock that are not treated as sales or exchanges
under the Code will generally be subject to income tax under the Code as
dividends to the extent of our current and accumulated earnings and profits.


<P align="left" style="font-size: 10pt"><B>Information Reporting and Backup Withholding</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information reporting requirements will apply to dividends on, and the
proceeds of a sale or exchange of, our common stock that are paid within the
United States (and, in some cases, outside the United States) to U.S. Holders,
other than Puerto Rico U.S. Holders, and certain exempt recipients (such as
corporations). Certain U.S. Holders may be subject to backup withholding at
the rate of 28% on dividends paid or the proceeds of a sale or exchange of our
common stock. Generally, backup withholding applies only when the taxpayer
fails to furnish or certify a proper taxpayer identification number or when the
payor is notified by the Internal Revenue Service that the taxpayer has failed
to report payments of interest and dividends properly. U.S. Holders should
consult their own tax advisors regarding their qualification for exemption from
backup withholding and information reporting and the procedure for obtaining
any applicable exemption.


<P align="left" style="font-size: 10pt"><B>Passive Foreign Investment Company Rules</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Code provides special rules for distributions received by U.S. Holders
on stock of a passive foreign investment company (&#147;PFIC&#148;) as well as amounts
received from the sale or other disposition of PFIC stock. For purposes of the
PFIC rules, pledges generally will be considered dispositions.


<P align="center" style="font-size: 10pt">113
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A non-United States corporation generally will be classified as a PFIC for
United States federal income tax purposes in any taxable year in which either
(i)&nbsp;at least 75% of its gross income is &#147;passive income&#148; or (ii)&nbsp;at least 50%
of the gross value of its assets, determined on the basis of a quarterly
average, is attributable to assets that produce passive income or are held for
the production of passive income. For this purpose, passive income generally
includes, among other items, dividends, interest, rents, royalties and gains
from the sale or exchange of passive assets. Passive assets generally are
assets which produce passive income or which are held for the production of
passive income. Based upon certain proposed Treasury Regulations under the
PFIC provisions of the Code (the &#147;Proposed Regulations&#148;), banking income earned
by an active bank and assets held by a non-United States bank that are used to
produce income in the active conduct of a banking business are not considered
passive income and assets, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a foreign corporation owns directly or indirectly at least 25% by value
of the stock of another corporation, the foreign corporation is treated as
owning its proportionate share of the assets of the corporation, and as if it
had received directly its proportionate share of the income of such other
corporation. Because we wholly-own Euro Seguros, Inc. and Eurobank for
purposes of the PFIC tests, we should be treated as owning all of the assets of
and receiving directly all of the income of Euro Seguros, Inc. and Eurobank.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon the Proposed Regulations, we believe that neither we nor any of
our subsidiaries will be a PFIC in our current taxable year and we expect to
continue to conduct our affairs in a manner so that neither we nor any of our
subsidiaries meet the criteria to be considered a PFIC in the foreseeable
future. If, contrary to our expectations, either we or any of our subsidiaries
are determined to be a PFIC for any taxable year, a U.S. Holder would generally
be subject to taxation under special rules, regardless of whether we or any of
our subsidiaries remains a PFIC, with respect to (1)&nbsp;any &#147;excess distribution&#148;
made by us to the U.S. Holder and (2)&nbsp;any gain realized on the sale, pledge or
other disposition of our common stock or the stock of the subsidiary that was
determined to be a PFIC.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An &#147;excess distribution&#148; is, generally, any distributions received by the
U.S. Holder on the common stock in a taxable year that are greater than 125% of
the average annual distributions received by the U.S. Holder in the three
preceding taxable years, or the U.S. Holder&#146;s holding period for the common
stock if shorter. Under these rules, (1)&nbsp;the excess distribution or gain would
be allocated ratably over each day in the U.S. Holder&#146;s holding period for the
common stock, (2)&nbsp;the amount allocated to the current taxable year and any
taxable year prior to the first taxable year beginning after December&nbsp;31, 1986
in which we would be a PFIC would be taxed as ordinary income, and (3)&nbsp;the
amount allocated to each of the other taxable years would be subject to tax at
the highest rate of tax in effect for the applicable class of taxpayer for that
year, and an interest charge for the deemed deferral benefit would be imposed
on the resulting tax attributable to each such year. Proposed Regulations
provide that Puerto Rico U.S. Holders would generally only be subject to the
rule described in (3)&nbsp;above to the extent that any excess distribution or gain
is allocated to a taxable year during which the individual held the common
stock and was not a bona fide resident of Puerto Rico during the entire taxable
year within the meaning of Section&nbsp;933 of the Code or, in certain cases, a
portion thereof. Gains recognized on a sale, pledge or other disposition are
treated in the same manner as if such gain were an excess distribution.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an alternative to these rules, if we are a PFIC, U.S. Holders may, in
certain circumstances, elect a mark-to-market treatment with respect to their
common stock, provided that the common stock will constitute &#147;marketable stock&#148;
for purposes of these rules. In general, marketable stock is stock that is
treated under applicable Treasury regulations as being regularly traded on a
&#147;qualified exchange,&#148; which includes the NASDAQ.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a mark-to-market election is available and is validly made, then for
each taxable year of ownership, a U.S. Holder generally would include in gross
income, as an item of ordinary income, the excess, if any, of the fair market
value of common stock at the end of such taxable year over such U.S. Holder&#146;s
adjusted tax basis, and would deduct from gross income, as an ordinary loss,
the excess, if any, of the adjusted tax basis of the stock over its fair market
value at the end of the taxable year (but only to the extent of the amount
previously included in such U.S. Holder&#146;s gross income as a result of the
mark-to-market election). A U.S. Holder&#146;s adjusted tax basis in common stock
will be adjusted to reflect any such income or loss that is included in, or
deducted from, such U.S. Holder&#146;s gross income. If the mark-to-market election
is made, it can only be revoked with the consent of the Internal Revenue
Service. Special rules apply if the mark-to-market election is not made for
the first taxable year in which a U.S. Holder owns shares in a PFIC and with
respect to indirect holders.


<P align="center" style="font-size: 10pt">114
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alternatively, a U.S. Holder of shares in a PFIC may, if the PFIC
satisfies certain information reporting requirements and grants access to its
books of account, make a &#147;QEF election,&#148; pursuant to which the U.S. Holder will
include in taxable income each year the U.S. Holder&#146;s pro rata share of the
ordinary earnings and net realized capital gain of the PFIC (whether or not
such earnings or gain is distributed). We do not anticipate, at this time
providing a purchaser with the necessary information or access that would be
required to enable the purchaser to make a QEF election.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we or any of our subsidiaries are determined to be a PFIC in any year,
a U.S. Holder who beneficially owns common stock during that year must make an
annual return on Internal Revenue Service Form&nbsp;8621 that describes any
distributions received from us and any gain realized on the disposition of
common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If there is an overlap of income inclusion under the FPHC rules (discussed
below) and the PFIC rules, the FPHC rules will generally take precedence. A
Puerto Rico U.S. Holder will only be required to include in his/her gross
income any PFIC income for United States federal income tax purposes to the
extent required by the Code.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should consult your own tax advisors regarding the application of the
PFIC rules to our common stock in your particular circumstances, including the
availability of making an election to avoid adverse United States federal
income tax consequences under the PFIC rules in the case that either we or any
of our subsidiaries are a PFIC for any given taxable year.


<P align="left" style="font-size: 10pt"><B>Foreign Personal Holding Company Rules</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A non-United States corporation will be classified as a foreign personal
holding company (&#147;FPHC&#148;) for United States federal income tax purposes if (i)
at any time during the taxable year at issue, five or fewer individuals who are
United States citizens or residents, referred to as a &#147;United States group,&#148;
own or are deemed to own (pursuant to certain constructive ownership rules)
more than 50% of all classes of the corporation&#146;s stock measured by voting
power or value, and (ii)&nbsp;at least 60% of its gross income for the taxable year
is &#147;FPHC income&#148; or, if the corporation has been classified as a FPHC for any
preceding tax year ending after August&nbsp;26, 1937, at least 50% of its gross
income for the taxable year is &#147;FPHC income,&#148; with certain exceptions. Under
these constructive ownership rules, a person will be treated as owning shares
of our stock owned by certain members of the person&#146;s family, shares of stock
that could be acquired upon the exercise of an option held by the person and a
proportionate amount of our stock owned by a corporation, partnership, estate,
or trust in which that person is a shareholder, partner or beneficiary. If a
non-United States corporation meets the stock ownership test and is a
shareholder in a FPHC, then for purposes of determining whether it meets the
gross income test and determining its &#147;undistributed foreign personal holding
company income,&#148; discussed below, a dividend is deemed included in its gross
income for the applicable taxable year equal to its proportionate share of the
FPHC&#146;s &#147;undistributed foreign personal holding company income&#148; to the extent of
the FPHC&#146;s current and accumulated earnings and profits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If EuroBancshares or any of our subsidiaries were to be treated as a FPHC,
a portion of the applicable &#147;undistributed foreign personal holding company
income&#148; (as defined for United States federal income tax purposes) would be
imputed to U.S. Holders on the last day on which a United States group (as
defined above) existed in the applicable taxable year. In the event a United
States group ceases to exist prior to the end of a taxable year, the proportion
of the FPHCs&#146; undistributed foreign personal holding company income includible
in such U.S. Holder&#146;s income would be based on the ratio of the number of days
in the taxable year up to and including the last day on which the &#147;United
States group&#148; existed to the total number of days in that year. If we are a
FPHC, such income would be taxable as a deemed dividend to U.S. Holders to the
extent of our current and accumulated earnings and profits even if no cash
dividend were actually paid and would not be eligible for a reduced rate of tax
under recently enacted legislation. The amount of the deemed dividend
included in the gross income of a U.S. Holder would be treated as then
reinvested by the U.S. Holder as a contribution to the capital of
EuroBancshares, and the U.S. Holder&#146;s tax basis in our stock should generally
be increased by that same amount. Distributions by us to our shareholders with
respect to their stock in subsequent taxable years will generally be subject to
income tax as dividends to the extent of our current and accumulated earnings
and profits, reduced to reflect the amount any deemed FPHC dividends. A
distribution paid by us to a U.S. Holder that is characterized as a dividend
would likewise not be eligible for a reduced rate of tax under recently enacted
legislation with respect to dividends paid before 2009. Further, in such case,
upon the death of any United States individual owning shares in a FPHC, such
individual&#146;s heirs or estate would not be entitled to a &#147;step-up&#148; in the basis
of the common shares which might


<P align="center" style="font-size: 10pt">115
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">otherwise be available under United States federal income tax laws. If we
are not a FPHC and such income is from one or more of our subsidiaries that are
FPHCs, then the &#147;undistributed personal holding company income&#148; of the
subsidiaries that are FPHCs could be taxable as a deemed dividend to U.S.
Holders in certain circumstances.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, both we and our subsidiaries satisfied the stock
ownership test for classification as a FPHC in 2004 (<I>i.e</I>., 50% or more of the
shares of our stock have been owned or deemed owned by five or fewer
individuals who are U.S. citizens or residents and therefore constitute a
&#147;United States group&#148;) and the stock ownership test could continue to be
satisfied after the offering. As discussed below, unless Eurobank and its
subsidiaries that are organized and doing business under the banking and credit
laws of Puerto Rico (which we refer to as &#147;Banking Subsidiaries&#148;) receive
certificates from the Commissioner of the Internal Revenue Service that they
are not FPHCs, Eurobank and such subsidiaries would likely meet the gross
income test and be treated as FPHCs in 2004. Furthermore, if Eurobank and its
Banking Subsidiaries do not receive a certificate for 2004, it is likely that
we would also meet the gross income test and be treated as a FPHC in 2004. In
addition, even if Eurobank and its Banking Subsidiaries receive certificates
that they are not FPHCs, EuroBancshares could still be treated as a FPHC for
2004 if its FPHC income (including the &#147;undistributed foreign personal holding
company income&#148; of any subsidiary classified as a FPHC) is sufficient to meet
the gross income test, although we expect to manage our affairs in such a
manner as to make such event unlikely.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon the information available to us regarding our existing
shareholder base and the expected dispersion of ownership of our common shares
following this offering, we expect that immediately following the consummation
of the offering, less than 50% of our stock will be owned or deemed owned by
five or fewer individuals who are U.S. citizens or residents. In other words,
based upon this information and certain assumptions we have made, we expect
that a &#147;United States group&#148; will no longer exist with respect to
EuroBancshares and its subsidiaries immediately following the completion of the
offering. If a &#147;United States group&#148; does not exist immediately following the
completion of the offering, a U.S. Holder that does not otherwise own our
common stock prior to the completion of the offering should not be required to
include any &#147;undistributed foreign personal holding company income&#148; in their
taxable income in 2004 provided a &#147;United States group&#148; does not exist for the
remainder of our taxable year. There can be no assurances, however, that the
information provided to us is accurate and complete and the assumptions that we
have made are true in all respects. We intend therefore, to take the actions
described immediately below in an attempt to prevent EuroBancshares and its
subsidiaries from being treated as FPHCs in 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, a corporation organized and doing business under the banking
and credit laws of a foreign country should not be treated as a FPHC provided
it establishes annually (or at other periodic intervals) to the satisfaction of
the Internal Revenue Service that such corporation is not formed or availed of
for the purpose of evading or avoiding United States income taxes which would
otherwise be imposed upon its shareholders. If this is so established, the
Commissioner of the Internal Revenue Service (or such other official to whom
such authority has been delegated) will issue a certificate to the corporation
that it is not a FPHC. We plan to timely apply for a certificate from the
Internal Revenue Service for Eurobank and each of its Banking Subsidiaries for
each entity&#146;s 2004 taxable year. It is not free from doubt that Eurobank and
each of its Banking Subsidiaries would be eligible to receive a certificate.
Consequently, no assurance can be made that the Internal Revenue Service will
issue such certificates. If we obtain the certificates, none of Eurobank or
its Banking Subsidiaries would be treated as a FPHC in that taxable year. In
addition, provided that Eurobank and each of its Banking Subsidiaries receives
a certificate that it is not a FPHC, no &#147;undistributed foreign personal holding
company income&#148; should be imputed to EuroBancshares from Eurobank and its
Banking Subsidiaries, and it is likely that any actual dividends received by
EuroBancshares from Eurobank would not be treated as FPHC income for purposes
of determining whether EuroBancshares is a FPHC in that taxable year. Eurobank
and each of its Banking Subsidiaries will seek a certificate for each of their
taxable years for which we reasonably believe that the ownership test and the
income test are met. If any of Eurobank or its Banking Subsidiaries obtain a
certificate in any given taxable year from the Internal Revenue Service that it
is not a FPHC, each U.S. Holder must attach a copy of the certificate to his or
her individual United States federal income tax return for such taxable year.
If a certificate has been applied for but has not been issued at the time the
U.S. Holder&#146;s United States federal income tax return is filed, the U.S. Holder
should compute the tax on his or her United States federal income tax return by
treating EuroBancshares, Eurobank and its Banking Subsidiaries as FPHCs. If,
after the U.S. Holder&#146;s return is filed, a certificate is subsequently issued
(or it is shown that the ownership test or income test was not met), the U.S.
Holder may file a claim for refund or an amended return, attaching a copy of
the certificate.


<P align="center" style="font-size: 10pt">116
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If certificates are issued by the Internal Revenue Service to Eurobank and
to its Banking Subsidiaries that they are not FPHCs in 2004, we expect, based
upon our projected gross revenues for the remainder of the year (including
those of any subsidiary treated as a FPHC in 2004), that we will not meet the
gross income test in 2004. We also expect based on our existing shareholder
base and the expected dispersion of ownership of our common shares following
this offering and our projected income that neither we nor any of our
subsidiaries will be a FPHC in 2005. We cannot be certain, however, that we or
any of our subsidiaries will not be considered a FPHC due to legal and factual
uncertainties regarding the application of the constructive ownership rules,
the makeup of our shareholder base, our gross income and/or the gross income of
our subsidiaries and other circumstances that could change the application of
the FPHC rules to us. In addition, if we or any of our subsidiaries are or
become a FPHC, we cannot be certain that the amount required to be included in
a U.S. Holder&#146;s income under the FPHC rules would be immaterial.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If there is an overlap of income inclusion under the FPHC rules and the
PFIC rules (discussed above), the FPHC rules will generally take precedence. A
Puerto Rico U.S. Holder will not be required to include in his/her gross income
any &#147;undistributed foreign personal holding company income&#148; for United States
federal income tax purposes.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>You should consult your own tax advisors regarding the application of the
FPHC rules to common stock in your particular circumstances in the case that
we are a FPHC for any given taxable year.</B>


<P align="left" style="font-size: 10pt"><B>Estate and Gift Taxation</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer of our common stock by inheritance or gift by an individual
who is a resident of Puerto Rico at the time of his or her death or at the time
of the gift will not be subject to United States federal estate and gift tax if
the individual is a citizen of the United States who acquired his or her
citizenship solely by reason of birth or residence in Puerto Rico. Other
individuals should consult their own tax advisors in order to determine the
appropriate treatment for United States federal estate and gift tax purposes of
the transfer of our common stock by death or gift.

<DIV align="left">
<A name="418"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>SHARES ELIGIBLE FOR FUTURE SALE</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If our stockholders sell, or there is a perception they may sell,
substantial amounts of our common stock, including shares issued upon the
exercise of outstanding options or warrants, in the public market following the
offering, the market price of our common stock could decline. These sales may
also make it more difficult for us to sell equity or equity-related securities
in the future at a time and price that we deem appropriate.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of this offering, we will have outstanding an aggregate of
&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; shares of our common stock (plus any shares issued upon exercise of
the underwriters&#146; over-allotment option) and &#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; shares of common stock
issuable upon the exercise of outstanding options. Of these shares, all of the
shares sold in the offering (plus any shares issued upon exercise of the
underwriter&#146;s over-allotment option) will be freely tradeable without
restriction or further registration under the Securities Act, unless the shares
are purchased by &#147;affiliates,&#148; (as that term is defined in Rule&nbsp;144 under the
Securities Act), which generally include officers, directors or 10%
stockholders, which shares will be subject to the resale limitations of Rule
144, or purchased under the directed share program, which shares will be
subject to a 180-day lock-up period. The remaining outstanding shares of
common stock held by existing stockholders are &#147;restricted securities&#148; within
the meaning of Rule&nbsp;144 under the Securities Act. These shares may be sold in
the public market only if registered, or if they qualify for an exemption from
registration under Rules&nbsp;144, 144(k) or 701 promulgated under the Securities
Act, which are summarized below.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taking into account the lock-up agreements described below, and assuming
Keefe, Bruyette &#038; Woods, Inc. does not release any parties from these
agreements, the following shares will be eligible for sale in the public market
at the following times:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>beginning on the effective date of this offering, only the
&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; shares of common stock sold in this offering (but
excluding any shares purchased under the directed share program) and
the &#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt">117
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shares of common stock not subject to lock-up agreements will be
immediately available for sale in the public market;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>beginning 180&nbsp;days after the date of this prospectus, the
expiration date for the lock-up agreements, any shares purchased
under the directed share program and approximately &#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; shares of common stock held by affiliates will be eligible for sale
pursuant to Rule&nbsp;144, including the volume restrictions described
below; and Rule&nbsp;701.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning 180&nbsp;days after the date of this prospectus, the expiration date
for the lock-up agreements, approximately &#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; shares of common stock
issued pursuant to Rule&nbsp;701 prior to this offering and held by non-affiliates
will be eligible for sale in the market, although approximately &#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; of
these shares will remain subject to vesting requirements.


<P align="left" style="font-size: 10pt"><B>Lock-Up Agreements</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, our directors and officers, the selling stockholders and substantially
all of our existing stockholders owning approximately &#091; &#093;% of our
outstanding common stock immediately prior to the offering have entered into
lock-up agreements (and the purchasers of shares of our common stock under the
directed share program will agree to restrictions) generally providing, subject
to limited exceptions, that they will not, without the prior written consent of
Keefe, Bruyette &#038; Woods, Inc., directly or indirectly, during the period ending
180&nbsp;days after the date of this prospectus:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale or otherwise dispose of, any shares of
common stock of EuroBancshares, or any securities convertible into,
exchangeable for or that represent the right to receive shares of
common stock of EuroBancshares, whether now owned or hereafter
acquired, owned directly (including holding as a custodian) or with
respect to which such stockholder has beneficial ownership within
the rules and regulations of the SEC, or file or cause to be filed
any registration statement under the Securities Act with respect to
the foregoing; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>engage in any hedging or other transaction that is designed
to or that reasonably could be expected to lead to or result in a
sale or disposition of any shares of common stock of EuroBancshares,
such prohibited hedging or other transactions to include any short
sale or grant of any right (including without limitation any put or
call option) with respect to any shares of common stock of
EuroBancshares or with respect to any security that includes,
relates to, or derives any significant part of its value from such
shares.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 180-day restricted period described above is subject to extension
under limited circumstances. In the event that either (1)&nbsp;during the period
that begins on the date that is 15 calendar days plus 3 business days before
the last day of the 180-day restricted period and ends on the last day of the
180-day restricted period, we issue an earnings release or material news or a
material event relating to us occurs; or (2)&nbsp;prior to the expiration of the
180-day restricted period, we announce that we will release earnings results
during the 16-day period beginning on the last day of the 180-day restricted
period, then the restricted period will continue to apply until the expiration
of the date that is 15 calendar days plus 3 business days after the date on
which the earnings release is issued or the material news or material event
relating to us occurs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of these contractual restrictions, notwithstanding possible
earlier eligibility for sale under the provisions of Rule&nbsp;144, 144(k) or 701,
shares subject to lock-up agreements will not be eligible for sale until these
agreements expire or are waived by Keefe, Bruyette &#038; Woods, Inc. on behalf of
the underwriters.


<P align="left" style="font-size: 10pt"><B>Rule&nbsp;144</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule&nbsp;144 as currently in effect, and beginning after the
expiration of the lock-up agreements, a person (or persons whose shares are
aggregated) who has beneficially owned restricted securities for at least one
year is entitled to sell within any three-month period a number of shares that
does not exceed the greater of:


<P align="center" style="font-size: 10pt">118
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one percent of the total number of our then outstanding
shares of common stock (approximately &#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; shares immediately
after this offering), as shown by our most recent published report
or statement at that time; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the average weekly trading volume of our common stock on the
Nasdaq National Market during the four calendar weeks preceding the
date on which notice of the sale is filed with the Securities and
Exchange Commission.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales under Rule&nbsp;144 also are subject to manner of sale provisions, notice
requirements and the availability of current public information about us. To
the extent that shares were acquired from one of our affiliates, such acquiring
person&#146;s holding period for purposes of effecting a sale under Rule&nbsp;144
commences on the date of transfer from the affiliate.


<P align="left" style="font-size: 10pt"><B>Rule&nbsp;144(k)</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Rule&nbsp;144(k), a person who is not deemed to have been one of our
affiliates at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation, or notice provisions of Rule&nbsp;144.


<P align="left" style="font-size: 10pt"><B>Rule&nbsp;701</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule&nbsp;701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchased shares of our
common stock from us in connection with a compensatory stock or option plan or
other written agreement is eligible to resell those shares (subject to the
terms of any applicable lock-up agreements) 90&nbsp;days after the effective date of
the offering in reliance on Rule&nbsp;144, but without compliance with some of the
restrictions, including the holding period, contained in Rule&nbsp;144.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As soon as practicable after the completion of this offering, we intend to
file a registration statement under the Securities Act to register shares to be
issued under our stock option plan. We expect this registration statement to
become effective immediately upon filing with the SEC. Shares covered by this
registration statement will be freely tradeable, subject to vesting provisions,
terms of the lock-up agreements and, in the case of affiliates only, the
restrictions of Rule&nbsp;144 other than the holding period requirement.

<DIV align="left">
<A name="419"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>UNDERWRITING</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the terms and conditions of the underwriting agreement among
us, the Bank, the selling stockholders and Keefe, Bruyette &#038; Woods, Inc., UBS
Securities LLC and Brean Murray &#038; Co., Inc., as representatives (the
&#147;Representatives&#148;), on behalf of the underwriters, the underwriters named below
have severally agreed to purchase from us and the selling stockholders, and we
and the selling stockholders have severally agreed to sell to the underwriters
the following respective numbers of shares of common stock at the initial
public offering price less the underwriting discounts and commissions set forth
on the cover page of this prospectus.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="85%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Underwriters</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Keefe, Bruyette &#038; Woods, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">UBS Securities LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Brean Murray &#038; Co., Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms and conditions of the underwriting agreement, the
underwriters are committed to accept and pay for all of the shares offered by
this prospectus, if any are taken. If an underwriter defaults, the
underwriting agreement provides that the purchase commitments of the
non-defaulting underwriters may be increased or, in certain cases, the
underwriting agreement may be terminated. The underwriting agreement provides
that the underwriters&#146; obligations are subject to approval of certain legal
matters by their counsel, including, without


<P align="center" style="font-size: 10pt">119
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">limitation, the authorization and the validity of the shares, and to
various other conditions customary in a firm commitment underwritten public
offering, such as receipt by the underwriters of officers&#146; certificates, legal
opinions and comfort letters.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriters propose to offer our common stock directly to the public
at the public offering price set forth on the cover page of this prospectus and
to selected securities dealers (who may include the underwriters) at that price
less a concession not in excess of $&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; per share. The underwriters may
allow, and the selected dealers may reallow, a concession not in excess of
$&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; per share to certain brokers and dealers. After the initial public
offering, the offering price and other selling terms may be changed from time
to time by the Representatives of the underwriters. The underwriters expect to
deliver the shares of common stock on or about &#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;, 2004.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At our request, the underwriters have reserved up to &#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; shares of
our common stock for sale, at the initial public offering price, to our
directors, officers, employees and related persons. Any shares purchased under
this directed share program will be subject to a 180-day lock-up period. The
number of shares of our common stock available for sale to the general public
will be reduced to the extent these persons purchase such reserved shares. Any
reserved shares that are not so purchased will be offered by the underwriters
to the general public on the same basis as the other shares offered by this
prospectus.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and the selling stockholders have granted the underwriters an option,
exercisable within 30&nbsp;days after the date of this prospectus, to purchase up to
&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093; additional shares solely to cover over-allotments, if any, at the same
price per share to be paid by the underwriters for the other shares in this
offering. If the underwriters purchase any additional shares under this
option, each underwriter will be committed to purchase the additional shares in
approximately the same proportion allocated to them in the table above.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the per share and total underwriting discounts
to be paid by us and the selling stockholders to the underwriters in connection
with this offering. These amounts are shown assuming both no exercise and full
exercise of the over-allotment option.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="50%">&nbsp;</TD>

    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Per Share</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Total</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Underwriting discount to be paid by:</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>No Exercise</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Full Exercise</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>No Exercise</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Full Exercise</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Us</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Selling Stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, there has been no public market for our common
stock. We have applied for quotation of our common stock on the Nasdaq
National Market under the symbol &#147;&nbsp;&nbsp;&nbsp;.&#148; The initial public offering price
for the common stock will be determined by negotiations between the
Representatives of the underwriters and us and the offering price of the common
stock may not be indicative of the market price following the offering.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the offering, the underwriters may engage in
transactions that are intended to stabilize, maintain or otherwise affect the
market price of our common stock during and after the offering, such as the
following:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The underwriters may over-allot or otherwise create a short
position in the common stock for their own account by selling more
shares of common stock than have been sold to them;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The underwriters may elect to cover any such short position
by purchasing shares of common stock in the open market or by
exercising the over-allotment option;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The underwriters may stabilize or maintain the price of the
common stock by bidding; and</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">120
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The underwriters may impose penalty bids, under which selling
concessions allowed to syndicate members or other broker-dealers
participating in the offering are reclaimed if shares of common
stock previously distributed in the offering are repurchased in
connection with stabilization transactions or otherwise.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effect of these transactions may be to stabilize or maintain the
market price of our common stock at a level above that which might otherwise
prevail in the open market. The imposition of a penalty bid may also affect
the price of our common stock to the extent that it discourages resales of the
common stock. The magnitude or effect of any stabilization or other
transactions is uncertain. These transactions may be effected on the Nasdaq
National Market or otherwise and, if commenced, may be discontinued at any
time.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, the Bank and the selling stockholders have agreed to indemnify the
underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the underwriters may be required to make in connection with those
liabilities.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, our directors and officers, the selling stockholders and substantially
all of our existing stockholders owning approximately &#091; &#093;% of our
outstanding common stock immediately prior to the offering have entered into
lock-up agreements (and the purchasers of shares of our common stock under the
directed share program will agree to restrictions) generally providing, subject
to limited exceptions, that they will not, without the prior written consent of
Keefe, Bruyette &#038; Woods, Inc., directly or indirectly, during the period ending
180&nbsp;days after the date of this prospectus:


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale or otherwise dispose of, any shares of
common stock of EuroBancshares, or any securities convertible into,
exchangeable for or that represent the right to receive shares of
common stock of EuroBancshares, whether now owned or hereafter
acquired, owned directly (including holding as a custodian) or with
respect to which such stockholder has beneficial ownership within
the rules and regulations of the SEC, or file or cause to be filed
any registration statement under the Securities Act with respect to
the foregoing; or</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>engage in any hedging or other transaction that is designed
to or that reasonably could be expected to lead to or result in a
sale or disposition of any shares of common stock of EuroBancshares,
such prohibited hedging or other transactions to include any short
sale or grant of any right (including without limitation any put or
call option) with respect to any shares of common stock of
EuroBancshares or with respect to any security that includes,
relates to, or derives any significant part of its value from such
shares.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 180-day restricted period described above is subject to extension
under limited circumstances. In the event that either (1)&nbsp;during the period
that begins on the date that is 15 calendar days plus 3 business days before
the last day of the 180-day restricted period and ends on the last day of the
180-day restricted period, we issue an earnings release or material news or a
material event relating to us occurs; or (2)&nbsp;prior to the expiration of the
180-day restricted period, we announce that we will release earnings results
during the 16-day period beginning on the last day of the 180-day restricted
period, then the restricted period will continue to apply until the expiration
of the date that is 15 calendar days plus 3 business days after the date on
which the earnings release is issued or the material news or material event
relating to us occurs.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;18, 2001, Eurobank issued $25.0&nbsp;million and on December&nbsp;19,
2002 EuroBancshares issued $20.0&nbsp;million in trust preferred securities. These
trust preferred securities were placed by Keefe, Bruyette &#038; Woods, Inc. In
addition, from time to time, in the ordinary course of business, Eurobank
enters into transactions for the purchase or sale of securities and the
placement of brokered deposits with several broker-dealers and commercial banks
in the United States and Puerto Rico markets including, but not limited to, UBS
Securities LLC and Keefe, Bruyette &#038; Woods, Inc.


<P align="center" style="font-size: 10pt">121
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="420"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>LEGAL MATTERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the shares of common stock offered hereby will be passed
upon for us by Jenkens &#038; Gilchrist, a Professional Corporation, Dallas, Texas,
in reliance upon certain matters passed upon by Fiddler, Gonzalez &#038; Rodriguez,
P.S.C. as to the laws of the Commonwealth of Puerto Rico.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain legal matters relating to this offering will be passed upon for
the underwriters by Skadden, Arps, Slate, Meagher &#038; Flom LLP, Houston, Texas.

<DIV align="left">
<A name="421"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>EXPERTS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KPMG LLP, independent auditors, have audited our consolidated financial
statements as of December&nbsp;31, 2002 and 2003 and for the years then ended, as
set forth in their report. Their report refers to the adoption of the
provisions of Financial Accounting Standards Board&#146;s Interpretation No.&nbsp;46R,
Consolidation of Variable Interest Entities, as of December&nbsp;31, 2003. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on KPMG LLP&#146;s report, given on their
authority as experts in accounting and auditing.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements as of December&nbsp;31, 2001, included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent auditors, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of this
firm as experts in accounting and auditing in giving these reports. We have
been unable to obtain, after reasonable efforts, the written consent of Arthur
Andersen LLP to our naming it as an expert and as having audited the
consolidated financial statements for the year ended December&nbsp;31, 2001 and
including its audit report in this prospectus. Under these circumstances, Rule
437(a) under the Securities Act permits this registration statement to be filed
without the consent of Arthur Andersen LLP. This lack of consent may limit your
ability to recover damages from Arthur Andersen LLP under Section&nbsp;11 of the
Securities Act for any untrue statements of material fact contained in the
financial statements audited by Arthur Andersen LLP or any omissions to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.

<DIV align="left">
<A name="422"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus is part of a registration statement on Form S-1 we filed
with the SEC. This prospectus does not contain all of the information
contained in the registration statement and all of its exhibits and schedules.
For further information about us and the common stock being offered by this
prospectus, please see the complete registration statement. Summaries of
agreements or other documents in this prospectus are not necessarily complete.
Please refer to the exhibits to the registration statement for complete copies
of these documents.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may read and copy our registration statement and all of its exhibits
and schedules at the SEC Public Reference Room located at 450 Fifth Street,
N.W., Washington, DC, 20549. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
registration statement is also available from the SEC&#146;s Web site at
http://www.sec.gov.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After this offering, we intend to provide annual reports to our
stockholders that include financial information examined and reported on by an
independent registered public accounting firm.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only on
the date of this prospectus regardless of the time of the delivery of this
prospectus or of any sale of our common stock.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No action is being taken in any jurisdiction outside the United States to
permit public offering of the common stock or possession or distribution of
this prospectus in that jurisdiction. Persons who come into possession or


<P align="center" style="font-size: 10pt">122
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">distribution of this prospectus in jurisdictions outside the United States
are required to inform themselves about and to observe any restrictions as to
this offering and the distribution of this prospectus applicable to that
jurisdiction.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2004, all dealers that buy, sell or trade in our
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers&#146; obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.


<P align="center" style="font-size: 10pt">123
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="423"></A>
</DIV>

<P align="center" style="font-size: 10pt"><B>INDEX TO FINANCIAL STATEMENTS</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="86%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Audited Financial Statements of EuroBancshares and
Subsidiaries as of and
for the Fiscal Years Ended December&nbsp;31, 2003 and
December&nbsp;31, 2002.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Independent Auditors&#146; Report</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated
Balance Sheets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated
Statemens of Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated
Statements of Changes in Stockholders&#146; Equity and Comprehensive
Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated
Statements of Cash Flows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Notes to Consolidated Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Audited
Financial Statements of Eurobank as of and
for the Fiscal Year Ended December&nbsp;31, 2001.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Copy of Independent Auditors&#146; Report</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Balance Sheet</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;56</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Statement of Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;57</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Statement of Changes in Stockholders&#146; Equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;58</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated Statement of Cash Flows</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;60</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Notes to Consolidated Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">F&#150;61</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P align="center" style="font-size: 10pt">(With Independent Auditors&#146; Report Thereon)




<P align="center" style="font-size: 10pt">F-1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt"><IMG src="y96993y9699301.gif" alt="(KPMG LETTERHEAD)">



<P align="center" style="font-size: 10pt"><B>Independent Auditors&#146; Report</B>



<P align="left" style="font-size: 10pt">The Shareholders and Board of Directors<BR>
EuroBancshares, Inc:

<P align="left" style="font-size: 10pt">We have audited the accompanying consolidated balance sheets of EuroBancshares,
Inc. and subsidiaries (the Company) as of December&nbsp;31, 2003 and 2002, and the
related consolidated statements of income, changes in stockholders&#146; equity and
comprehensive income, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The financial statements of Eurobank
(included herein as the consolidated financial statements of EuroBancshares,
Inc. and subsidiaries) for the year ended December&nbsp;31, 2001 were audited by
other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those consolidated financial statements in their report
dated January&nbsp;11, 2002.


<P align="left" style="font-size: 10pt">We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.


<P align="left" style="font-size: 10pt">In our opinion, the 2003 and 2002 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
EuroBancshares, Inc. and subsidiaries as of December&nbsp;31, 2003 and 2002, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States
of America.


<P align="left" style="font-size: 10pt">As discussed in note 1, the Company has adopted the provision of Financial
Accounting Standards Board&#146;s Interpretation No.&nbsp;46R, <I>Consolidation of Variable
Interest Entities, </I>as of December&nbsp;31, 2003.



<P align="right" style="font-size: 10pt"><IMG src="y96993y9699302.gif" alt="(KPMG LLP)">


<P align="left" style="font-size: 10pt">San Juan, Puerto Rico


<P align="left" style="font-size: 10pt">February&nbsp;25, 2004, except as to note 30,<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;which is as of May&nbsp;12, 2004


<P align="left" style="font-size: 10pt">Stamp No.&nbsp;1902222 of the Puerto Rico<BR>
Society of Certified Public Accountants<BR>
was affixed to the record copy of this report.


<P align="left" style="font-size: 10pt"><IMG src="y96993y9699303.gif" alt="(KPMG LOGO)">



<P align="center" style="font-size: 10pt">F-2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Consolidated Balance Sheets



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and due from banks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,522,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,620,623</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest-bearing deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,324,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,881,975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Securities purchased under agreements to resell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,483,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,014,420</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment securities available for sale:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Pledged securities with creditors&#146; right to repledge</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,355,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,515,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,582,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,279,865</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,342,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,405,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loans held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,846,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,238,539</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loans, net of allowance for loan losses of $9,393,943 in 2003
and $6,918,141 in 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">883,151,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">755,634,838</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accrued interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,792,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,483,643</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Customers&#146; liability on acceptances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Premises and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,531,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,379,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,443,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,570,501</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,320,934,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,035,305,497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><B>Liabilities and Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deposits:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Noninterest bearing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">104,757,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,444,179</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest bearing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">879,791,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">757,600,898</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">984,549,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">843,045,077</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Securities sold under agreements to repurchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207,523,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,112,687</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Acceptances outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes payable to Federal Home Loan Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,850,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Junior subordinated debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,393,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Trust Preferred Capital Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accrued interest payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,868,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,439,945</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accrued expenses and other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,267,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,241,347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,255,858,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">977,970,016</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Preferred stock:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Preferred stock, $0.01 par value. Authorized 20,000,000 shares;
none issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Common stock:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Common stock, $0.01 par value. Authorized 12,500,000 shares; issued and
outstanding 6,973,698 and 6,939,685 shares in 2003 and 2002, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,397</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Capital paid in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,943,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,675,749</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Retained earnings:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Reserve fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,348,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,299,469</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Undivided profits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,521,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,687,559</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accumulated other comprehensive income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(807,244</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,603,307</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,075,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,335,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commitments and contingencies (notes 16, 17, 20, 22, 24, and 25)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,320,934,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,035,305,497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">See accompanying notes to consolidated financial statements.


<P align="center" style="font-size: 10pt">F-3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Consolidated Statements of Income



<P align="center" style="font-size: 10pt">Years ended December&nbsp;31, 2003, 2002, and 2001


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans, including fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">64,952,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,958,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,719,014</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,009,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,341,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,284,082</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest-bearing deposits, securities purchased
under agreements to resell, and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">554,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">667,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">586,497</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,515,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,967,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,589,593</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,384,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,467,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,471,478</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Securities sold under agreements to repurchase,
notes payable, and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,537,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,656,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,907,063</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,922,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,123,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,378,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,593,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,844,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,211,052</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,451,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,353,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,377,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net interest income after provision for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,142,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,490,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,834,052</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noninterest income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Service charges &#151; fees and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,456,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,331,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,640,658</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net gain on sale of securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">707,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,842</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net loss on sale of other real estate owned, repossessed
assets, and on disposition of other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(662,556</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(310,567</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(86,143</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Gain on sale of loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,546,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">974,669</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total noninterest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,047,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,020,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,724,026</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noninterest expense:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Salaries and employee benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,434,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,943,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,374,586</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Occupancy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,909,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,592,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,971,872</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Professional services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,402,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,055,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951,460</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Commissions and service fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,050,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">764,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719,880</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Office supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">984,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">746,458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">627,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">384,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">352,558</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Promotional</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">510,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">356,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289,108</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,955,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,091,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,285,110</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,875,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,934,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,607,018</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Income before income taxes and extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,315,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,576,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,951,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,432,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,723,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,147,090</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,882,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,852,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,803,970</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Extraordinary gain on acquisition of Banco Financiero (note 2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,080,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,882,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,933,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,803,970</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">See accompanying notes to consolidated financial statements.

<P align="center" style="font-size: 10pt">F-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Consolidated Statements of Changes in Stockholders&#146; Equity<BR>
and Comprehensive Income



<P align="center" style="font-size: 10pt">Years ended December&nbsp;31, 2003, 2002, and 2001


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD nowrap align="center" colspan="7"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Preferred stock:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issuance of preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Class&nbsp;A common stock:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Transfer to common stock and capital paid in excess of
par value (note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,000,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Class&nbsp;B common stock:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,026,032</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Transfer to common stock (note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,026,032</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Common stock:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,778,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issuance of EuroBank common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">752,465</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Exchange as a result of the creation of the holding company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,720,537</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchase and retirement of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(97</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Transfer from Class&nbsp;A common stock (note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Transfer from Class&nbsp;B common stock (note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,026,032</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,778,497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Capital paid in excess of par value &#151; common stock:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,675,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,610,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,746,145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issuance of EuroBank common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Exchange as a result of the creation of the holding company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,720,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchase and retirement of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(87,319</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,375,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,864,642</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Transfer from Class&nbsp;A common stock (note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,943,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,675,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,610,787</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Reserve fund:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,299,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">602,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,920</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Transfer from undivided profits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,049,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">696,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">577,937</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,348,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,299,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">602,857</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Undivided profits:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,687,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,450,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224,284</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,882,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,933,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,803,970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Transfer to reserve fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,049,129</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(696,612</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(577,937</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,521,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,687,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,450,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accumulated other comprehensive income (loss), net of taxes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,603,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">363,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,961</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unrealized net gain (loss)&nbsp;on investment securities available for
sale, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,410,551</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,239,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,506</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(807,244</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,603,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">363,467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">65,075,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,335,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,805,925</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>


<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Consolidated Statements of Changes in Stockholders&#146; Equity<BR>
and Comprehensive Income, continued



<P align="center" style="font-size: 10pt">Years ended December&nbsp;31, 2003, 2002, and 2001


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Comprehensive income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,882,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,933,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,803,970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other comprehensive income (loss), net of tax:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Unrealized net gains (losses)&nbsp;on investment securities
available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,880,185</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,239,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420,135</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Reclassification adjustment for realized gains included
in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(530,366</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98,629</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Unrealized net gains (losses)&nbsp;on investment
securities available for sale, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,410,551</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,239,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,506</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,472,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,173,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,125,476</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt">See accompanying notes to consolidated financial statements.


<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Consolidated Statements of Cash Flows



<P align="center" style="font-size: 10pt">Years ended December&nbsp;31, 2003, 2002, and 2001


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,882,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,933,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,803,970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Adjustments to reconcile net income to net cash provided by (used in)
operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,442,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,243,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,058,957</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Provision for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,451,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,353,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,377,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Deferred tax provision (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(145,846</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Extraordinary item (note 2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,080,983</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net gain on sale of securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(707,155</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(194,842</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Gain on sale of loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,546,634</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(974,669</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Loss on sale of foreclosed and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net (discount accretion) premium amortization on securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,916,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(166,237</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Decrease in deferred loan costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,688,506</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,241,706</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,088,410</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Proceeds from sale of trading securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Origination of loans held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49,165,365</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32,634,629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(30,612,487</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Proceeds from sale of loans held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,284,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,447,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,639,287</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">(Increase) decrease in accrued interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,309,044</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,602,118</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,564</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net (increase)&nbsp;decrease in other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,930,458</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,258,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,690,676</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">(Decrease) increase in accrued interest payable, accrued expenses,
and other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(545,698</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(404,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,185,111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash provided by (used in) operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,220,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,224,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,675,406</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net decrease in securities purchased under
agreements to resell and federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,530,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35,450,327</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,259,485</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net increase (decrease)&nbsp;in interest-bearing deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,557,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,122,683</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,656,543</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from sale of investment securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,219,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,483,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchases of investment securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(400,874,835</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(105,347,471</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(69,970,575</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from principal payments and maturities
of investment securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,088,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,692,672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,303,774</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchases of investment securities held to maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,673,100</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,188,900</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from principal payments, maturities, and calls of
investment securities held to maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,124,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">992,100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from sale of loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net increase in loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(194,890,697</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(255,641,865</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141,360,471</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from sale of foreclosed and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,160,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,693,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,638,020</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,594,393</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,947,741</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,127,612</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Acquisition of Banco Financiero including direct costs (note 3p)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(541,272</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and due from banks of Banco Financiero</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,273,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(279,350,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(349,320,324</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(140,957,762</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net increase in deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,504,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273,148,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,267,149</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Increase in securities sold under agreements to repurchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,410,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,749,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22,699,084</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Repayment of notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,150,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,950,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(600,000</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issuance of notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,550,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,600,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from issuance of Trust Preferred Capital Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,617,107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchase and retirement of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(87,416</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">277,031,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333,631,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,185,172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,901,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,535,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,552,004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,620,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,085,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,533,238</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,522,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,620,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,085,242</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">See accompanying notes to consolidated financial statements.

<P align="center" style="font-size: 10pt">F-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(1)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Organization</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>EuroBancshares, Inc. (the Company or EuroBancshares) was incorporated on
November&nbsp;21, 2001, under the laws of the Commonwealth of Puerto Rico to
engage, for profit, in any lawful acts or businesses and serve as the
holding company for Eurobank (the Bank). The Bank is a full service
commercial bank with a delivery system of 19 branches in Puerto Rico.
During 2002, the Bank became a wholly owned subsidiary of EuroBancshares,
Inc. The reorganization into a holding company was effected on July&nbsp;1, 2002
pursuant to an agreement and plan of merger by and among the Bank, Euro
Interim Bank (a nonoperating bank organized under the laws of the
Commonwealth of Puerto Rico for purposes of the merger), and the Company
whereby the common stock of the Bank was converted into common stock of the
Company.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In connection with the merger of the Bank and Euro Interim Bank, which was
carried out as part of the reorganization, each stockholder of the Bank who
owned at least 100 shares of the Bank stock was entitled to receive from
the Company, in exchange for each share of the Bank stock owned as of the
effective date of the merger, one share of the voting common stock of the
Company, par value $0.01 per share. All remaining stockholders of the Bank
received cash for their shares of the Bank stock equal to $9.00 per share.
On September&nbsp;20, 2002, the Company became a financial holding company. As
part of the reorganization, each holder of options to acquire shares of the
Bank stock outstanding received one option to purchase a share of the
Company&#146;s stock. The formation of the Company and the reorganization has
been accounted for at historical cost. Financial statements of the Bank as
of December&nbsp;31, 2001 and for the year then ended have been presented for
comparative purposes, as it is the same accounting entity.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As a financial holding company, the Company is subject to the provisions of
the Bank Holding Company Act, and to the supervision and regulation by the
board of governors of the Federal Reserve System.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The consolidated financial statements of the Company include the accounts
of its wholly owned subsidiaries: the Bank; Euroseguros, Inc. (Euroseguros
or the Agency), a company acting as an agent to sell life, property, and
casualty insurance products in Puerto Rico, principally to customers of the
Bank; Eurobank Statutory Trust I (the Trust); and Eurobank Statutory Trust
II (the Trust II). However, effective December&nbsp;31, 2003, the Company
adopted Financial Accounting Standards Board&#146;s Interpretation No.&nbsp;46R (FIN
46R), <I>Consolidation of Variable Interest Entities</I>. FIN 46R required the
Company to deconsolidate the Trust and Trust II as of December&nbsp;31, 2003.
Deconsolidation resulted in the recharacterization of the liability
previously presented as Trust Preferred Capital Securities as junior
subordinated debentures payable to the statutory trusts that issued the
capital securities. The Company&#146;s equity interest in the Trust and Trust II
has been included in other investments in the 2003 consolidated balance
sheet. The Trust and the Trust II are special purpose vehicles that entered
into financing transactions involving the issuance of Trust Preferred
Capital Securities (note 15).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(2)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Acquisition</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective December&nbsp;15, 2002, the Company, through the Bank, acquired all of
the then issued and outstanding shares of common stock of Banco Financiero
de Puerto Rico (Banco Financiero) for a purchase price of $1,548,671,
consisting of the issuance of common stock of the Company valued at
$1,222,280 and $326,391 paid in cash. Banco Financiero was a commercial
bank which operated through three branches in Ponce, Puerto Rico. Also, as
a result of this transaction, Banco Financiero merged with and into the
Bank in a business combination. The estimated fair value of the assets
acquired less liabilities assumed of $2,844,535 exceeded the acquisition
price of $1,763,552, including additional costs associated</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002




<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to the
acquisition of $214,881. This excess resulted in an extraordinary gain on
business acquisition of $1,080,983 after reducing the value of certain
assets acquired by $456,351.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of acquisition.</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="74%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and due from banks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,273,349</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest-bearing deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,102,749</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,115,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Federal funds sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,514,480</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loans receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,203,612</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets, including deferred taxes of
of $3,450,529</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,865,127</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,074,780</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(84,233,389</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(996,856</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total liabilities assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(85,230,245</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,844,535</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has received the opinion of its tax counselor, dated December
15, 2002, to the effect that the acquisition will be treated for Puerto
Rico income taxes as a tax-free reorganization.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The results of operations of the Company include the operations of the
acquired bank after the date of acquisition.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The pro forma information below is theoretical in nature and not
necessarily indicative of future consolidated results of operations of the
Company or the consolidated results of operations which would have resulted
had the Company acquired the stock of Banco Financiero as of beginning of
the years presented. The Company&#146;s unaudited pro forma condensed
consolidated statements of operations for the years ended December&nbsp;31, 2002
and 2001, assuming Banco Financiero had been acquired as of January&nbsp;1,
2001, are as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Years ended December 31,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">61,008,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,073,582</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,588,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,299,013</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,669,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,299,013</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per share &#151; diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.52</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)



<P align="center" style="font-size: 10pt">F-9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002




<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(3)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Summary of Significant Accounting Policies</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates. Following is a
description of significant accounting policies followed by the Company in
the preparation of the accompanying consolidated financial statements:</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Cash Equivalents</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of the presentation in the statements of cash flows, cash
and cash equivalents are defined as those amounts included in the
balance sheet caption cash and due from banks.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Securities Purchased under Agreements to Resell</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company enters into purchases of securities under agreements to
resell. The amounts advanced under these agreements represent
short-term investment transactions.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(c)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Investment Securities Available for Sale</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Investment securities available for sale consist of bonds, notes, and
other debt securities not classified as trading or held-to-maturity
securities. Investment securities available for sale are recorded at
fair value and unrealized gains and losses, net of tax, on these
investments are reflected as a separate component of stockholders&#146;
equity in accumulated other comprehensive income until realized.
Realized gains or losses on sales of investment securities available
for sale are recognized when realized and are computed on the
specific-identification basis.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Declines in fair value of securities below their cost that are deemed
to be other than temporary result in a reduction in carrying amount to
fair value. The impairment is charged to earnings and a new cost basis
for the security is established. To determine whether an impairment is
other than temporary, the Company considers whether it has the ability
and intent to hold the investment until a market price recovery and
considers whether evidence indicating the cost of the investment is
recoverable outweighs evidence to the contrary. Evidence considered in
this assessment includes the reasons for the impairment, the severity
and duration of the impairment, changes in value subsequent to
year-end, and forecasted performance of the investee.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Premiums and discounts are amortized over the estimated average life of
the related investment security available for sale as an adjustment to
yield using the effective interest method. Dividend and interest income
are recognized when earned.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(d)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Other Investments</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other investments include Federal Home Loan Bank (FHLB)&nbsp;stock and
equity investment in the Trust and Trust II (unconsolidated statutory
trusts). The FHLB stock is carried at cost, representing the amount for
which the FHLB would redeem the stock. Investment in statutory trusts
is carried on the equity method of accounting.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)



<P align="center" style="font-size: 10pt">F-10
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(e)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Loans Held for Sale</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Mortgage loans originated and intended for sale in the secondary market
are carried at the lower of cost or estimated fair value in the
aggregate. Net unrealized losses, if any, are recognized through a
valuation allowance by charges to income.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(f)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Loans and Allowance for Loan Losses</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their
outstanding unpaid principal balances adjusted by any charge-offs,
unearned finance charges, allowance for loan losses, and net deferred
nonrefundable fees or costs on origination. The allowance for loan
losses is an estimate to provide for probable collection losses in the
loan portfolio. Losses are charged and recoveries are credited to the
allowance account at the time a loss is incurred or a recovery takes
place.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company follows a consistent procedural discipline and accounts for
loan loss contingencies in accordance with Financial Accounting
Standards Board (FASB)&nbsp;Statement of Financial Accounting Standards
(SFAS)&nbsp;No.&nbsp;5, <I>Accounting for Contingencies</I>, and SFAS No.&nbsp;114,
<I>Accounting by Creditors for Impairment of a Loan, </I>as amended by SFAS
No.&nbsp;118, <I>Accounting by Creditors for Impairment of a Loan &#150; Income
Recognition and Disclosures. </I>The following is a description of how each
portion of the allowance for loan losses is determined.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company segregates the loan portfolio for loan loss purposes into
segments based upon the type of loan and underlying collateral. The
Company provides for a general allowance for losses inherent in the
portfolio by such collateral categories. General loss percentages are
established based upon historical analyses as well as estimates of the
inherent losses which probably exist as of the evaluation date even
though they might not have been identified by the more objective
processes used. This is due to the risk of error and/or inherent
imprecision in the process. This portion of the allowance is
particularly subjective and requires judgments based on qualitative
factors which do not lend themselves to exact mathematical calculations
such as: trends in delinquencies and nonaccruals; migration trends in
the portfolio; trends in volume, terms, and portfolio mix; new credit
products and/or changes in the geographic distribution of those
products; changes in lending policies and procedures; loan review
reports on the efficacy of the risk identification process; changes in
the outlook for local, regional, and national economic conditions;
concentrations of credit; and peer group comparisons.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Specific allowances are provided in the event that the specific
analysis on each classified loan indicates that it is probable that the
Company will be unable to collect all amounts due, both principal and
interest, according to the contractual terms of the loan agreement.
When a loan is impaired, the Company measures impairment based on
either (a)&nbsp;the present value of the expected future cash flows of the
impaired loan discounted at the loan&#146;s original effective rate, (b)&nbsp;the
observable market price of the impaired loans, or (c)&nbsp;the fair value of
the collateral of a collateral-dependent loan. The Company selects the
measurement method on a loan-by-loan basis, except for
collateral-dependent loans for which foreclosure is probable must be
measured at the fair value of the collateral. When the measure of the
impaired loan is less than the recorded amount, the impairment is
recorded through a valuation allowance. In a troubled debt
restructuring involving a restructured loan, the Company measures
impairment by discounting the total expected future cash</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>flows at the loan&#146;s original effective rate of interest. The provision
for loan loss is adjusted in order to state the allowance for loan
losses to the required level as determined above.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Management believes that the allowance for loan losses is adequate;
however, regulatory agencies, including the Federal Reserve and the
Federal Deposit Insurance Corporation (the FDIC), as an integral part
of their examination process, periodically review the Company&#146;s
allowance for loan losses.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company classifies loans as nonperforming when they become 90&nbsp;days
past due.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(g)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Lease Financing</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company leases vehicles and equipment to individual and corporate
customers. The finance method of accounting is used to recognize
revenue on lease contracts that meet the criteria specified by SFAS No.
13, <I>Accounting for Leases</I>, as amended. Aggregate rentals due over the
term of the leases less unearned income are included in net loans.
Unearned income is amortized using a method that results in approximate
level rates of return on the principal amounts outstanding. Finance
lease origination fees and costs are deferred and amortized over the
average life of the portfolio as an adjustment of yield.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(h)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Transfer of Financial Assets and Servicing Rights Retained</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Transfers of financial assets are accounted for as sales when control
over the assets has been surrendered. Control over transferred assets
is deemed to be surrendered when (a)&nbsp;the assets have been isolated from
the Company, (b)&nbsp;the transferee obtains the right (free of conditions
that constrain it from taking advantage of that right) to pledge or
exchange the transferred assets, and (c)&nbsp;the Company does not maintain
effective control over the transferred assets through an agreement to
repurchase them before their maturity.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon completion of a transfer of assets that satisfies the conditions
described above to be accounted for as a sale, the Company:</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Derecognizes all assets sold;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Recognizes all assets obtained and liabilities incurred
in consideration as proceeds of the sale;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Initially measures, at fair value, assets obtained and liabilities incurred in a sale; and</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Recognizes in earnings any gain or loss on the sale.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">The Company receives fees for servicing activities on loans it has
sold. These activities include, but are not limited to, collecting
principal, interest, and escrow payments from borrowers; paying taxes
and insurance from escrowed funds; monitoring delinquencies; and
accounting for and remitting principal and interest payments. To the
extent that the servicing fees exceed or do not provide adequate
compensation for the services provided, the Company records a servicing
asset or liability for the fair value of the servicing retained.


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(i)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Servicing Assets</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has no contracts to service loans for others, except for
servicing retained on the sale of leases. The total cost of leases to
be sold with servicing assets retained is allocated to the servicing
assets and the leases (without the servicing assets), based on their
relative fair values. Servicing assets are amortized in proportion to
and over the period of estimated net servicing income. In addition, the
Company assesses capitalized servicing assets for impairment based on
the fair value of those assets.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To estimate the fair value of servicing assets the Company considers
prices for similar assets and the present value of expected future cash
flows associated with the servicing assets calculated using assumptions
that market participants would use in estimating future servicing
income and expense, including discount rates, anticipated prepayment,
and credit loss rates. For purposes of evaluating and measuring
impairment of capitalized servicing assets, the Company evaluates
separately servicing retained for each loan portfolio sold. The amount
of impairment recognized, if any, is the amount by which the
capitalized servicing assets exceed its estimated fair value.
Impairment is recognized through a valuation allowance with changes
included in net income for the period in which the change occurs.
Servicing assets are included as part of other assets in the balance
sheets.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(j)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Premises and Equipment</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Premises and equipment are stated at cost, less accumulated
depreciation and amortization, which are computed utilizing the
straight-line method over the estimated useful lives of the depreciable
assets. Leasehold improvements are stated at cost and are amortized
using the straight-line method over the estimated useful lives of the
assets or the term of the lease, whichever is shorter. Expenditures for
major improvements and remodeling are capitalized while maintenance and
repairs are charged to expense. Gains or losses on disposition of
premises and equipment and related operating income and maintenance
expenses are included in current operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(k)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Other Real Estate and Repossessed Assets</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other real estate and repossessed assets, normally obtained through
foreclosure or other workout situations, are initially recorded at fair
value at the date of foreclosure, establishing a new cost basis. Any
resulting loss is charged to the allowance for loan losses. An
appraisal of other real estate properties and repossessed assets is
made periodically after its acquisition and comparison between the
appraised value and the carrying value is performed. Additional
declines in value after acquisition, if any, are charged to current
operations. Gains or losses on disposition of other real estate and
repossessed assets and related operating income and maintenance
expenses are included in current operations.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(l)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Trust Services</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In connection with its trust activities, the Company administers and is
custodian of assets which amounted to approximately $10,227,000 and
$4,176,000 at December&nbsp;31, 2003 and 2002, respectively.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(m)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Securities Sold under Agreements to Repurchase</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company sells securities under agreements to repurchase the same or
similar securities. Amounts received under these agreements represent
short-term financing transactions.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(n)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Income Taxes</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company uses the asset and liability method for the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company&#146;s
financial statements or tax returns. Deferred income tax assets and
liabilities are determined for differences between financial statement
and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future as well as net operating losses
carryforwards. The computation is based on enacted tax laws and rates
applicable to periods in which the temporary differences are expected
to be recovered or settled.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(o)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Reserve Fund</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Banking Law of Puerto Rico requires that a reserve fund be created
and that annual transfers of at least 10% of annual net income of the
Bank be made, until such fund equals total paid-in capital. Such
transfers restrict the retained earnings, which would otherwise be
available for dividends. If net losses are experienced, such losses
will be initially charged to retained earnings before reducing the
reserve fund.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(p)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Interest Income</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest income on loans and investment securities is recognized on a
basis which produces a constant yield over the term of the loan or
security. Accrual of interest income is discontinued when
collectibility of the related loan appears doubtful or after 90&nbsp;days of
delinquency, unless the credit is well secured and in process of
collection. All interest accrued but not collected for loans that are
placed on nonaccrual or charged off is reversed against interest
income. The interest on these loans is accounted on the cash basis or
cost recovery method, until qualifying for return to accrual. Loans are
returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are
reasonably assured.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(q)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Loan Origination and Commitment Fees</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Loan fees and certain direct loan origination costs are deferred, and
the net amount is recognized in interest income using the interest
method over the contractual life of the loans. Commitment fees and
costs relating to commitments whose likelihood of exercise is remote
are recognized over the commitment period on a straight-line basis. If
the commitment is subsequently exercised during the commitment period,
the remaining unamortized commitment fee at the time of exercise is
recognized over the life of the loan as an adjustment of yield.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(r)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Earnings Per Share</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Basic earnings per share represent income available to common
stockholders divided by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflect
additional common shares that would have been outstanding if dilutive
potential common shares had been issued, as well as any adjustment to
income that would result from the</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>assumed issuance. Potential common shares that may be issued by the
Company relate solely to outstanding stock options and are determined
using the treasury stock method.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(s)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Supplementary Cash Flow Information</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Supplemental disclosures of cash flow information are as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash paid during the years for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">32,494,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,939,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,085,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,116,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,037,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">924,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noncash transactions:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Repossessed assets acquired
through foreclosure of loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,431,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,463,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,225,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Change in fair value of available-
for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,214,069</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,653,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428,675</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Tax effect of change in fair
value of available-for-sale
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(803,518</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,169</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Capital contribution through
issuance of EuroBancshares
common stock on acquisition
of Banco Financiero (note 2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,222,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(t)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Stock Option Plan</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As allowed by SFAS No.&nbsp;123, <I>Accounting for Stock-Based Compensation</I>,
and as amended by SFAS No.&nbsp;148, <I>Accounting for Stock-Based Compensation
&#150; Transition and Disclosure, an amendment of FASB Statement No.&nbsp;123</I>,
the Company has elected to continue to measure cost for its stock
compensation plan using the intrinsic value method prescribed by
Accounting Principles Board (APB)&nbsp;Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees</I>. Under the intrinsic value method, compensation
cost is the excess, if any, of the quoted market price of the stock at
the grant date or other measurement date over the amount an employee
must pay to acquire the stock. Entities choosing to continue applying
APB Opinion No.&nbsp;25 must provide pro forma disclosures of the
consolidated net income, as if the fair value method of accounting had
been applied. Under this method, compensation cost is measured at the
grant date based on the fair value of the employee stock option and is
recognized ratably over the service period of the option, which is
usually the vesting period.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>SFAS No.&nbsp;123 established accounting and disclosure requirements using a
fair value based method of accounting for stock-based employee
compensation plans. The per share fair value of stock options granted
during 2003, 2002, and 2001 was $1.27, $1.60, and $1.68 on the date of
grant using the Black-Scholes option pricing model (excluding a
volatility assumption) with the following weighted average assumptions
used for grants in 2003, 2002, and 2001, respectively: no dividend
yield for 2003, 2002, and 2001; risk-free interest rates of 2.75% for
2003, 4% for 2002, and 6% for 2001; and expected lives of five years.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002




<P align="left" style="margin-left:6%; font-size: 10pt">The following table illustrates the effect on net income if the fair
value based method had been applied to all outstanding stock-based
compensation in each period.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="53%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3"><B>(Unaudited)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,882,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,933,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,803,970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deduct total stock-based employee
compensation expense determined
under fair value based method for
all awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(364,421</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(270,832</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(277,452</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,518,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,663,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,526,518</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.90</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.89</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As part of the reorganization described in note 1, each holder of
options to acquire shares of the Bank stock outstanding at the merger
effective date received one option to purchase a share of the Company
stock in exchange for each option to purchase a share of the Bank stock
that such person held as of the merger effective date.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(u)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Comprehensive Income</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. In addition to net income, the
Company recognizes unrealized holding gains and losses arising during
the year in comprehensive income.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(v)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Impairment of Long-Lived Assets</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company adopted SFAS No.&nbsp;144 on January&nbsp;1, 2002. The adoption of
SFAS No.&nbsp;144 did not affect the Company&#146;s financial statements. In
accordance with SFAS No.&nbsp;144, long-lived assets, such as property,
plant, and equipment, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of the
asset. Assets to be disposed of would be separately presented in the
balance sheet and reported at the lower of the carrying amount or fair
value less costs to sell, and are no longer depreciated. The assets and
liabilities of a disposed group classified as held for sale would be
presented separately in the appropriate asset and liability sections of
the consolidated balance sheet.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Prior to the adoption of SFAS No.&nbsp;144, the Company accounted for
long-lived assets in accordance with SFAS No.&nbsp;121, <I>Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of</I>.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(w)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Derivative Instruments</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company does not purchase, sell, or enter into derivative financial
instruments or derivative commodity instruments as defined by SFAS No.
133, <I>Accounting for Derivative Instruments and Hedging Activities</I>.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(x)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Reclassifications</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certain amounts in the 2002 financial statements have been reclassified
to conform with 2003 presentation.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(y)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Business Segments</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An operating segment is a component of a business for which separate
financial information is available that is evaluated regularly by the
chief operating decision-maker in deciding how to allocate resources
and evaluate performance. Presently, the Company&#146;s decisions are
generally based on specific market areas and/or product offerings.
Accordingly, based on the financial information now regularly evaluated
by the Company&#146;s chief operating decision-maker, the Company operates
in a single business segment.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(z)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Recently Issued Accounting Standards</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In June&nbsp;2001, SFAS No.&nbsp;143, <I>Accounting for Asset Retirement
Obligations</I>, was issued. SFAS No.&nbsp;143 requires the Company to record
the fair value of an asset retirement obligation as a liability in the
period in which it incurs a legal obligation associated with the
retirement of tangible long-lived assets that result from the
acquisition, construction, development, and/or normal use of the
assets. The Company also would record a corresponding asset that is
depreciated over the life of the asset. Subsequent to the initial
measurement of the asset retirement obligation, the obligation would be
adjusted at the end of each period to reflect the passage of time and
changes in the estimated future cash flows underlying the obligation.
The Company was required to adopt SFAS No.&nbsp;143 on January&nbsp;1, 2003. The
adoption of SFAS No.&nbsp;143 had no effect on the Company&#146;s financial
statements.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In April&nbsp;2002, SFAS No.&nbsp;145, <I>Rescission of FASB Statements No.&nbsp;4, 44,
and 64, Amendment of FASB Statement No.&nbsp;13, and Technical Corrections</I>,
was issued. SFAS No.&nbsp;145 amends existing guidance on reporting gains
and losses on the extinguishment of debt to prohibit the classification
of the gain or loss as extraordinary, as the use of such
extinguishments have become part of the risk management strategy of
many companies. SFAS No.&nbsp;145 also amends SFAS No.&nbsp;13, <I>Accounting for
Leases</I>, to require sale-leaseback accounting for certain lease
modifications that have economic effects similar to sale-leaseback
transactions. The provisions of SFAS No.&nbsp;145 related to the rescission
of SFAS No.&nbsp;4, <I>Reporting Gains and Losses from Extinguishment of Debt</I>,
were applied in fiscal years beginning after May&nbsp;15, 2002. The
provisions of SFAS No.&nbsp;145 related to SFAS No.&nbsp;13 were effective for
transactions occurring after May&nbsp;15, 2002. The adoption of SFAS No.&nbsp;145
had no effect on the Company&#146;s financial statements.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002




<P align="left" style="margin-left:6%; font-size: 10pt">In June&nbsp;2002, SFAS No.&nbsp;146, <I>Accounting for Costs Associated with Exit
or Disposal Activities</I>, was issued. SFAS No.&nbsp;146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF)&nbsp;Issue No.
94-3, <I>Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity</I>. The provisions of SFAS No.&nbsp;146
were effective for exit or disposal activities initiated after December
31, 2002, with early application encouraged. The adoption of SFAS No.
146 had no effect on the Company&#146;s financial statements.



<P align="left" style="margin-left:6%; font-size: 10pt">In November&nbsp;2002, FASB Interpretation No.&nbsp;45 (FIN 45), <I>Guarantor&#146;s
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness to Others</I>, an interpretation of
SFAS No.&nbsp;5, 57, and 107 and a rescission of FIN 34, was issued. This
interpretation enhances the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations under
guarantees issued. The interpretation also clarifies that a guarantor
is required to recognize, at inception of a guarantee, a liability for
the fair value of the obligation undertaken. The initial recognition
and measurement provisions of the Interpretation were applicable to
guarantees issued or modified after December&nbsp;31, 2002 and the
disclosure requirements were effective for financial statements of
interim or annual periods ending after December&nbsp;15, 2002. This
statement did not have a material impact on the Company&#146;s financial
statements.



<P align="left" style="margin-left:6%; font-size: 10pt">In December&nbsp;2002, SFAS No.&nbsp;148, <I>Accounting for Stock-Based Compensation</I>
&#150; <I>Transition and Disclosure, an amendment of FASB Statement No.&nbsp;123</I>,
was issued. This statement amends SFAS No.&nbsp;123, <I>Accounting for
Stock-Based Compensation</I>, to provide alternative methods of transition
for a voluntary change to the fair value method of accounting for
stock-based employee compensation. In addition, SFAS No.&nbsp;148 amends the
disclosure requirements of SFAS No.&nbsp;123 to require prominent
disclosures in both annual and interim financial statements.
Disclosures required by this standard are included in the notes to
these consolidated financial statements.



<P align="left" style="margin-left:6%; font-size: 10pt">In January&nbsp;2003, the FASB issued FIN No.&nbsp;46, <I>Consolidation of Variable
Interest Entities</I>. The FASB&#146;s stated intent in issuing FIN No.&nbsp;46 was
to clarify the application of Accounting Research Bulletin No.&nbsp;51,
<I>Consolidated Financial Statements</I>, to certain entities in which equity
investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial
support from other parties. FIN No.&nbsp;46 requires an enterprise to
consolidate a variable interest entity (as defined in FIN No.&nbsp;46) if
that enterprise has a variable interest (or combination of variable
interests) that will absorb a majority of the entity&#146;s expected losses
if they occur, receive a majority of the entity&#146;s expected returns if
they occur, or both. In December&nbsp;2003, the FASB issued a revised FIN
No.&nbsp;46 (FIN No.&nbsp;46R), which attempts to clarify the guidance in the
original interpretation. FIN No.&nbsp;46 applies to variable interest
entities created after January&nbsp;31, 2003. FIN No.&nbsp;46 also applies to all
variable interest entities created prior to February&nbsp;1, 2003 that are
considered to be special-purpose entities (as defined in FIN No.&nbsp;46R)
as of December&nbsp;31, 2003. FIN No.&nbsp;46R must be applied to all variable
interest entities no later than the end of the first reporting period
that ends after March&nbsp;15, 2004. Certain variable interest entities that
are qualifying special purpose entities subject to the reporting
requirements for SFAS No.&nbsp;140, <I>Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities</I>, are not required
to be consolidated under the provisions of FIN No.&nbsp;46. At December&nbsp;31,
2003, the Company had two wholly owned statutory trust that issued
trust preferred securities (also referred to as Capital Securities).
Prior to FIN No.&nbsp;46R, the statutory


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002




<P align="left" style="margin-left:6%; font-size: 10pt">trusts were consolidated subsidiaries of the Company. The Company
adopted the provisions of FIN No.&nbsp;46R, requiring the deconsolidation of
these trusts effective December&nbsp;31, 2003. Refer to note 15 to the
consolidated financial statements for further information of the
statutory trusts.



<P align="left" style="margin-left:6%; font-size: 10pt">In April&nbsp;2003, SFAS No.&nbsp;149, <I>Amendment of Statement 133 on Derivative
Instruments and Hedging Activities</I>, was issued. SFAS No.&nbsp;149 amends and
clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities under SFAS No.&nbsp;133, <I>Accounting for Derivative Instruments
and Hedging Activities</I>. SFAS No.&nbsp;149 (a)&nbsp;clarifies under what
circumstances a contract with an initial net investment meets the
characteristic of a derivative discussed in paragraph 6(b) of SFAS No.
133, (b)&nbsp;clarifies when a derivative contains a financing component,
(c)&nbsp;amends the definition of an underlying to conform it to language
used in FIN No.&nbsp;45, <I>Guarantor&#146;s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others</I>, and (d)&nbsp;amends certain other existing pronouncements. Those
changes will result in more consistent reporting of contracts as either
derivatives or hybrid instruments. SFAS No.&nbsp;149 is effective for
contracts entered into or modified after June&nbsp;30, 2003, with certain
exceptions, and for hedging relationships designated after June&nbsp;30,
2003. In addition, except for certain situations, all provisions of
this statement are to be applied prospectively. Also, the provisions
related to forward purchases or sales of when-issued securities or
other securities that do not yet exist, should be applied to both
existing contracts and new contracts entered into after June&nbsp;30, 2003.
The adoption of SFAS No.&nbsp;149 did not have an impact on the Company&#146;s
financial condition or results of operations for the year ended
December&nbsp;31, 2003.



<P align="left" style="margin-left:6%; font-size: 10pt">In December&nbsp;2003, SFAS No.&nbsp;132 (revised), <I>Employers&#146; Disclosures about
Pensions and Other Postretirement Benefits</I>, was issued. SFAS No.&nbsp;132
(revised)&nbsp;prescribes employers&#146; disclosures about pension plans and
other postretirement benefit plans; it does not change the measurement
or recognition of those plans. The statement retains and revises the
disclosure requirements contained in the original SFAS No.&nbsp;132. It also
requires additional disclosures about the assets, obligations, cash
flows, and net periodic benefit cost of defined-benefit pension plans
and other postretirement benefit plans. The statement generally is
effective for fiscal years ending after December&nbsp;15, 2003. The adoption
of SFAS No.&nbsp;132 (revised)&nbsp;had no effect on the Company&#146;s financial
statements because the Company has no plans subject to the agreements
of such statement.



<P align="left" style="margin-left:6%; font-size: 10pt">SFAS No.&nbsp;150, <I>Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity</I>, was issued in May&nbsp;2003.
This statement establishes standards for the classification and
measurement of certain financial instruments with characteristics of
both liabilities and equity. The statement also includes required
disclosures for financial instruments within its scope. For the
Company, the statement was effective for instruments entered into or
modified after May&nbsp;31, 2003 and otherwise will be effective as of
January&nbsp;1, 2004, except for mandatorily redeemable financial
instruments. For certain mandatorily redeemable financial instruments,
the statement will be effective for the Company on January&nbsp;1, 2005. The
effective date has been deferred indefinitely for certain other types
of mandatorily redeemable financial instruments. This statement did not
have a material impact on the Company&#146;s financial statements.



<P align="left" style="margin-left:6%; font-size: 10pt">During the fourth quarter of 2003, the Company adopted EITF No.&nbsp;03-1
(EITF 03-1), <I>The Meaning of Other-Than-Temporary Impairment and its
Application of Certain Investments</I>. EITF 03-1


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002




<P align="left" style="margin-left:6%; font-size: 10pt">provides new guidance regarding impairment accounting on debt and
equity securities carried at amounts higher than the securities&#146; fair
values and disclosure of additional information about unrealized
losses. The initial adoption of EITF 03-1 resulted in additional
disclosures.



<P align="left" style="margin-left:6%; font-size: 10pt">In December&nbsp;2003, the Accounting Standards Executive Committee issued
Statement of Position 03-3 (SOP 03-3), <I>Accounting for Certain Loans or
Debt Securities Acquired in a Transfer</I>. This statement addresses
accounting for differences between contractual cash flows and cash
flows expected to be collected from an investor&#146;s initial investment in
loans or debt securities acquired in a transfer if those differences
are attributable, at least in part, to credit quality. SOP 03-3 does
not apply to loans originated by the entity. SOP 03-3 limits the yield
that may be accreted (accretable yield) to the excess of the investor&#146;s
estimate of undiscounted expected principal, interest, and other cash
flows (cash flows expected at acquisition to be collected) over the
investor&#146;s initial investment in the loan. SOP 03-3 requires that the
excess of contractual cash flows over cash flows expected to be
collected (nonaccretable difference) not be recognized as an adjustment
of yield, loss accrual, or valuation allowance. SOP 03-3 prohibits
investors from displaying accretable yield and nonaccretable difference
in the balance sheet. Subsequent increases in cash flows expected to be
collected generally should be recognized prospectively through
adjustment of the loan&#146;s yield over its remaining life. Decreases in
cash flows expected to be collected should be recognized as impairment.
SOP 03-3 prohibits &#147;carrying over&#148; or creation of valuation allowances
in the initial accounting of all loans acquired in a transfer that are
within the scope of this statement. The prohibition of the valuation
allowance carryover applies to the purchase of an individual loan, a
pool of loans, a group of loans, and loans acquired in a purchase
business combination. SOP 03-3 is effective for loans acquired in
fiscal years beginning after December&nbsp;15, 2004. Early adoption is
encouraged. The Company elected to adopt SOP 03-3 for the year ending
December&nbsp;31, 2005.


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(4)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Securities Purchased Under Agreements to Resell</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Securities purchased under agreements to resell at December&nbsp;31, 2003 and
2002 consist of short-term investments. The following table summarizes
certain information on securities purchased under agreements to resell:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Amount outstanding at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,483,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,014,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,049,613</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Maximum aggregate balance
outstanding at any month-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,314,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,014,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,132,455</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average monthly aggregate balance
outstanding during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,017,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,232,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,667,805</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average interest rate for
the year ended December 31</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.19</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.68</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.20</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average interest rate at
year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.75</TD>
    <TD nowrap>%</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P align="left" style="margin-left:3%; font-size: 10pt">The amounts advanced under those agreements are reflected as assets in the
balance sheet. It is the Company&#146;s policy to take possession of securities
purchased under agreements to resell. Agreements with third parties specify
the Company&#146;s rights to request additional collateral, based on its
monitoring of the fair value of the underlying securities on a daily basis.
The securities are segregated by the broker or dealer


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>custodian bank account designated under a written custodial agreement that
explicitly recognizes the Company&#146;s interest in the securities.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of the collateral securities held by the Bank on these
transactions as of December&nbsp;31, 2003 and 2002 was approximately $20,504,000
and $45,608,000, respectively.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(5)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Investment Securities Available for Sale</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Investment securities available for sale and related contractual maturities
as of December&nbsp;31 are as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>gains</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>losses</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>value</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commonwealth of Puerto
Rico obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,317,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,366,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">More than five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. corporate notes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Less than one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,967,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,994,335</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. Treasury obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,748,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">367,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,116,251</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Federal Home Loan Bank
notes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Less than one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,347</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,052,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,076,748</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Five through ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,356,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,369,114</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Federal National Mortgage
Association notes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,449,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,470,987</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Federal Home Loan Mortgage
corporation notes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,009,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,324</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,006,736</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage-backed securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">More than one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,912,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,990,916</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,322,024</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">326,014,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">916,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,993,240</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,938,042</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)



<P align="center" style="font-size: 10pt">F-21
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>cost</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>gains</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>losses</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>value</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commonwealth of Puerto
Rico obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,072,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">More than five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,659,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,989</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,686,130</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. corporate notes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Less than one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">968,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,287</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">965,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,950,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,402</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,099,420</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. Treasury obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Less than one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,974,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,158,350</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,969,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,101,900</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Federal Home Loan Bank
notes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Less than one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,992,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,139,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,550,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(167</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,613,285</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Federal National Mortgage
Association notes:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">One through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,003,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,110,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage-backed securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Less than one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,870</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">More than five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,413,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,366,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(106,955</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,673,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">143,657,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,251,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(113,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,794,865</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Contractual maturities on certain investment securities available for sale
could differ from actual maturities since certain issuers have the right to
call or prepay these securities.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During the year ended December&nbsp;31, 2003 proceeds from sales of investment
securities available for sale were approximately $83,220,000 and gross
gains of approximately $707,000 were realized. During 2002, there were no
sales of investment securities available for sale. Proceeds from sales of
investment securities available for sale during the year ended December&nbsp;31,
2001, were approximately $16,483,000 and gross gains of approximately
$195,000 were realized.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Gross unrealized losses on investment securities available for sale and the
fair value of the related securities, aggregated by investment category and
length of time that individual securities have been in a continuous
unrealized loss position, at December&nbsp;31, 2003, were as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Less than 12 months</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>12 months or more</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Total</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>losses</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>value</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>losses</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>value</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>losses</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>value</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. agency debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,006,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,006,736</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage-backed securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,990,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,098,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,990,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,098,409</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,993,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,105,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,993,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,105,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>U.S. Agency Debt Securities &#150; </I></B>The unrealized losses on
investments in U.S. agency debt securities were caused by interest
rate increases. The contractual terms of these investments do not
permit the issuer to settle the securities at a price less than the
amortized cost of the investment. Because the Company has the ability
and intent to hold these investments until a market price recovery or
maturity, these investments are not considered other-than-temporarily
impaired.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Mortgage-Backed Securities &#150; </I></B>The unrealized losses on investments
in mortgage-backed securities were caused by interest rate increases.
The contractual cash flows of these securities are guaranteed by
Federal National Mortgage Association (FNMA)&nbsp;and Federal Home Loan
Mortgage Corporation (FHLMC). It is expected that the securities would
not be settled at a price less than the amortized cost of the
investment. Because the decline in fair value is attributable to
changes in interest rates and not credit quality, and because the
Company has the ability and intent to hold these investments until a
market price recovery or maturity, these investments are not
considered other-than-temporarily impaired.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest income on investment securities is summarized as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Taxable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">76,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490,705</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tax-exempt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,836,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,928,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,663,350</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,027</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,009,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,341,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,284,082</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(6)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Other Investments</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other investments at December&nbsp;31, 2003 and 2002 consist of the following:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">FHLB stock, at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,953,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,405,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment in statutory trusts (notes 1 and 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,388,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,342,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,405,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(7)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Pledged Assets</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At December&nbsp;31, 2003, various securities and loans were pledged to secure
the following:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Asset pledged</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>value</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Items secured/collateralized</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">10,593,237</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deposits of public funds</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Commercial loans<BR>
guaranteed by the Small<BR>
Business Administration
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">1,570,969</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Deposits of public funds</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16,040,904</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notes payable to Federal Home Loan Bank</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Residential mortgage loans
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,186,641</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notes payable to Federal Home Loan Bank</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">125,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assets pledged with the Commissioner of
Financial Institutions of the Commonwealth of
Puerto Rico for IRA Trust</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">220,766</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assets for Eurobank IRA Trust</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">438,300</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assets pledged with the Commissioner of
Financial Institutions of the Commonwealth of
Puerto Rico for the IRA Trust and the
International Banking Entity operations</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">297,155</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assets pledged with the Federal Reserve Bank
for Treasury, tax, and loan account</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,179,136</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assets pledged with the Federal Reserve Bank<BR>
for Discount Window</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">213,355,417</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities sold under agreements to repurchase</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="font-size: 10pt"><B>(8)&nbsp;Loans, Net</B>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A summary of the Company&#146;s loan portfolio at December&nbsp;31, is as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commercial and industrial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">476,745,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380,384,767</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,505,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,936,789</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,941,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,198,273</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Consumer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,249,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,303,160</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Lease financing contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,935,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256,087,396</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Overdrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,235,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,665,207</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">889,613,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">762,575,592</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred loan costs, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,706,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,018,268</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Unearned finance charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,774,047</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,040,881</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,393,943</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,918,141</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">883,151,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">755,634,838</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The components of the net financing leases receivable at December&nbsp;31, were
as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">285,444,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236,128,785</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Guaranteed residual payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,490,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,958,611</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred origination costs, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,932,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,408,211</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less unearned income (equipment leases)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,734,141</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,837,458</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less allowance for lease losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,950,090</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,824,616</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">317,183,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254,833,533</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Guaranteed residual payments on automobile leases apply to leases where
there is a more than nominal final payment for transfer of vehicles to
lessee. Such amounts are obligations of the lessee, which are generally
established at amounts not to exceed the vehicles&#146; estimated values at the
end of the lease term.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At December&nbsp;31, 2003, future minimum lease payments are expected to be
received as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">82,105,444</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,082,932</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,733,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,809,422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,930,784</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,782,174</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">285,444,407</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following is a summary of information pertaining to impaired loans:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="65%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Impaired loans with related allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,187,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,261,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Impaired loans that did not require allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,242,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,084,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total impaired loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,429,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,345,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allowance for impaired loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">451,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">491,000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average investment in impaired loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,246,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,769,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income recognized on impaired
loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">547,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">574,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income recognized on a cash
basis on impaired loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">547,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">574,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,000</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No additional funds are committed to be advanced in connection with
impaired loans.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2003, 2002, and 2001, loans in which the accrual of
interest has been discontinued amounted to $17,058,295, $15,889,045, and
$6,539,665, respectively. If these loans had been accruing interest, the
additional interest income realized would have been $822,355, $833,228, and
$571,111 for 2003, 2002, and 2001, respectively.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Commercial and industrial loans with principal outstanding balances
amounting to approximately $3,650,000 and $3,600,000 in 2003 and 2002,
respectively, are guaranteed by the U.S. government through the Small
Business Administration at percentages varying from 75% to 90% in 2003 and
2002. As of December&nbsp;31, 2003 and 2002, industrial loans with a principal
outstanding balance of approximately $1,556,000 and $2,650,000,
respectively, were guaranteed by the U.S. government through the U.S.
Department of Agriculture.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(9)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Allowance for Loan Losses</B></TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following analysis summarizes the changes in the allowance for loan
losses for the years ended December&nbsp;31:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,918,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,512,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,050,556</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Provision for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,451,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,353,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,377,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans charged-off</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,065,207</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,387,240</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,396,326</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Recoveries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,090,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">481,702</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Allowance from the acquisition of
Banco Financiero</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,017,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,393,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,918,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,512,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(10)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Premises and Equipment, Net</B></TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Premises and equipment at December&nbsp;31, are as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Estimated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>useful lives</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Building</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">40 years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,748,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,748,836</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">5 to 20 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,315,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,550,728</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Furniture, fixtures, and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">2 to 5 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,734,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,737,752</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925,217</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,920,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,962,533</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accumulated depreciation and
amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,389,622</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,582,600</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,531,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,379,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(11)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Other Assets</B></TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other assets at December&nbsp;31, consist of the following:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred tax assets, net (note 18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,010,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,679,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,939,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,998,713</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other real estate, net of valuation allowance of $27,525 in
2003 and 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,774,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,962,571</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other repossessed assets, net of valuation allowance of
$671,058 and $610,396 in 2003 and 2002, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,642,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,680,630</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Servicing assets, net of amortization
of $629,483 in 2003 (note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,031,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Prepaid expenses and deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,982,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,911,766</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,062,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,337,111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,443,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,570,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other repossessed assets are presented net of an allowance for losses. The
following analysis summarizes the changes in the allowance for losses for
the years ended December&nbsp;31:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance,
beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">610,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision
for losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">522,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,037</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net
charge-offs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(461,998</TD>
    <TD align="left">)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(6,171</TD>
    <TD align="left">)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, end
of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">671,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">610,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,037</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
</DIV>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(12)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Deposits</B></TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Total interest bearing deposits as of December&nbsp;31 consisted of the
following:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Savings deposits:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Savings accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">230,326,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146,763,099</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">NOW and money market accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,019,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,446,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307,345,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214,209,654</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Time deposits:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Under $100,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,232,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156,930,112</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">$100,000 and over</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406,213,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">386,461,132</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">572,445,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">543,391,244</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">879,791,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">757,600,898</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-27

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest expense on time deposits over $100,000 or more amounted to
approximately $14,396,000, $12,383,000, and $11,146,000 for the years ended
December&nbsp;31, 2003, 2002, and 2001, respectively.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At December&nbsp;31, 2003, the scheduled maturities of time deposits are as
follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">268,267,442</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,857,109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106,627,488</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,021,068</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,357,471</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,315,108</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">572,445,686</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At December&nbsp;31, 2003 and 2002, the Bank had brokered certificates of
deposit amounting to approximately $228,212,000 and $214,679,000,
respectively.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(13)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Securities Sold Under Agreements to Repurchase</B></TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Securities sold under agreements to repurchase represent short-term
financing transactions with securities dealers and the FHLB. The following
table summarizes certain information on securities sold under agreements to
repurchase:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Amount outstanding at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">207,523,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,112,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,363,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Maximum aggregate balance outstanding
at any month-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207,523,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,112,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,803,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Average monthly aggregate balance
outstanding during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,068,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,472,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,822,996</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average interest rate for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.71</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.60</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.54</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average interest rate at year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.04</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.43</TD>
    <TD nowrap>%</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The investment securities underlying such agreements were delivered to the
dealers with whom the agreements were transacted. The dealers may have
sold, loaned, or otherwise disposed of such securities in the normal course
of business operations, but have agreed to resell to the Company
substantially the same securities on the maturity dates of the agreements.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following table presents the liability associated with the repurchased
transactions (including accrued interest), their maturities and weighted
average interest rates. Also, it includes the amortized cost and
approximate market value of the collateral (including accrued interest) as
of December&nbsp;31, 2003 and 2002:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortized</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Repurchase</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>cost of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Market value</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>liability</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>collateral</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of collateral</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>interest rate</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. Treasury securities &#150;
within 30&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">84,975,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,748,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,116,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.89</TD>
    <TD nowrap>%</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Obligations of U.S. Government agencies and
corporations &#150; within 30&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,450,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,550,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,551,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage-backed securities &#150;
after 90&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,979,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,436,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,440,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.41</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Collateralized mortgage
obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Within 30&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,445,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,860,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,620,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.47</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">After 30 to 90&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,034,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,115,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,052,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.16</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">After 90&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,639,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,239,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,573,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.65</TD>
    <TD nowrap>%</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,118,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,215,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,246,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.55</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">207,523,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,950,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,355,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.26</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortized</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Repurchase</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>cost of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Market value</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>liability</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>collateral</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of collateral</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>interest rate</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">U.S. Treasury securities &#150;
within 30&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,996,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,944,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,260,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.27</TD>
    <TD nowrap>%</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Obligations of U.S. Government agencies and corporations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Within 30&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">After 30 to 90&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,938,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,003,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.33</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">After 90&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,756,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,028,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.66</TD>
    <TD nowrap>%</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,694,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,003,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,138,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.81</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mortgage-backed securities &#150;
After 90&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,221,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,794,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,817,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.79</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Collateralized mortgage
obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Within 30&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,616,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,725,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,812,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.35</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">After 90&nbsp;days</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,583,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,738,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,205,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.48</TD>
    <TD nowrap>%</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,199,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,464,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,018,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.07</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">64,112,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,206,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,235,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.14</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(14)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Notes Payable to FHLB</B></TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At December&nbsp;31, the Company owes several advances to the FHLB as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Maturity</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Interest rate range</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">2.89% to 7.28%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,150,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">6.50% to 6.81%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,500,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4.81% to 5.72%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.20</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,200,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,850,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest rates are fixed for the term of each advance and are payable on
the first business day of the following month when the original maturity of
the note exceeds six months. In notes with original terms of
six months or less, interest is paid at maturity. Interest payments during
2003, 2002, and 2001 amounted to approximately $831,000, $998,000, and
$902,000, respectively. These notes are guaranteed by approximately
$16,041,000 in securities and $2,187,000 in mortgage loans as of December
31, 2003 (note 7).</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)



<P align="center" style="font-size: 10pt">F-30
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(15)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Junior Subordinated Debentures</B></TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On December&nbsp;18, 2001, the Trust issued $25,000,000 of floating rate Trust
Preferred Capital Securities Series&nbsp;1 due in 2031 with a liquidation amount
of $1,000 per security. Distributions payable on each capital security is
payable at an annual rate equal to 5.60% beginning on (and including) the
date of original issuance and ending on (but excluding) March&nbsp;18, 2002, and
at an annual rate for each successive period equal to the three-month
London Interbank Offered Rate (LIBOR), plus 3.60% with a ceiling rate of
12.50%. The capital securities of the Trust are fully and unconditionally
guaranteed by EuroBancshares (a wholly owned subsidiary of the Bank in
2001), now the Company (note 1). EuroBancshares then issued $25,774,000 of
floating rate junior subordinated deferrable interest debentures to the
Trust due in 2031. The terms of the debentures, which comprise
substantially all of the assets of the Trust, are equal to the terms of the
capital securities issued by the Trust. These debentures are fully and
unconditionally guaranteed by the Bank. The Bank subsequently issued an
unsecured promissory note to EuroBancshares for the issued amount and at an
annual rate equal to that being paid on the Trust Preferred Capital
Securities Series&nbsp;1 due in 2031.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">On December&nbsp;19, 2002, the Trust II issued $20,000,000 of floating rate
Trust Preferred Capital Securities due in 2032 with a liquidation amount of
$1,000 per security. Distributions payable on each capital security will be
payable at an annual rate equal to 4.66% beginning on (and including) the
date of original issuance and ending on (but excluding) March&nbsp;26, 2003, and
at an annual rate for each successive period equal to the three-month LIBOR
plus 3.25% with a ceiling rate of 11.75%. The capital securities of the
Trust II are fully and unconditionally guaranteed by EuroBancshares.
EuroBancshares then issued $20,619,000 of floating rate junior subordinated
deferrable interest debentures to the Trust II due in 2032. The terms of
the debentures, which comprise substantially all of the assets of the Trust
II, are equal to the terms of the capital securities issued by the Trust
II. These debentures are fully and unconditionally guaranteed by the Bank.
The Bank subsequently issued an unsecured promissory note to the
EuroBancshares for the issued amount and at an annual rate equal to that
being paid on the Trust Preferred Capital Securities due in 2032.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Interest expense on Trust Preferred Capital Securities amounted to
approximately $2,124,000, $1,472,000, and $54,000 for the years ended
December&nbsp;31, 2003, 2002, and 2001, respectively.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Prior to FIN No.&nbsp;46R, the statutory trusts described above, were considered
subsidiaries of the Company. The capital securities were included in the
consolidated balance sheet as of December&nbsp;31, 2002 under the caption Trust
Preferred Capital Securities, and the retained common capital securities of
the statutory trusts were eliminated against the Company&#146;s investment in
the statutory trusts. Distributions on the trust preferred capital
securities were recorded as interest expense on the consolidated statement
of income for the year ended December&nbsp;31, 2002.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">As a result of the adoption of FIN No.&nbsp;46R, the Company deconsolidated
these statutory trusts effective December&nbsp;31, 2003. The junior subordinated
debentures issued by the Company to the statutory trusts, totaling
$46,393,000 were reflected in the Company&#146;s consolidated balance sheet at
December&nbsp;31, 2003 under the caption of &#147;Junior Subordinated Debentures&#148;. In
the future, the Company will record interest expense on the corresponding
junior subordinated debentures in the consolidated statement of income. At
December&nbsp;31, 2003, the Company also recorded in the caption of other
investments in the consolidated balance sheet, the common securities issued
by statutory trusts.


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Federal Reserve has indicated in supervisory letter SR 03-13 (the
Supervisory Letter), dated July&nbsp;2, 2003 that trust preferred securities
will be treated as Tier 1 capital until notice is given of the contrary.
The Supervisory Letter also indicates that the Federal Reserve will review
the regulatory implications of any accounting treatment changes and will
provide further guidance if necessary or warranted.


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(16)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company leases certain premises used in its operations under operating
lease agreements expiring at various dates through 2032. The total
approximated minimum rental payments and the related approximated minimum
future rental income, respectively, under the agreements, including rentals
based upon increases in taxes and other costs, are approximately as
follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Minimum</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Estimated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>rental</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>rental</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>payments</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>income</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Year:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,792,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,555,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,775,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,538,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,557,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,320,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,134,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">897,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">851,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">851,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,710,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,710,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,819,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">948,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,871,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Rent expense for the years ended December&nbsp;31, 2003, 2002, and 2001 was
approximately $1,780,000, $1,322,000, and $1,127,000, respectively.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company is involved as plaintiff or defendant in a variety of routine
litigation incidental to the normal course of business. Management
believes, based on the opinion of legal counsel, that it has adequate
defense or insurance protection with respect to such litigations and that
any losses therefrom, whether or not insured, would not have a material
adverse effect on the results of operations or financial position of the
Company.


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(17)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Sale of Receivables and Servicing Assets</B></TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During June and December&nbsp;2003, the Company sold to a third party lease
financing contracts with carrying values of $30,000,011 and $20,000,035,
respectively. In these sales the Company retained servicing
responsibilities and servicing assets of $2,316,450 and $1,344,330 were
recognized on each transaction. The Company surrendered control of the
lease financing receivables, as defined by SFAS No.&nbsp;140, <I>Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities</I>, and accounted for these transactions as sales. The net
proceeds from these sales amounted to approximately $50&nbsp;million and
recognized net gains of approximately $1,797,000 and $1,023,000 during the
year ended December&nbsp;31, 2003. Under the terms of the transactions, the
Company has limited recourse obligations to repurchase up to $1.5&nbsp;million
and $1.0&nbsp;million of defaulted leases. No loan repurchases were made during
2003.


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-32
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Additionally, in September&nbsp;2003, the Company sold to Citibank, N.A.
approximately $42.8&nbsp;million of mortgage loans. The Company surrendered
control of the mortgage loans receivables, including servicing rights, as
defined by SFAS No.&nbsp;140, and accounted for this transaction as sale. The
net proceeds from the sale of such loans amounted to approximately $43.5
million, resulting in a gain of approximately $700,000 during the year
ended December&nbsp;31, 2003.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Total loans serviced for others were $45,300,506 at December&nbsp;31, 2003.
Quantitative information about delinquencies of servicing assets for
principal amount over 60&nbsp;days past due is $90,771.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The movement in servicing assets for the year ended December&nbsp;31, 2003 was
as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Allocated cost of servicing retained</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,660,780</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(629,483</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,031,297</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Less valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, end of year, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,031,297</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Key assumptions used in measuring the servicing assets at the dates of the
sales completed during the year ended December&nbsp;31, 2003, were as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Prepayment rate
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.5</TD>
    <TD nowrap valign="top">%</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Weighted average life (in years)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">3.9 to 4.03
</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Discount rate
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">9.35 to 9.95%
</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The estimated fair value of servicing assets at December&nbsp;31, 2003 was
$3,086,408. Such fair value was estimated by an independent financial
advisor using the present value of expected cash flows associated with the
servicing assets using a prepayment assumption of 12%. For purposes of
impairment, the Company considers each of its sold lease portfolios
individually. Risk characteristics of leases within each sold lease
portfolio are considered similar.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The estimated aggregate amortization expense related to servicing assets
for the next five years is as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,556,089</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">936,125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">455,236</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,847</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,031,297</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During December&nbsp;2001, the Company sold to Banco Financiero, in a
transaction unrelated to the acquisition described in note 2, a portion of
its lease financing contracts portfolio with a carrying value of $9,015,447
as of December&nbsp;28, 2001 (the Agreement). In this sale, the Company retained
only servicing</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">responsibilities; however, no servicing asset was recognized
as the servicing arrangement provides for adequate compensation. The
Company surrendered control of the lease financing receivables, as defined
by SFAS No.&nbsp;140, and accounted for this transaction as sale and recognized
a gain of approximately $975,000 during the year ended December&nbsp;31, 2001.
The Company had a limited recourse obligation as per the Agreement that
required the Company to repurchase defaulted lease up to certain limits.
Nevertheless, as a result of the acquisition of Banco Financiero, this
portfolio is now part of the Company&#146;s lease finance contracts portfolio.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">No receivables were sold during 2002.


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(18)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Income Taxes</B></TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Puerto Rico income tax law does not provide for filing a consolidated
income tax return; therefore, the income tax expense reflected in the
accompanying consolidated statements of income represents the sum
of the income tax expense of the individual companies. At December&nbsp;31,
2003, the Company&#146;s tax provision and related accounts are substantially
those of its subsidiary Bank.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Bank is subject to Puerto Rico income tax at statutory rates. Under the
provisions of the Puerto Rico Internal Revenue Code of 1994, as amended,
the Bank is subject to regular tax or the alternative minimum tax,
whichever is higher. Customarily, the effective tax rate is lower than the
statutory rate primarily because interest income on certain U.S. and Puerto
Rico securities is exempt from Puerto Rico income taxes.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Bank is also subject to federal income tax on its U.S. source income.
However, the Bank had no taxable U.S. income for the years ended December
31, 2003, 2002, and 2001. The Bank is not subject to federal income tax on
U.S. Treasury securities that qualify as portfolio interest, nor to the
branch profit tax and the branch-level interest tax on such income.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During 2000, the Bank established an international bank unit engaged in
investment securities, deposits, and other funding transactions outside
Puerto Rico. The revenue generated by these transactions, net of related
interest costs and operating expenses, is exempt from Puerto Rico taxes.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Total income taxes for the years ended December&nbsp;31 are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,432,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,723,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,147,090</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholder&#146;s equity for unrealized gains
and losses on investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(803,518</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,170</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,628,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,137,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,254,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The components of the income tax provision from operations for the years
ended December&nbsp;31, are as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="51%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,959,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,420,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,292,936</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred tax provision (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(145,846</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total income tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,432,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,723,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,147,090</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The difference between the income tax provision and the amount computed
using the statutory rate at December&nbsp;31, is due to the following:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rate</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax at statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,192,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">39.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,344,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">39.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,100,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">39.00</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Change in the beginning-of-the-year
balance of valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(584,712</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4.40</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Benefits of tax-exempt interest
income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(175,070</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.31</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(146,381</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.71</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(339,094</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4.26</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">International banking unit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,054,468</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7.92</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(524,366</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(435,460</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5.48</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">(Allowance) disallowance of
certain expenses for tax
purposes and other items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(179,269</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.26</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,432,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">25.78</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,723,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">31.76</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,147,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">27.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-35
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">Deferred income taxes reflect 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.
Significant components of the Bank&#146;s deferred tax assets and liabilities at
December&nbsp;31, were as follows:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="65%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Allowance for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,663,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,698,075</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net operating loss carryforward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,297,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,850,472</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unrealized loss on securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other temporary differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">427,384</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Gross deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,699,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,975,931</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Less valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(584,712</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,699,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,391,219</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred loan costs, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,835,642</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,177,073</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Servicing assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(854,261</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Unrealized gain on securities available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(534,436</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,689,903</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,711,509</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,010,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,679,710</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">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 not 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, and tax planning strategies in making this
assessment. In order to fully realize the deferred tax asset, the Bank will
need to generate future taxable income of approximately $5.9&nbsp;million
related to its operations of the former Banco Financiero (note 2) prior to
the expiration of the net operating loss carryforwards through the year
2009. Such operations yielded approximately $1.4&nbsp;million of taxable income
during 2003 and considering economies of scale to be achieved from the
merger and projected future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely
than not that the Bank will realize the benefits of these deductible
differences at December&nbsp;31, 2003. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are
reduced.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">At December&nbsp;31, 2003, the Bank has net operating loss carryforwards for
income tax purposes of approximately $5,891,000, which are available to
offset future taxable income of the former Banco Financiero operations
(note 2), if any, through 2009.


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(19)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Stock Transactions</B></TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During 2003, EuroBancshares issued 34,013 of the common stock shares at
$7.87 per share through stock options exercised.


<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">As a result of the reorganization into a holding company (note 1), on July
1, 2002, EuroBancshares became the sole owner of the Bank&#146;s common stock.
As part of such reorganization, the outstanding 6,788,421 shares of the
Bank common stock, $1 par value, were exchanged to 6,788,421 shares of
EuroBancshares common stock, $0.01 par value per share. Also as part of the
reorganization, during 2002 EuroBancshares
purchased and retired approximately 9,707 shares of its outstanding common
stock, $0.01 par value, held by the remaining minority stockholders at a
price of $9.00 per share.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During 2002, EuroBancshares issued 38,750 of its common stock shares at
$4.00 per share through stock options exercised. In addition, as a result
of the acquisition of Banco Financiero (note 2), EuroBancshares also issued
122,228 shares of its common stock, $0.01 par value, at a price of $10 per
share, amounting to $1,222,280.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During 2002, the Bank issued 9,924 of the common stock shares at $6.65 per
share through stock options exercised.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During 2001, the Bank converted its 4,000,000 Class&nbsp;A shares and 2,026,032
Class&nbsp;B shares outstanding with a par value of $5 and $1, respectively,
into 6,026,032 shares of common stock with a par value of $1 and capital
paid in excess of par value of $34,610,787.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During 2001, the Bank issued 699,739 of the new common stock shares at
$7.65 per share through a private placement on September&nbsp;24, 2001, and
52,726 through stock options exercised.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During 2001, the Bank amended its articles of incorporation and authorized
the issuance of 1,000,000 shares of preferred stock at $10 par value, of
which none had been issued.


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(20)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Stock Option Plan</B></TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">During 2002, the board of directors approved the stock option plan (the
Plan), which was ratified at a special meeting of stockholders. Under the
Plan, an aggregate of 677,850 shares of authorized common stock of the
Company, representing 10% of the shares of common stock outstanding on
February&nbsp;25, 2002, were reserved for issuance under the Plan. The
outstanding options as of December&nbsp;31, 2003 include options granted under a
stock option plan held by the Bank until the reorganization.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">All officers and directors of EuroBancshares are eligible under the Plan,
provided, however, that stock options shall not be exercisable by an
optionee who is the owner of 5% or more of the issued and outstanding shares of the Company or in exercising the stock options would become the
owner of 5% or more of the issued and outstanding shares of the Company,
unless the optionee obtains the approvals required from the appropriate
regulatory agencies to hold shares in excess of such percent. Any eligible
person may hold more than one option at a time.


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The compensation committee, appointed by the board of directors, has
absolute discretion to select which of the eligible persons will be granted
stock options, the number of shares of the Company&#146;s common stock subject
to such options, whether stock appreciation rights will be granted for such
options and generally, to determine the terms and conditions of such
options in accordance with the provisions of the Plan. Options are
exercisable within five years after the grant date at the discretion of the
optionee. The options are granted at the approximate fair value of the
Company&#146;s common stock at the date of issuance.


<P align="right" style="font-size: 10pt">(Continued)


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

</TABLE>

<P align="center" style="font-size: 10pt">F-37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">A summary of the status of stock options under the Plan at December&nbsp;31,
2003, 2002, and 2001 and changes during the years then ended is presented
in the table below:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2001</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>price</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Options outstanding January 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.15</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">287,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.65</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(34,013</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(48,674</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52,726</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.01</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Options outstanding and
exercisable December 31</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">561,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The following is a summary of outstanding and exercisable options under the
Plan at December&nbsp;31, 2003:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Expiration</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Date granted</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and exercisable</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>price</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>date</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>date</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1999
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,776</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">6.65</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December&nbsp;30, 1999
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December&nbsp;30, 2004</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2001
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">120,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.65</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;28, 2001
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;28, 2006</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2002
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">151,281</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;26, 2002
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;26, 2007</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2003
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">287,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March&nbsp;24, 2003
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March&nbsp;24, 2008</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><HR size="1" noshade>&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">561,057</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><HR size="4" noshade>&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)


<P align="center" style="font-size: 10pt">F-38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EUROBANCSHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(21)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Earnings Per Share</B></TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The following is a reconciliation of the income and share data in the basic
and diluted earnings per share computations for the year ended December&nbsp;31:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2001</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,882,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,852,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,803,970</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Extraordinary gain on the acquisition of
Banco Financiero</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,080,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Income available to common
shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,882,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,933,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,803,970</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Weighted average number of common
shares outstanding applicable to basic
EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,940,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,811,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,175,843</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Effect of dilutive securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,977</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Adjusted weighted average
number of common shares
outstanding applicable to
diluted earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,117,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,862,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,213,820</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Basic earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Diluted earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">For periods prior to the formation of the holding company (note 1), the
share information above is that of the Bank, since the exchange of shares
of that transaction was one to one (note 19).


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">After December&nbsp;31, 2003, the Company issued additional common shares as
part of a private placement offering and the acquisition of The Bank &#038;
Trust Company of Puerto Rico (note 30).


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(22)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Employees&#146; Benefit Plan</B></TD>
</TR>

</TABLE>


<P align="left" style="margin-left: 3%; text-indent: 0%; margin-right: 0%; font-size: 10pt">The Company maintains a defined contribution plan covering substantially
all its employees after three months of service. Under the provisions of
the plan, employees elect to contribute to the plan from up to 10% of their
compensation and the Company matches 100% of the amount contributed by the
employees up to maximum of 3% of the employees&#146; annual compensation. The
amount of contribution expense recognized by the Company for the years
ended December&nbsp;31, 2003, 2002, and 2001 amounted to $185,000, $140,000, and
$135,000, respectively.


<P align="right" style="font-size: 10pt">(Continued)



<P align="center" style="font-size: 10pt">F-39
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(23)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Related-Party Transactions</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company makes loans to its directors, principal stockholders, officers,
employees, organizations, and individuals associated with them in the
normal course of business. At December&nbsp;31, 2003 and 2002, loans outstanding
with these parties amounted to $4,108,945 and $4,159,779, respectively.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The summary of change in the related-party loans follows (in thousands):</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Executive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Principal</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>officers</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>shareholders</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and related</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Directors and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and related</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>parties</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>related parties</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Employees</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>parties</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, December&nbsp;31, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">583,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,023,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,972,266</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">759,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,248,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,082,504</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Reductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(623,492</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,239,471</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32,028</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,894,991</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,032,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,159,779</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">678,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">986,756</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Reductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(408,942</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(408,360</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(220,288</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,037,590</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Balance, December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">409,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,302,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,108,945</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Deposits of $7,836,751 and $6,369,869 from these parties were outstanding
as of December&nbsp;31, 2003 and 2002, respectively.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(24)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Financial Instruments with Off-Balance-Sheet Risk</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financial needs of its
customers, such as commitments to extend credit, approved loans not yet
disbursed, unused lines of credit, and standby letters of credit. Such
instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the consolidated balance
sheets. The contract or notional amount reflects the extent of involvement
the Company has in this particular class of financial instrument.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company&#146;s exposure to credit loss in the event of nonperformance by the
other party to these financial instruments is represented by the
contractual notional amount of those instruments. The Company uses some
credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Unless noted otherwise, the Company requires collateral or other security
to support financial instruments with credit risk. The Company performs its
normal credit granting due diligence procedures, to the extent necessary,
in evaluating its involvement in financial instruments with credit risk.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At December&nbsp;31, the approximate contract or notional amount of the
Company&#146;s financial instruments with off-balance-sheet risk follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Financial instruments whose contract amounts represent
credit risk &#150; stand-by and commercial letters of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,674,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,043,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Commitments to extend credit, approved loans not yet
disbursed, and unused lines of credit:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Variable rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,815,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,830,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Fixed rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,910,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,141,000</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. The commitments may expire
without being drawn upon. Therefore, the total commitment amounts do not
necessarily represent future cash requirements. The amount of collateral
obtained, if it is deemed necessary by the Company, is based on
management&#146;s credit evaluation of the customer.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Unused lines of credit are commitments for possible future extensions of
credit to existing customers. These lines of credit are uncollateralized
and usually do not contain a specified maturity date and may not be drawn
upon to the total extent to which the Company is committed.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Commercial and stand-by letters of credit are conditional commitments
issued by the Company to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing, and
similar transactions. All guarantees expire within a year. The credit risk
involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The Company holds
certificates of deposit as collateral supporting those commitments for
which collateral is deemed necessary.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(25)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Fair Value of Financial Instruments</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following methods and assumptions were used to estimate the fair value
of each class of financial instruments in accordance with SFAS No.&nbsp;107, as
amended by SFAS No.&nbsp;119, <I>Disclosure about Derivative Financial Instruments
and Fair Value of Financial Instruments</I>.</TD>
</TR>

</TABLE>


<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(a)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Cash and Due from Banks, Securities Purchased under Agreements to
Resell, and Interest-Bearing Deposits</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The carrying amount of cash and cash equivalents, securities purchased
under agreements to resell, and interest-bearing deposits is a
reasonable estimate of fair value, due to the short-term nature of
these instruments.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(b)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Investment Securities Available for Sale</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of investment securities available for sale is estimated
based on bid prices published in financial newspapers or bid quotations
received from securities dealers. If a quoted market price is not
available, fair value is estimated using quoted market prices for
similar securities.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-41
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(c)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Other Investments</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The carrying value of FHLB stock approximates fair value based on the
redemption provisions of the FHLB. The carrying value of equity
interest in unconsolidated statutory trusts approximates the fair value
of the residual equity in the trusts.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(d)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Loans and Loans Held for Sale</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as
commercial, consumer, mortgage, and other loans. Each loan category is
further segmented into fixed and adjustable interest rate terms.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of loans is calculated by discounting scheduled cash
flows through the estimated maturity using estimated market discount
rates that reflect the credit and interest rate risk inherent in the
loan.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The estimate of fair value of loans considers the credit risk inherent
in the portfolio through the allowance for loan losses. Assumptions
regarding credit risk, cash flows, and discount rates are judgmentally
determined using available market information and specific-borrower
information.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(e)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Accrued Interest Receivable</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The carrying amount of accrued interest receivable is a reasonable
estimate of its fair value, due to the short-term nature of the
instruments.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(f)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Deposits</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of deposits with no stated maturity, such as demand
deposits, savings accounts, money market, and checking accounts is
equal to the amount payable on demand as of December&nbsp;31, 2003 and 2002.
The fair value of time deposits is based on the discounted value of
contractual cash flows. The discount rate is estimated using the rate
currently offered for deposits of similar remaining maturities.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(g)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Security Sold Under Agreements to Repurchase</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of securities sold under agreements to repurchase are
estimated using discounted cash flow analysis using rates for similar
types of borrowing arrangements.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(h)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Notes Payable to Federal Home Loan Bank</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of notes payable is calculated by discounted scheduled
cash flows through the estimated maturity using market discount rates.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(i)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Accrued Interest Payable, Accrued Expenses, and Other Liabilities</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The carrying amount of accrued interest payable, accrued expenses, and
other liabilities is a reasonable estimate of fair value, due to the
short-term nature of the instruments.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-42
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(j)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Junior Subordinated Debentures</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of junior subordinated debentures payable to statutory
trust outstanding is calculated by discounting scheduled cash flows
through the estimated maturity using the annual rate for each
successive period equal to the three-month LIBOR, plus 3.60%, and the
three-month LIBOR, plus 3.25%.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(k)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Trust Preferred Capital Securities</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of Trust Preferred Capital Securities outstanding is
calculated by discounting scheduled cash flows through the estimated
maturity using the annual rate for each successive period equal to the
three-month LIBOR, plus 3.60%, and the three-month LIBOR, plus 3.25%.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(l)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Commitments to Extend Credit and Letters of Credit</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of commitments to extend credit and letters of credit
was not readily available and not deemed significant.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right"><B><I>(m)</I></B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Limitations</I></B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value estimates are made at a discrete point in time based on
relevant market information and information about the financial
instruments. Because no market exists for a significant portion of the
Company&#146;s financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could
significantly affect the estimates.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value estimates are based on existing on- and
off-balance-sheet financial instruments without attempting to estimate
the value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments. As described
for investments and mortgage-backed securities, the tax ramifications
related to the realization of the unrealized gains and losses may have
a significant effect on fair value estimates and have not been
considered in many of the estimates.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-43
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Following are the carrying amount and fair value of financial
instruments as of December&nbsp;31:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>&nbsp;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair value</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair value</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Financial assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,522,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,522,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,620,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,620,623</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest-bearing deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,324,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,324,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,881,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,881,975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Securities purchased under
agreements to resell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,483,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,483,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,014,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,014,420</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Investment securities
available for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,938,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324,938,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,794,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,794,865</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,342,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,342,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,405,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,405,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans held for sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,846,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,846,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,238,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,238,539</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Loans, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">883,151,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">886,156,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">755,634,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">760,747,294</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued interest receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,792,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,792,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,483,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,483,643</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Financial liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">984,549,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,008,458,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">843,045,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">863,816,014</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Securities sold under
agreements to repurchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207,523,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207,649,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,112,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,784,764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Notes payable to FHLB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,543,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,850,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,917,351</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Junior subordinated debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,393,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,395,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Trust Preferred Capital
Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,018,004</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued interest payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,868,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,868,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,439,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,439,945</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Accrued expenses and
other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,267,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,267,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,241,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,241,347</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(26)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Significant Group Concentrations of Credit Risk</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Most of the Company&#146;s business activities are with customers located within
Puerto Rico. The Company has a commercial and industrial concentrated loan
portfolio with no significant concentration in any economic sector.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(27)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Regulatory Matters</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that,
if undertaken, could have a direct material effect on the Bank&#146;s financial
statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The capital amounts and classifications
are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors. Prompt corrective action
provisions are not applicable to bank holding companies.</TD>
</TR>

</TABLE>


<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Quantitative measures established by regulations to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios
(set forth in the following table) of total and Tier I capital (as defined
in the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (Leverage) (as defined). Management
believes, as of December&nbsp;31, 2003 and 2002, that the Company and the Bank
met all capital adequacy requirements to which they are subject.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The most recent notification from the FDIC categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. To
be categorized as well capitalized, an institution must maintain minimum
total risk-based, Tier I risk-based, and Tier I Leverage ratios as set
forth in the following tables. There are no conditions or events since the
notification that management believes have changed the institution&#146;s
capital category. The Company&#146;s and the Bank&#146;s actual capital amounts and
ratios as of December&nbsp;31, 2003 and 2002 are also presented in the table.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At December&nbsp;31, required and actual regulatory capital amounts and ratios
are as follow (dollars in thousands):</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Well</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Required</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>capitalized</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ratio</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total capital (to risk-
weighted assets):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">81,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">117,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.60</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.57</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><FONT face="Symbol">&#179;</FONT>10.00</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tier I capital (to risk-
weighted assets):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.30</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.44</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><FONT face="Symbol">&#179;</FONT>6.00</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tier I capital (to average assets):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.76</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.06</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><FONT face="Symbol">&#179;</FONT>5.00</TD>
    <TD nowrap>%</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-45
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Well</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Required</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>capitalized</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>amount</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ratio</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>ratio</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total capital (to risk-
weighted assets):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">65,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">105,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">12.79</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">12.78</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><FONT face="Symbol">&#179;</FONT>10.00</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tier I capital (to risk-
weighted assets):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.63</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.99</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><FONT face="Symbol">&#179;</FONT>6.00</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Tier I capital (to average assets):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Consolidated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.93</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.37</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><FONT face="Symbol">&#179;</FONT>5.00</TD>
    <TD nowrap>%</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-46
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(28)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Parent Company Financial Information</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As discussed in note 1, Eurobancshares became the holding company of
Eurobank effecive March&nbsp;18, 2002. The following condensed financial
information presents the financial position of EuroBancshares as of
December&nbsp;31, 2003 and 2002, and the results of its operations and its cash
flows for the years then ended.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Condensed Balance Sheets:</B></TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(In thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Notes receivable from Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">32,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest receivable from Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest receivable from other subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Due from Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment in Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,785</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investment in other subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,393</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">111,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><B>Liabilities and Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Due to other subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Junior subordinated debentures held by subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,393</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accrued interest payable to other subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,584</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,336</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">111,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-47
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P align="left" style="font-size: 10pt"><B>Condensed Statements of Income:</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Year ended December 31</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(In thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Interest on note receivable from Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,412</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Dividend income from preferred stock
of Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Dividend income from other subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense on junior subordinated
debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Equity in undistributed earnings of
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,951</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Noninterest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Earnings before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-48
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P align="left" style="font-size: 10pt"><B>Condensed Statements of Cash Flows:</B>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="75%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="72%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Year ended December 31</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(In thousands)</B></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,934</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Adjustments to reconcile net income to
net cash used in operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Equity in undistributed earnings of
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,891</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,951</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Decrease (increase)&nbsp;in accrued
interest receivable from
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Increase in prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Increase in due from Eurobank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(160</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(171</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Increase (decrease)&nbsp;in accrued
interest payable to subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(128</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Increase in due to other subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(66</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash used in operating
activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(268</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(134</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Proceeds from issuance of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Purchase and retirement of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(87</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net cash provided by
financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net increase (decrease)&nbsp;in
cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Supplemental disclosure:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Issuance of EuroBancshares common
stock on acquisition of Banco
Financiero</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,222</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Conversion of note receivable from
Eurobank in Eurobank&#146;s preferred
stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Note receivable resulting from Trust
Preferred Capital Securities issuance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Note payable to the Trust II in
connection with its creation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">619</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Equity in other comprehensive income
of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,411</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,240</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-49
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(29)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Selected Quarterly Financial Data (Unaudited)</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The quarterly results of operations for the years ended December&nbsp;31, 2003
and 2002 are as follows:</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Year ended December 31, 2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fourth</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>First</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>quarter</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,735,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,113,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,398,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,268,067</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,050,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,972,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,944,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,955,002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,685,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,140,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,454,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,313,065</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,330,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,450,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,577,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,094,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net interest income
after provision
for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,355,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,690,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,877,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,219,065</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,811,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,843,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,283,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,108,668</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,115,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,082,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,220,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,456,722</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Income before
income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,051,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,452,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,940,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,871,011</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">467,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,001,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,380,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">583,240</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,584,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,451,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,559,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,287,771</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.19</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="85%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>Year ended December 31, 2002</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fourth</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>First</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>quarter</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>quarter</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,675,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,347,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,289,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,655,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,189,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,514,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,023,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,396,111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,486,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,832,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,265,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,259,585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Provision for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,034,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">773,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net interest income
after provision
for loan losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,451,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,826,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,725,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,486,585</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,005,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">956,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,088,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">970,617</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,358,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,092,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,572,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,911,379</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Income before
income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,098,683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,690,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,241,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,545,823</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">706,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">841,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">718,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">457,749</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Extraordinary gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,080,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,473,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,849,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,523,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,088,074</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Income before extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="right" style="font-size: 10pt">(Continued)

<P align="center" style="font-size: 10pt">F-51
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><B>EUROBANCHARES, INC. AND SUBSIDIARIES</B>



<P align="center" style="font-size: 10pt">Notes to Consolidated Financial Statements



<P align="center" style="font-size: 10pt">December&nbsp;31, 2003 and 2002



<P>

<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right"><B>(30)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Subsequent Events</B></TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Bank was defendant in a suit filed in 1994 alleging that money was
permitted to be withdrawn from a corporate account at the Bank without full
written authorization. On March&nbsp;30, 2004, the court ruled against the Bank
ordering restoration of approximately $890,000 in funds, interest thereon,
and attorney&#146;s fess. While the trial court found in favor of plaintiff, the
Bank intends to appeal the decision. Management, based on the opinion of
its legal counsel, expects to prevail.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On May&nbsp;3, 2004, the Company acquired all of the capital stock of The Bank &#038;
Trust Company of Puerto Rico (BankTrust) for approximately $23.3&nbsp;million
for which the Company issued 357,747 common shares (valued at $16.25 per
share) and 429,507 shares of noncumulative preferred stock, Series&nbsp;A
(valued at $25 per share) and made cash payments of approximately $6.7
million. BankTrust was a commercial bank operating in Puerto Rico through
an existing network of five branches and whose total assets at December&nbsp;31,
2003 amounted to approximately $567&nbsp;million. The BankTrust acquisition is
consistent with the Company&#146;s growth strategy.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following table (unaudited)&nbsp;summarizes the estimated value of the
assets acquired and liabilities assumed as of December&nbsp;31, 2003 (in
thousands):</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="55%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="71%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Investments securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,156</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Loans, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381,169</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,200</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">559,634</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(433,571</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90,662</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,821</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total liabilities acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(536,054</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has received a private letter ruling from the Puerto Rico
Treasury Department to the effect that the acquisition will be treated for
Puerto Rico income taxes as a tax-free reorganization.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In connection with the acquisition of BankTrust, on May&nbsp;12, 2004, the
Company issued 369,231 shares of common stock to its common stockholders
and to holders of options to purchase its common stock who were not
otherwise stockholders, through a private placement offering. The net
proceeds received by the Company from the private placement of its common
stock were $6,000,004.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">F-52
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">Eurobank</FONT></B>

<P align="center">
<B><FONT size="2">Consolidated Financial Statements</FONT></B>

<DIV align="center">
<B><FONT size="2">As of December&nbsp;31, 2001 and
2000</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Together with Auditors&#146; Report</FONT></B>
</DIV>

<P align="center"><FONT size="2">F-53
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Report of Independent Public
    Accountants</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD align="right" valign="bottom" nowrap><FONT size="2">F-55</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Consolidated Balance Sheets<BR>
    </FONT></B><FONT size="2">December&nbsp;31, 2001 and 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Consolidated Statements of Income<BR>
    </FONT></B><FONT size="2">For the Years Ended December&nbsp;31,
    2001, 2000 and 1999
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Consolidated Statements of Changes in
    Stockholders&#146; Equity and Other Comprehensive Income<BR>
    </FONT></B><FONT size="2">For the Years Ended December&nbsp;31,
    2001, 2000 and 1999
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Consolidated Statements of Cash Flows<BR>
    </FONT></B><FONT size="2">For the Years Ended December&nbsp;31,
    2001, 2000 and 1999
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Notes to Consolidated Financial
    Statements</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-54
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">THIS IS A COPY OF AN AUDIT REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP IN CONNECTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF EUROBANCSHARES, INC. AND
SUBSIDIARIES AS OF DECEMBER&nbsp;31, 2000 AND 2001 AND EACH OF
THE THREE YEARS IN THE PERIOD ENDED DECEMBER&nbsp;31, 2001. THIS
AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH THE FILING OF THIS REGISTRATION STATEMENT.
</FONT>

<P align="center">
<B><FONT size="2">REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS</FONT></B>

<P align="left">
<FONT size="2">To the Shareholders and Board of Directors of
</FONT>

<DIV align="left">
<FONT size="2">Eurobank:
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying consolidated
balance sheets of Eurobank (a Puerto Rico corporation) as of
December&nbsp;31, 2001 and 2000, and the related consolidated
statements of income, changes in stockholders&#146; equity and
other comprehensive income, and cash flows for each of the three
years in the period ended December&nbsp;31, 2001. These
consolidated financial statements are the responsibility of the
Bank&#146;s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Eurobank as of December&nbsp;31, 2001 and 2000, and
the results of their operations and their cash flows for each of
the three years in the period ended December&nbsp;31, 2001, in
conformity with accounting principles generally accepted in the
United States.
</FONT>

<P align="left">
<FONT size="2">/s/ ARTHUR ANDERSEN LLP
</FONT>

<P align="left">
<FONT size="2">San Juan, Puerto Rico,
</FONT>

<DIV align="left">
<FONT size="2">January&nbsp;11, 2002.
</FONT>
</DIV>

<P align="center"><FONT size="2">F-55
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EUROBANK</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED BALANCE SHEETS</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2001 and 2000</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="12" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and Cash Equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,085,242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,533,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest Bearing Deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,656,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities Purchased under Agreements to Resell
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,049,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,790,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trading Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment Securities Available for Sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,708,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,736,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,476,193</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,467,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans Held for Sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,051,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,078,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">449,115,342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">308,068,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued Interest Receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,881,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,864,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Customers&#146; Liability on Acceptances
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">543,956</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">333,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bank Premises and Equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,675,281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,606,626</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other Assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,471,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,379,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">607,715,320</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">452,009,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="12" align="center" valign="top">
    <B><FONT size="2">LIABILITIES AND STOCKHOLDERS&#146;
    EQUITY</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Deposits:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Demand
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,364,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,294,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Savings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66,836,935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,464,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Time
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">317,461,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">216,637,045</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">485,662,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">350,395,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities Sold under Agreements to Repurchase
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,363,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,062,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acceptances Outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">543,956</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">333,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes Payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued Interest Payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,241,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,948,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued Expenses and Other Liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,847,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,955,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trust Preferred Capital Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559,909,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">415,945,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitments and Contingencies (Notes&nbsp;14 and
    20)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Stockholders&#146; Equity:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock&nbsp;&#151;<BR>
    $10 par value; 1,000,000&nbsp;shares authorized, none issued
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&nbsp;&#151;<BR>
    Class A, $5 par value; 4,000,000 shares authorized,
    4,000,000&nbsp;shares issued and outstanding in 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <FONT size="2">Class B, $1, par value; 2,500,000&nbsp;shares
    authorized, 2,026,032&nbsp;shares issued and outstanding in 2000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,026,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, $1 par value;
    12,500,000&nbsp;shares authorized, 6,778,497&nbsp;shares issued
    and outstanding in 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,778,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital paid in excess of par value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,610,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,746,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">363,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reserve fund
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">602,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,920</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Undivided profits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,450,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">224,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,805,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,063,342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities and stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">607,715,320</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">452,009,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
these consolidated balance sheets.
</FONT>

<P align="center"><FONT size="2">F-56
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EUROBANK</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF INCOME</FONT></B>

<DIV align="center">
<B><FONT size="2">For the Years Ended December&nbsp;31, 2001,
2000 and 1999</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Interest Income:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans, including loan fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,719,014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,701,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,209,408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,284,082</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,480,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,070,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest-bearing deposits, securities purchased
    under agreements to resell, and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">586,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">606,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">449,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,589,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,788,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,729,599</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Interest Expense:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,471,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,383,322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,988,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities sold under agreements to repurchase,
    notes payable and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,907,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,489,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">403,134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,378,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,872,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,391,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,211,052</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,916,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,338,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Provision for Loan Losses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,377,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,343,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,103,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net Interest Income after Provision for Loan
    Losses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,834,052</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,573,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,235,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Non-Interest Income:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service charges, fees and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,640,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,059,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,782,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net gain on sale of securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194,842</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">354,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss on sale of other real estate owned,
    repossessed assets and on disposition of other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(86,143</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on sale of loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">974,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total non-interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,724,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,413,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,782,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Non-Interest Expense:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Salaries and employee benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,374,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,639,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,039,122</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Occupancy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,971,872</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,313,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,445,503</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">951,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">575,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">547,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Insurance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">352,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,789</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206,839</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Promotional
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">289,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">269,316</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,493</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,667,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,938,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,674,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total non-interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,607,018</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,047,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,063,517</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income before Income Taxes</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,951,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,938,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,954,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Provision for Income Taxes</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,147,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,907,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,170,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net Income</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,803,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,030,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,784,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Earnings Per Share:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic earnings per common share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">.80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Diluted earnings per common share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">.80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">.36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
these consolidated statements.
</FONT>

<P align="center"><FONT size="2">F-57
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EUROBANK</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS&#146; EQUITY</FONT></B>

<DIV align="center">
<B><FONT size="2">AND OTHER COMPREHENSIVE INCOME</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">For the Years Ended December&nbsp;31, 2001,
2000 and 1999</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Class A Common Stock:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,004,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,004,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,995,150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer to common stock and capital paid in
    excess of par value (see Note&nbsp;17)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,000,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,004,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Class B Common Stock:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,026,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,026,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,958,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer to common stock (see Note 17)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,026,032</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,026,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,026,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Common Stock:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">752,465</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer from Class A common stock (see Note 17)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer from Class B common stock (see Note 17)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,026,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,778,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Capital Paid in Excess of Par Value:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,746,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,096,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,000,137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,864,642</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,649,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of treasury stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(570</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer from Class A common stock (see Note 17)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,610,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,746,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,096,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Treasury Stock, at cost:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(156</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock sold (purchased) at cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(156</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(156</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Accumulated Other Comprehensive Income (Loss),
    net of taxes:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,186,148</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(345,540</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized net gain (loss) on investment
    securities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">321,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,228,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(840,608</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">363,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,186,148</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Reserve Fund:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,920</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer from undivided profits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">577,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,920</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">602,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,920</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Undivided Profits (Accumulated
    Deficit):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">224,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,781,380</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,565,639</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,803,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,030,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,784,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer to reserve fund
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(577,937</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,920</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,450,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">224,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,781,380</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,805,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,063,342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,159,929</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-58
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="51%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Comprehensive Income:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,803,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,030,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,784,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive income (loss), net of tax-
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized net gains (losses) on investment
    securities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420,135</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,228,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(840,608</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reclassification adjustment for realized gains
    included in net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(98,629</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized net gains (losses) on investment
    securities available for sale, net of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">321,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,228,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(840,608</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,125,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,258,693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">943,651</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
these consolidated statements.
</FONT>

<P align="center"><FONT size="2">F-59
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EUROBANK</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">For the Years Ended December&nbsp;31, 2001,
2000 and 1999</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash Flows from Operating
    Activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,803,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,030,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,784,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net income to net cash
    provided by operating activities&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,058,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">921,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">759,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,377,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,343,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,103,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax (benefit) provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(145,846</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,470,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,132,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net gain on sale of securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(194,842</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(354,063</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on sale of loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(974,669</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net (discount accretion) premium amortization on
    securities, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(166,237</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(65,725</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Decrease in deferred loan costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,088,410</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(524,073</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(395,024</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of trading securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129,676,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of trading securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(129,763,387</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in accrued interest receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,564</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,300,642</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,052,656</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(760,799</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(418,741</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase in accrued interest payable, accrued
    expenses and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,185,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,578,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total adjustments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,868,156</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,313,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,396,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by operating activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,935,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,344,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,181,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash Flows from Investing
    Activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) decrease in securities purchased under
    agreements to resell
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,259,485</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">207,339</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,921,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) decrease of interest bearing deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,656,543</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of investment securities available for
    sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(69,970,575</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(104,559,757</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(50,801,002</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from maturities and sales of investment
    securities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,786,804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83,771,730</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,626,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of investment securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(848,200</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(593,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from investment securities called
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">992,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,430,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase in loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(145,333,671</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(126,118,444</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31,772,105</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital expenditures, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,127,612</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,065,923</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(728,809</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(148,568,982</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(148,613,255</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,766,293</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash Flows from Financing
    Activities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase in demand deposits and savings
    accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,442,808</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,832,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,749,046</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase in time deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,824,341</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,327,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,253,423</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Decrease) increase in securities sold under
    agreements to repurchase
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,699,084</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,107,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,955,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of notes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(600,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,000,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of notes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,600,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,850,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of trust preferred capital
    securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from sale of treasury stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of treasury stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(726</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,617,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,643,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">147,185,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">139,312,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,971,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Increase (Decrease) in Cash and Cash
    Equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,552,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,955,901</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,386,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and Cash Equivalents, beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,533,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,489,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,102,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and Cash Equivalents, end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,085,242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,533,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,489,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
these consolidated statements.
</FONT>

<P align="center"><FONT size="2">F-60
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">EUROBANK</FONT></B>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2001, 2000 and
1999</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Organization and Summary of Significant
    Accounting Policies:</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Organization and Basis of
    Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Eurobank (the Bank) is a full service commercial
bank with a delivery system of fifteen branches in Puerto Rico.
During December 2001, Eurobank organized EuroBancshares, Inc.
(the Subsidiary), a wholly owned subsidiary incorporated in
Puerto Rico. The Subsidiary in turn formed a special purpose
vehicle, Eurobank Statutory Trust&nbsp;I (the Trust),
incorporated in the state of Connecticut. The Trust entered into
a financing transaction involving the issuance of trust
preferred capital securities. It is the intent of the Bank to
restructure this wholly owned subsidiary into a holding company
during year 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accounting and reporting policies of the
Bank, its Subsidiary and the Trust conform with accounting
principles generally accepted and banking industry practices in
the United States. The accompanying financial statements have
been consolidated during 2001 to include the newly formed
entities. Consequently, the accompanying financial statements as
of December&nbsp;31, 2000, and for the years ended
December&nbsp;31, 2000 and 1999, do not include any accounts
from the Subsidiary and/or the Trust.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Principles of consolidation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements include the
accounts of the Bank, its subsidiary, and the Trust. All
intercompany balances and transactions have been eliminated in
consolidation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Use of Estimates</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of the consolidated financial
statements in conformity with accounting principles generally
accepted in the United States requires management to make
estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amount of revenues and expenses during the
reporting periods. Actual results could differ from those
estimates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Securities Purchased under Agreements to
    Resell</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank purchases securities under agreements to
resell. The amounts advanced under these agreements represent
short-term financing transactions and are carried at the amounts
at which the transactions will be settled.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Trading Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank acquires securities for trading and
carries its trading account at market. The Bank classifies as
trading those securities that are acquired and held principally
for the purpose of selling them in the near term. Realized and
unrealized changes in market value are recorded separately in
the trading profit or loss account in the periods in which the
changes occur. Interest revenue and expense arising from trading
instruments are included in the consolidated income statements
as part of net interest income rather than in the trading profit
or loss account.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Investment Securities Available for
    Sale</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investment securities available for sale are
recorded at fair value and unrealized gains and losses on these
investments are reflected as a separate component of
stockholders&#146; equity in accumulated other comprehensive
income. Gains or losses on sales of investments securities
available for sale are recognized when realized and are computed
on the basis of specific identification.
</FONT>

<P align="center"><FONT size="2">F-61
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Investment Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investment securities are carried at cost,
adjusted for premium amortization and discount accretion. The
Bank classifies as investment securities those investments which
it has the intent and the ability to hold until maturity.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Interest Income</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest income on loans and investment
securities is recognized on a basis which produces a constant
yield over the term of the loan or security. Accrual of interest
income is discontinued when collectibility of the related loan
appears doubtful or after 90&nbsp;days of delinquency, unless
the credit is well secured and in process of collection. The
interest on these loans is accounted on the cash basis or cost
recovery method, until qualifying for return to accrual. Loans
are returned to accrual status when all the principal and
interest amounts contractually due are brought current and
future payments are reasonably assured.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loans Held for Sale</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Loans originated and intended for sale in the
secondary market are carried at the lower of cost or estimated
fair value. Net unrealized losses, if any, are recognized
through a valuation allowance by charges to income.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loans and Allowance for Loan
    Losses</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Loans are stated at the amount of unpaid
principal, reduced by unearned finance charges, allowance for
loan losses and net deferred nonrefundable fees. The allowance
for loan losses is an estimate to provide for probable
collection losses in the loan portfolio. Losses are charged and
recoveries are credited to the allowance account at the time a
loss is incurred or a recovery takes place.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank provides for loan losses based on
factors which, in management&#146;s judgment, deserve
recognition in estimating loan losses. Factors considered by
management include the growth and composition of the loan
portfolio, economic conditions, the value and adequacy of
collateral, and the current level of the allowance. These
factors are reviewed periodically and adjustments, as they
become necessary, are reported in the periods in which they
become known.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Management believes that the allowance for loan
losses is adequate; however, regulatory agencies, including the
Federal Deposit Insurance Corporation (the FDIC), as an integral
part of their examination process, periodically review the
Bank&#146;s allowance for loan losses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank classifies loans as non-performing when
they become 90&nbsp;days past due.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank measures impaired loans based on the
present value of expected future cash flows discounted at the
loan&#146;s original effective interest rate. As a practical
expedient, impairment may be measured based on the loan&#146;s
observable market price or the fair value of the collateral (if
the loan is collateral dependent). When the measure of the
impaired loan is less than the recorded amount, the impairment
is recorded through a valuation allowance.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Bank Premises and Equipment</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Bank premises and equipment are stated at cost,
less accumulated depreciation and amortization, which is
computed utilizing the straight-line method over the estimated
useful lives of the depreciable assets. Leasehold improvements
are stated at cost and are amortized using the straight-line
method over the estimated useful lives of the assets or the term
of the lease, whichever is lower. Expenditures for major
improvements and remodeling are capitalized while maintenance
and repairs are charged to expense. Gains or
</FONT>

<P align="center"><FONT size="2">F-62
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">losses on disposition of Bank premises and
equipment, and related operating income and maintenance expenses
are included in current operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Other Real Estate and Repossessed
    Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other real estate and repossessed assets,
normally obtained through foreclosure or other workout
situations, are stated at the lower of the outstanding loan
balance at the time of acquisition, or the fair market value of
the property or repossessed asset based on appraisals. Any
resulting loss is charged to the allowance for loan losses. An
appraisal of other real estate properties and repossessed assets
is made periodically after its acquisition and comparison
between the appraised value and the carrying value is performed.
Additional declines in value after acquisition, if any, are
charged to current operations. Gains or losses on disposition of
other real estate and repossessed assets and related operating
income and maintenance expenses are included in current
operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Trust Services</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with its trust activities, the Bank
administers and is custodian of assets which amounted to
approximately $1,255,000 and $1,028,000 at December&nbsp;31,
2001 and 2000, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Securities Sold under Agreement to
    Repurchase</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank sells securities under agreements to
repurchase the same or similar securities. Amounts received
under these agreements represent short-term financing
transactions and the securities underlying the agreements remain
in the asset accounts.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank uses the asset and liability method for
the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Bank&#146;s consolidated financial statements
or tax returns. Deferred income tax assets and liabilities are
determined for differences between financial statement and tax
bases of assets and liabilities that will result in taxable or
deductible amounts in the future. The computation is based on
enacted tax laws and rates applicable to periods in which the
temporary differences are expected to be recovered or settled.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reserve Fund</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Banking Law of Puerto Rico requires that a
reserve fund be created and that annual transfers of at least
10% of annual consolidated net income be made, until such fund
equals total paid-in capital. Such transfers restrict the
retained earnings, which would otherwise be available for
dividends. On the other hand, if net losses are experienced,
such losses will be initially charged to retained earnings and
the balance, if any, will be then charged to or included as a
reduction of the reserve fund.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loan Origination and Commitment
    Fees</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Loan origination and commitment fees and certain
loan origination costs are deferred. These are amortized over
the life of the related loans as a yield adjustment.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Transfers and Servicing of Financial Assets
    and Extinguishment of Liabilities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank recognizes financial and servicing
assets based on a financial component approach that focuses on
assets controlled and the liabilities that have been incurred.
Financial assets are derecognized when control has been
surrendered and liabilities are derecognized when extinguished.
</FONT>

<P align="center"><FONT size="2">F-63
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Statement of Cash Flows</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank considers all highly liquid instruments
with original maturities of three months or less to be cash
equivalents.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Supplemental Disclosures of Cash Flow Information:
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash paid during the years for&#151;&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,085,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,195,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,177,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">923,995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Noncash transactions during the years 2001 and
2000 consist of the acquisition of other repossessed assets and
other real estate of approximately of $6,625,000 and $1,222,000,
respectively. During 1999, noncash transactions consisted of the
acquisition of other real estate of approximately $25,000.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock Option Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As allowed by Statement of Financial Accounting
Standards (SFAS)&nbsp;No.&nbsp;123, &#147;Accounting for
Stock-Based Compensation&#148;, the Bank elected to continue to
measure cost for its stock compensation plans using the
intrinsic value based method prescribed by Accounting Principles
Board (APB) Opinion No.&nbsp;25, &#147;Accounting for Stock
Issued to Employees&#148;. Under the intrinsic value method,
cost is the excess, if any, of the quoted market price of the
stock at grant date or other measurement date over the amount an
employee must pay to acquire the stock. Entities choosing to
continue applying APB&nbsp;Opinion No.&nbsp;25 on employee stock
options granted on or after January 1996 must provide pro forma
disclosures of the consolidated net income, as if the fair value
method of accounting had been applied. Under this method cost is
measure at the grant date based on the fair value of the
employee stock option and is recognized ratably over the service
period of the option, which is usually the vesting period. The
difference between applying the provisions of APB&nbsp;Opinion
No.&nbsp;25 and the pro forma disclosure required by
SFAS&nbsp;No.&nbsp;123 is not material to the accompanying
consolidated financial statements or to the computation of
earnings per share.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Comprehensive Income</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Comprehensive income is defined as the change in
equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner
sources. In addition to net income, the Bank recognizes
unrealized holding gains and losses arising during the year in
comprehensive income.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Earnings Per Common Share</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Basic earnings per common share are computed by
dividing net income attributable to common stock, by the
weighted average number of common shares outstanding during each
year. The Bank&#146;s average number of common shares
outstanding used in the computation of earnings per common share
was 6,175,843, 5,035,176 and 4,993,249 at December&nbsp;31,
2001, 2000 and 1999, respectively. Diluted earnings per share
are computed by dividing net income to common stock, by the
weighted average number of common shares outstanding during each
year, plus any stock options outstanding. The Bank&#146;s
average number of common shares outstanding used in the
computation of diluted earnings per share was 6,213,820,
5,063,629 and 5,021,702 at December&nbsp;31, 2001, 2000 and
1999, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Other Accounting
    Pronouncements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2000, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No.&nbsp;140 (SFAS No.&nbsp;140), &#147;Accounting for Transfers
and Servicing of Financial Assets and
</FONT>

<P align="center"><FONT size="2">F-64
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">Extinguishments of Liabilities&#148;. This
statement replaces SFAS No.&nbsp;125, &#147;Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities&#148;, revising the standards for accounting for
securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over
most of SFAS&nbsp;No.&nbsp;125&#146;s provisions without
reconsideration. This statement was effective for transfers and
servicing of financial assets and extinguishments of liabilities
occurring after March&nbsp;31, 2001, and for recognition and
reclassification of collateral and for disclosure relating to
securitization transactions and collateral for fiscal years
ending after December&nbsp;15, 2000. It is management&#146;s
opinion that the implementation of all other provisions of
SFAS&nbsp;No.&nbsp;140 did not have a significant impact on the
Bank&#146;s consolidated financial statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No.&nbsp;141 (SFAS No.&nbsp;141), &#147;Business
Combinations&#148;, which supersedes APB Opinion No.&nbsp;16,
&#147;Business Combinations&#148;, and FASB Statement
No.&nbsp;38, &#147;Accounting for Preacquisition Contingencies
of Purchased Enterprises&#148;. All business combinations in the
scope of this Statement are to be accounted for using one
method, the purchase method. The provisions of this Statement
apply to all business combinations initiated after June&nbsp;30,
2001. This Statement also applies to all business combinations
accounted for using the purchase method for which the date of
acquisition is July&nbsp;1, 2001, or later. It is the opinion of
management that the implementation of SFAS No.&nbsp;141 will not
have a material impact on the Bank&#146;s consolidated results
of operations or financial position.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No.&nbsp;142 (SFAS No.&nbsp;142), &#147;Goodwill and Other
Intangible Assets&#148;, which supersedes APB Opinion
No.&nbsp;17, &#147;Intangible Assets&#148;. This statement
addresses how intangible assets that are acquired individually
or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial
statements upon their acquisition. This Statement also addresses
how goodwill and other intangible assets should be accounted for
after they have been initially recognized in the financial
statements. The provisions of this Statement are required to be
applied starting with fiscal years beginning after
December&nbsp;31, 2001. It is the opinion of management that the
implementation of SFAS No.&nbsp;142 will not have a material
impact on the Bank&#146;s consolidated results of operations or
financial position.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No.&nbsp;143 (SFAS No.&nbsp;143), &#147;Accounting for Asset
Retirement Obligations&#148;. This Statement amends
SFAS&nbsp;No.&nbsp;19, &#147;Financial Accounting and Reporting
by Oil and Gas Producing Companies&#148;. This Statement applies
to all entities and applies to legal obligations associated with
the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal
operation of a long-lived asset, except for certain obligations
of lessees. As described in this Statement, a legal obligation
is an obligation that a party is required to settle as a result
of an existing or enacted law, statute, ordinance, or written or
oral contract or by a legal construction of a contract under the
doctrine of promissory estoppel. The provisions of this
Statement is effective for financial statements issued for
fiscal years beginning after June&nbsp;15, 2002. It is the
opinion of management that the implementation of SFAS
No.&nbsp;143 will not have a material impact on the Bank&#146;s
consolidated results of operations or financial position.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No.&nbsp;144 (SFAS No.&nbsp;144), &#147;Accounting for the
Impairment or Disposal of Long-Lived Assets&#148;. This
Statement supersedes SFAS No.&nbsp;121, &#147;Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of&#148;, and the accounting and reporting provisions
of APB&nbsp;Opinion No.&nbsp;30, &#147;Reporting the Results of
Operations&nbsp;&#151; Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the disposal
of a segment of a business. This Statement also amends
ARB&nbsp;No.&nbsp;51, &#147;Consolidated Financial
Statements&#148;, to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary.
The provisions of this Statement are effective for financial
statements issued for fiscal years beginning after
December&nbsp;15, 2001. It is
</FONT>

<P align="center"><FONT size="2">F-65
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<FONT size="2">the opinion of management that the implementation
of SFAS&nbsp;No.&nbsp;144 will not have a material impact on the
Bank&#146;s consolidated results of operations or financial
position.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Trading Securities:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Proceeds from sales and redemption of trading
securities during the years ended December&nbsp;31, 2001 and
2000, were approximately $150,000 and $129,677,000,
respectively. No gain or loss was recognized during the year
2001. Gross gains of approximately $92,000 and gross losses of
approximately $38,000 were realized during 2000. During 2000 the
Bank conducted its trading activities mostly with
U.S.&nbsp;Treasury securities. At December&nbsp;31, 2000, the
trading securities outstanding consisted of a U.S.&nbsp;Treasury
Bill, which matured during 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">3.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Investment Securities Available for
    Sale:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investment securities available for sale and
related contractual maturities as of December&nbsp;31, are as
follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="14" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="14" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Market</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commonwealth of Puerto Rico
    obligations&nbsp;&#151;<BR>
    One through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.000.000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. Corporate Notes&nbsp;&#151;<BR>
    One through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,052,140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. Treasury Notes&nbsp;&#151;<BR>
    Less than one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,498,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,737,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal Home Loan Bank Notes&nbsp;&#151;<BR>
    One through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,983,024</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,047,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal Farm Credit Bank Notes&nbsp;&#151;<BR>
    Less than one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,499,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,508,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal National Mortgage Association
    Notes&nbsp;&#151;<BR>
    Less than one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">275,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">One through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">555,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,415</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">560,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">More than five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,073,817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,205,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage-Backed Securities&nbsp;&#151;<BR>
    Less than one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">840,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">853,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">More than five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,498,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">364,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(394,402</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,468,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,224,168</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">879,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(394,402</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,708,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-66
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="14" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="14" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Market</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S.&nbsp;Treasury Bills&nbsp;&#151; Less than
    one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,752,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,770,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S.&nbsp;Treasury Notes&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less than one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,969,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">93,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,063,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">One through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,487,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">303,504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,790,625</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal Home Loan Bank Notes&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less than one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,519,453</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(84,188</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,441,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">One through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(450,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,550,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal Farm Credit Bank Notes&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less than one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,999,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,892</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,988,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">One through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,497,588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,521,875</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal National Mortgage Association
    Notes&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">One through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,750</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,492,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage-Backed Securities&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less than one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,496,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,507</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,497,292</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">One through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,154,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,352</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,159,832</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">More than five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,304,099</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,266</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,461,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,681,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">629,902</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(573,955</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,736,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Contractual maturities on certain investment
securities available for sale could differ from actual
maturities since certain issuers have the right to call or
prepay these securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Proceeds from sales of investment securities
available for sale during the years ended December&nbsp;31, 2001
and 2000, were approximately $16,483,000 and $45,361,000,
respectively. Gross gains of approximately $195,000 and $300,000
were realized during 2001 and 2000, respectively. During 1999,
there were no sales of investment securities available for sale.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">4.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Investment Securities:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investment securities and related contractual
maturities at December&nbsp;31, are as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="14" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="14" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commonwealth of Puerto Rico
    obligations&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less than one year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">224,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,251,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,251,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,476,193</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,476,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="14" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="14" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commonwealth of Puerto Rico
    obligations&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">One through five&nbsp;years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">228,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,052</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">233,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,238,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,238,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,467,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,052</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,471,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-67
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Contractual maturities on certain investment
securities could differ from actual maturities since certain
issuers have the right to call or prepay these securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001 approximately $992,000 of investment
securities were called by the issuer. During 2000, no investment
securities were called by the issuer. During 1999, proceeds from
investment securities that were called by the issuer were
approximately $3,430,000. No gains or losses were realized on
securities called during the years 2001, 2000 and 1999.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">5.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Investments Pledged:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2001, various securities and
loans were pledged to secure the following:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Asset Pledged</FONT></B></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Approximate Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Items Secured/Collateralized</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3,187,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deposits of public funds
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4,851,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deposits of public funds
    </FONT></DIV>
    </TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">15,628,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable from Federal Home Loan Bank (see
    Note&nbsp;12)
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">152,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets pledged with Puerto Rico Treasury
    Department for IRA Trust
    </FONT></DIV>
    </TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2,403,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets pledged with Federal Reserve for discount
    window
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">431,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets pledged with Commissioner of Financial
    Institutions of the Commonwealth of Puerto Rico for the trust
    and international bank operations
    </FONT></DIV>
    </TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">27,720,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities sold under agreements to repurchase
    (see Note&nbsp;11)
    </FONT></DIV>
    </TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Treasury, tax and loan account
    </FONT></DIV>
    </TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loans,
Net:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A summary of the Bank&#146;s loan portfolio at
December&nbsp;31, is as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commercial and industrial
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243,923,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">190,840,433</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Construction
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,524,384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,082,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,566,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,116,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consumer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,615,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,677,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lease financing contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138,629,173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,269,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,613,134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,130,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">455,871,758</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">315,117,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred loan costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,776,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">688,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned finance charges
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,020,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,686,054</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allowance for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,512,932</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,050,556</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">449,115,342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">308,068,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-68
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, the approximate recorded
investment in loans that were considered impaired is as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Impaired loans with related allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,839,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Impaired loans that did not require allowance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,767,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total impaired loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,606,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allowance for impaired loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">299,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">192,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income recognized on impaired loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">220,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">198,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The average outstanding amount of impaired loans
during the years ended December&nbsp;31, 2001 and 2000, was
approximately $5,769,000 and $4,803,000, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following schedule reflects the approximate
outstanding principal amount and the effect on earnings of
nonperforming loans.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Principal balance as of December&nbsp;31
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,292,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,968,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,303,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income which would have been recorded
    had the loans not been classified as nonperforming
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">584,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">477,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">852,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December 31, 2001 and 2000, $2,849,000 and
$2,900,000, respectively, of these nonperforming loans were
guaranteed by U.S.&nbsp;Department of Agriculture and or the
Small Business Administration.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Commercial and industrial loans with principal
outstanding balances amounting to approximately $2,364,000 and
$1,908,000 in 2001 and 2000, respectively, are guaranteed by the
U.S.&nbsp;government through the Small Business Administration
at percentages varying from 75% to 90% and 70% to 75% in 2001
and 2000, respectively. As of December&nbsp;31, 2001 and 2000,
industrial loans with a principal outstanding balance of
approximately $2,650,000 and $2,847,000, respectively, were
guaranteed by the U.S.&nbsp;government through the
U.S.&nbsp;Department of Agriculture.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001 and 2000, $4,851,000 and $3,935,000
of the guaranteed loans were pledged to secure public funds.
</FONT>

<P align="left">
<B><FONT size="2">7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for
Loan Losses:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following analysis summarizes the changes in
the allowance for loan losses for the years ended
December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, January 1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,050,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,143,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,032,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,377,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,343,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,103,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans charged off
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,396,326</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(766,992</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,417,383</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Recoveries credited
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">481,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">331,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">424,747</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, December 31
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,512,932</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,050,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,143,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-69
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank Premises
and Equipment, Net:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Bank premises and equipment at December 31, are
as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Estimated</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Useful Lives</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Building
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,744,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,738,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">5 to 20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,910,947</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,661,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture, fixtures and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">2 to 5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,684,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,615,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Construction in progress
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">857,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">142,491</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,197,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,158,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,521,900</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,552,061</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,675,281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,606,626</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
Assets:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other assets at December&nbsp;31, consist of the
following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">946,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">907,348</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,707,448</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">969,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other real estate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">534,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other repossessed assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,006,835</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,121,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prepaid expenses and deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,345,651</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">885,163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,436,271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">961,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,471,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,379,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time
Deposits:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank&#146;s time deposits include
certificates of deposit in denominations of $100,000 or more
amounting to approximately $223,903,000 and $147,479,000 at
December&nbsp;31, 2001 and 2000, respectively. Interest expense
on these deposits amounted to approximately $11,146,000 and
$5,963,000 for the years ended December&nbsp;31, 2001 and 2000,
respectively.
</FONT>

<P align="left">
<B><FONT size="2">11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities
Sold under Agreements to Repurchase:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Securities sold under agreements to repurchase
represent short-term financing transactions with securities
dealers and the Federal Home Loan Bank. The following table
summarizes certain information on securities sold under
agreements to repurchase at December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amount outstanding at year-end
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,363,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,062,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maximum aggregate balance outstanding at any
    month-end
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,803,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,521,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Average monthly aggregate balance outstanding
    during the year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,822,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,350,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average interest rate&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">For the year ended December&nbsp;31
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.54</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.35</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">At December 31
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-70
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The investment securities underlying such
agreements were delivered to the dealers with whom the
agreements were transacted. The dealers may have sold, loaned,
or otherwise disposed of such securities in the normal course of
business operations, but have agreed to resell to the Bank
substantially the same securities on the maturity dates of the
agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2001 and 2000, investment
securities with a carrying value of $27,720,000 and $49,884,528
were pledged as collateral under these agreements.
</FONT>

<P align="left">
<B><FONT size="2">12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes
Payable:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, the Bank owes several
advances to the Federal Home Loan Bank as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Maturity</FONT></B></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Interest Rate Range</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5.32%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">600,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">1.93% to 5.72%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,950,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,350,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">4.95% to 7.28%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,800,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,800,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">6.50% to 6.81%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5.72%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These notes are guaranteed by approximately
$15,628,000 in securities outstanding as of December&nbsp;31,
2001. Interest rates are fixed for the term of each advance and
payable on the first business day of the following month when
the original maturity of the note exceeds six months. In notes
with original terms of six months or less, interest is paid at
maturity. Interest payments during 2001, 2000 and 1999, amounted
to approximately $902,000, $1,100,000 and $282,000, respectively.
</FONT>

<P align="left">
<B><FONT size="2">13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trust
Preferred Capital Securities:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;18, 2001, the Trust issued
$25,000,000 of floating rate Trust Preferred Capital Securities
Series&nbsp;1 due in 2031 with a liquidation amount of $1,000
per security. Distributions payable on each capital security
will be payable at an annual rate equal to 5.60% beginning on
(and including) the date of original issuance and ending on (but
excluding) March&nbsp;18, 2002, and at an annual rate for each
successive period equal to the 3-month LIBOR, plus 3.60% with a
ceiling rate of 12.50%. The capital securities of the Trust are
fully and unconditionally guaranteed by the Bank&#146;s wholly
owned subsidiary (EuroBancshares).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">EuroBancshares then issued $25,000,000 floating
rate junior subordinated deferrable interest debentures to the
Trust due in 2031. The terms of the EuroBancshares debentures,
which comprises substantially all of the assets of the Trust,
are equal to the terms of the capital securities issued by the
Trust. These debentures are fully and unconditionally guaranteed
by the Bank.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank subsequently issued an unsecured
promissory note to EuroBancshares at an annual rate equal to
that being paid on the Trust Preferred Capital Securities
Series&nbsp;1 due in 2031. Consequently, the Bank holds as of
December&nbsp;31, 2001, $25,000,000 in trust preferred capital
securities in the accompanying consolidated balance sheets.
</FONT>

<P align="center"><FONT size="2">F-71
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commitments
and Contingencies:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank leases certain premises used in its
operations under operating lease agreements expiring at various
dates through 2017. The total approximated minimum rental
payments under the agreements, including rentals based upon
increases in taxes and other costs, are approximately as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="82%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,360,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,357,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,026,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">942,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">788,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,343,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,816,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rent expense for the years ended
December&nbsp;31, 2001, 2000 and 1999, was approximately
$1,127,000, $841,000 and $787,000, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank is involved as plaintiff or defendant in
a variety of routine litigation incidental to the normal course
of business. Management believes, based on the opinion of legal
counsel, that it has adequate defense or insurance protection
with respect to such litigation and that any losses therefrom,
whether or not insured, would not have a material adverse effect
on the consolidated results of operations or financial position
of the Bank.
</FONT>

<P align="left">
<B><FONT size="2">15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sale of
Receivables:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During December 2001 the Bank sold a portion of
its lease financing contracts portfolio with a current net value
of $9,015,447 as of December&nbsp;28, 2001 (the Agreement). In
this sale, the Bank retained various interests such as servicing
responsibilities, certain subordinated interests, such as late
payment fees, assumption fees and other. The Bank surrendered
control of the lease financing receivables, as defined by
SFAS&nbsp;140, and accounted for this transaction as sale and
recognized a gain of approximately $975,000 during the year
ended December&nbsp;31, 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank has a limited recourse obligation as per
the Agreement that requires the Bank to repurchase any defaulted
lease up to 7.5% of the sales price of all leases sold, which
amounts to approximately $750,000. Nevertheless, it is
management&#146;s expectation, based on prior loss experience,
that such limited recourse will not exceed $60,000 during the
average portfolio life which approximates five years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Management has estimated that the compensation to
be received for servicing the portfolio approximates the
expenses the Bank is expected to incur in the servicing.
Therefore, it is management&#146;s opinion that the net effect
of these items did not have a significant impact on the
Bank&#146;s consolidated financial statements. As a result, no
servicing asset or liability was recorded.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No receivables were sold during 2002 and 1999.
</FONT>

<P align="left">
<B><FONT size="2">16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
Taxes:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank is subject to Puerto Rico income tax at
statutory rates. Under the provisions of the Puerto Rico
Internal Revenue Code of 1994, as amended, the Bank is subject
to regular tax or the alternative minimum tax, whichever is
higher. Customarily, the effective tax rate is lower than the
statutory rate primarily because interest income on certain U.S.
and Puerto Rico securities is exempt from Puerto Rico income
taxes.
</FONT>

<P align="center"><FONT size="2">F-72
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank is also subject to federal income tax on
its U.S.&nbsp;source income. However, the Bank had no taxable
U.S.&nbsp;income for the years ended December&nbsp;31, 2001,
2000 and 1999. As a result of the U.S.&nbsp;Tax Reform Act of
1986, effective January&nbsp;1, 1990, the Bank is not subject to
federal income tax on U.S.&nbsp;Treasury securities that qualify
as portfolio interest, nor to the branch profit tax and the
branch level interest tax.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2000, the Bank established an
International Bank Unit engaged in investment securities,
deposits and other funding transactions outside Puerto Rico. The
revenues generated by these transactions, net of related
interest costs and operating expenses, are exempt from Puerto
Rico taxes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The components of the income tax provision for
the years ended December&nbsp;31, are as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current tax provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,292,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">437,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred tax (benefit) provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(145,846</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,470,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,132,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total income tax provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,147,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,907,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,170,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The difference between the income tax provision
and the amount computed using the statutory rate at
December&nbsp;31, is due to the following:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Rate</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Rate</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Rate</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax at statutory rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,100,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,316,043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,152,272</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits of tax-exempt interest income, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(339,094</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4.26</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(413,502</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6.96</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">International banking unit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(435,460</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.48</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,287</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Allowance) disallowance of certain expenses for
    tax purposes and other items
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(179,269</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.26</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,012</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,147,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,907,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.13</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,170,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.61</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred income taxes reflect 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. Significant components of the
Bank&#146;s deferred tax assets and liabilities at
December&nbsp;31, were as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="61%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net operating loss carryforward
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,389,796</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alternative minimum tax credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allowance for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,760,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,189,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">835,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred loan costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(692,859</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(268,380</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(63,991</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tax effect of unrealized (gains) and losses on
    securities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121,156</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,986</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">395,380</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other temporary differences
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,869</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">946,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">907,348</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,787,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock
Transactions:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Bank converted its
4,000,000&nbsp;Class&nbsp;A shares and
2,026,032&nbsp;Class&nbsp;B shares outstanding with a par value
of $5 and $1, respectively, into 6,026,032&nbsp;shares of common
stock with a par value of $1 and capital paid in excess of par
value of $34,610,787.
</FONT>

<P align="center"><FONT size="2">F-73
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Bank issued 699,739 of the new
common stock shares at $7.65 per share through a private
placement on September&nbsp;24, 2001, and 52,726 through stock
options exercised.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Bank amended its articles of
incorporation and authorized the issuance of
1,000,000&nbsp;shares of preferred stock at $10 par value, of
which none had been issued.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2000, the Bank issued 999,030 of its
Class&nbsp;A common stock at $6.65 per share through a private
placement on December&nbsp;29, 2000. In addition, during 2000,
the Bank sold the Class&nbsp;B common stock held in treasury at
$7.50 per share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 1999, the Bank issued 26,586&nbsp;shares
of its Class&nbsp;B common stock in accordance with certain
provisions of its merger agreement with another commercial bank.
During 1997, the Bank had placed in escrow 180,000&nbsp;shares
of Class&nbsp;B common stock to provide for any contingency
resulting from those matters. In accordance with the merger
agreement, the Bank maintained the shares in escrow until
June&nbsp;30, 1999, when the final settlement was made.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 1999, the Bank purchased 156&nbsp;shares
of its own $1 par value stock, Class&nbsp;B common stock at
$4.65&nbsp;per share.
</FONT>

<P align="left">
<B><FONT size="2">18.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Option
Plan:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 1997, the Board of Directors approved and
the shareholders ratified the Stock Option Plan (the Plan).
Under the Plan an aggregate of 550,000&nbsp;shares of authorized
but unissued common stock Class&nbsp;B of the Bank, representing
10% of the shares of common stock outstanding on June&nbsp;30,
1997, were reserved for issuance under the Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All officers and directors of Eurobank are
eligible under the Plan, provided, however, that stock options
shall not be exercisable by an optionee who is the owner of 5%
or more of the issued and outstanding shares of the Bank or in
exercising the stock options would become the owner of 5% or
more of the issued and outstanding shares of the Bank, unless
the optionee obtains the approvals required from the appropriate
regulatory agencies to hold shares in excess of such percent.
Any eligible person may hold more than one option at a time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The compensation committee, appointed by the
Board of Directors, has absolute discretion to select which of
the eligible persons will be granted stock options, the number
of shares of the Bank&#146;s common stock subject to such
options, whether stock appreciation rights will be granted for
such options and generally, to determine the terms and
conditions of such options in accordance with the provisions of
the Plan. Options are exercisable within five&nbsp;years after
the grant date at the discretion of the optionee. The options
are granted at the approximate fair value of the Bank&#146;s
common stock at the date of issuance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2001, the options issued and
outstanding were as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Date</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Granted</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Granted</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Exercised</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Cancelled</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Date Exercisable</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Expiration Date</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">November&nbsp;18, 1997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">November&nbsp;18, 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">December&nbsp;30, 1999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">December&nbsp;30, 2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,076</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">February&nbsp;28, 2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">February&nbsp;28, 2005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">306,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104,289</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">187,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The cost of these options is measured as the
excess, if any, of the quoted market price of the stock at grant
date or other measurement date over the amount and employee must
pay to acquire the stock. The cost recognized by the Bank for
its stock compensation plan was approximately $139,000 during
2001. No cost was recognized during 2000 and 1999.
</FONT>

<P align="center"><FONT size="2">F-74
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">
<B><FONT size="2">19.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Related Party
Transactions:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank makes loans to its directors, principal
stockholders, officers, employees and organizations and
individuals associated with them in the normal course of
business. At December&nbsp;31, 2001 and 2000, loans outstanding
with these parties amounted to $4,972,265 and $4,475,893,
respectively. Management believes that none of the above loans
to related parties involve more than the normal risk of
collectibility, nor present other features considered
unfavorable as compared to loans to nonrelated parties. Deposits
of $8,693,695 and $8,638,698 from these parties were outstanding
as of December&nbsp;31, 2001 and 2000, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">20.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Financial Instruments with Off-Balance Sheet
    Risk:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank is a party to financial instruments with
off-balance sheet risk in the normal course of business to meet
the financial needs of its customers, such as standby letters of
credit. Such instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheets. The contract or
notional amount of the standby letters of credit reflect the
extent of involvement the Bank has in this particular class of
financial instrument.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank&#146;s exposure to credit loss in the
event of nonperformance by the other party to the financial
instrument for standby letters of credit is represented by the
contractual notional amount of those instruments. The Bank uses
the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless noted otherwise, the Bank requires
collateral or other security to support financial instruments
with credit risk. The Bank performs its normal credit granting
due diligence procedures, to the extent necessary, in evaluating
its involvement in financial instruments with credit risk.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, the approximate contract or
notional amount of the Bank&#146;s financial instruments with
off-balance sheet risk follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Financial instruments whose contract amounts
    represent credit risk&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stand-by and commercial letters of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,655,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,570,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitments to extend credit, approved loans not
    yet disbursed and unused lines of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Stand-by letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a
customer to a third party. Those guarantees are primarily issued
to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. All
guarantees will expire within a year. The credit risk involved
in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The Bank
holds certificates of deposit as collateral supporting those
commitments for which collateral is deemed necessary.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">21.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Fair Value of Financial Instruments:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following methods and assumptions were used
to estimate the fair value of each class of financial
instruments in accordance with SFAS No.&nbsp;107,
&#147;Disclosure about Fair Value of Financial Instruments.&#148;
</FONT>

<P align="center"><FONT size="2">F-75
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash and Cash Equivalents, Securities
    Purchased under Agreements to Resell and Interest-Bearing
    Deposits</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The carrying amount of cash and cash equivalents,
securities purchased under agreements to resell and
interest-bearing deposits is a reasonable estimate of fair value.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Trading Securities, Investment Securities
    Available for Sale and Investment Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of trading securities, investment
securities available for sale and investment securities are
estimated based on bid prices published in financial newspapers
or bid quotations received from securities dealers. If a quoted
market price is not available, fair value is estimated using
quoted market prices for similar securities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loans and Loans Held for Sale</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fair values are estimated for portfolios of loans
with similar financial characteristics. Loans are segregated by
type such as commercial, consumer, mortgage and other loans.
Each loan category is further segmented into fixed and
adjustable interest rate terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of loans is calculated by
discounting scheduled cash flows through the estimated maturity
using estimated market discount rates that reflect the credit
and interest rate risk inherent in the loan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The estimate of fair value of loans considers the
credit risk inherent in the portfolio through the allowance for
loan losses. Assumptions regarding credit risk, cash flows and
discount rates are judgmentally determined using available
market information and specific borrower information.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Accrued Interest Receivable</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The carrying amount of accrued interest
receivable is a reasonable estimate of its fair value.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Deposits</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of deposits with no stated
maturity, such as demand deposits, savings accounts, money
market and checking accounts is equal to the amount payable on
demand as of December&nbsp;31, 2001 and 2000. The fair value of
fixed maturity certificates of deposit is based on the
discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of
similar remaining maturities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Notes Payable</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of notes payable is calculated by
discounting scheduled cash flows through the estimated maturity
using market discount rates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Accrued Interest Payable, Accrued Expenses
    and Other Liabilities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The carrying amount of accrued interest payable,
accrued expenses and other liabilities is a reasonable estimate
of fair value.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Trust Preferred Capital
    Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of trust preferred capital
securities outstanding is calculated by discounting scheduled
cash flows through the estimated maturity using the annual rate
for each successive period equal to the 3-month LIBOR, plus
3.60%.
</FONT>

<P align="center"><FONT size="2">F-76
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Commitments to Extend Credit and Letters of
    Credit</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of commitments to extend credit
and letters of credit is estimated considering these commitments
as loan equivalents. Fair values are estimated for commitments
to extent credit with similar financial characteristics.
Commitments to extend credit are segregated by type such as
commercial, consumer, mortgage and other loans. Each commitment
category is further segmented into fixed and adjustable interest
rate terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of commitments to extend credit
and letters of credit is calculated by discounting scheduled
cash flows at market discount rates that reflect the credit and
interest rate risks inherent in the commitments to extend credit
guarantees and letters of credit. Assumptions regarding credit
risks, cash flows and discount rates are judgmentally determined
using available market information and specific borrower
information.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Limitations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value estimates are made at a discrete
point in time based on relevant market information and
information about the financial instruments. Because no market
exists for a significant portion of the Bank&#146;s financial
instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subject in
nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value estimates are based on existing
on- and off-balance sheet financial instruments without
attempting to estimate the value of anticipated future business
and the value of assets and liabilities that are not considered
financial instruments. As described for investments and
mortgage-backed securities, the tax ramifications related to the
realization of the unrealized gains and losses may have a
significant effect on fair value estimates and have not been
considered in many of the estimates.
</FONT>

<P align="center"><FONT size="2">F-77
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following are the cost and fair value of
financial instruments as of December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="30%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Carrying</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Carrying</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance sheet financial instruments&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,085,242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,085,242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,533,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,533,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest bearing deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,656,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,656,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities purchased under agreements to resell
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,049,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,049,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,790,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,790,128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trading securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">149,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment securities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,708,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,708,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,736,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,736,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,476,193</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,476,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,467,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,471,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans held for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,051,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,051,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,078,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,078,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loans, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">449,115,342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">451,396,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">308,068,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">312,046,360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued interest receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,881,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,881,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,864,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,864,961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deposits&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Demand deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,364,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,364,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,294,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,294,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Savings and time deposits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">384,298,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">392,263,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266,101,486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">266,569,691</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">485,662,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">493,627,835</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">350,395,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">350,864,043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Securities sold under agreements to repurchase
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,363,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,330,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,062,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,062,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,931,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,383,988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued interest payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,241,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,241,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,948,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,948,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,847,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,847,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,955,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,955,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Trust preferred capital securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,010,003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Contract or</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Contract or</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Notional Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Notional Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Off-balance sheet financial
    instruments&nbsp;&#151;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stand-by and commercial letters of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,655,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,655,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,570,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,570,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitments to extend credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-78
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">22.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Significant Group Concentrations of Credit
    Risk:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most of the Bank&#146;s business activities are
with customers located within Puerto Rico. The Bank has a
commercial and industrial concentrated loan portfolio with no
significant concentration in any economic sector.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">23.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Regulatory Matters:</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Bank is subject to various regulatory capital
requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material
effect on the Bank&#146;s financial statements. Under capital
adequacy guidelines, the regulators require the Bank to meet
specific capital guidelines that involve quantitative measures
of the Bank&#146;s assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices.
The Bank&#146;s capital amounts and classification are also
subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Quantitative measures established by regulation
to ensure capital adequacy require the Bank to maintain minimum
amounts and ratios, as indicated above, of Total and Tier&nbsp;I
Capital (as defined) to risk-weighted assets (as defined), and
of Tier&nbsp;I Capital (as defined) to average assets (Leverage)
(as defined).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as
well capitalized the Bank must maintain minimum Tier&nbsp;I
Leverage, Tier&nbsp;I risk based and Total risk-based ratios of
not less than 5.0%, 6.0% and 10.0%, respectively. At
December&nbsp;31, 2001, the Bank&#146;s actual leverage ratio,
Tier&nbsp;I/Core and Total Capital Ratios to risk weighted
assets were 8.27%, 15.26%, and 9.57%, respectively. Management
believes that as of December&nbsp;31, 2001, the Bank maintains
all capital adequacy requirements to which it is subject.
Further, there are no conditions or events since that
notification that management believes have changed the
institution&#146;s capital category.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, required and actual
regulatory capital amounts and ratios follow:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="18" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="18" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">Required</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Well Capitalized</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Ratio</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Ratio</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Ratio</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="18" align="center" nowrap><B><FONT size="1">(Dollars in thousands)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tier 1 Capital<BR>
    (to Risk Weighted Assets)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.57</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2/36.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Capital<BR>
    (to Risk Weighted Assets)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,668</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,677</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15.26</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1/210.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tier I Capital<BR>
    (to Average Assets)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,947</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2/35.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-79
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">EUROBANK</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="18" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="18" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">Required</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Well Capitalized</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="6" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Ratio</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Ratio</FONT></B></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Ratio</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
    <TD></TD>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD><TD></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="18" align="center" nowrap><B><FONT size="1">(Dollars in thousands)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tier 1 Capital<BR>
    (to Risk Weighted Assets)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.86</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2/36.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Capital<BR>
    (to Risk Weighted Assets)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,072</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.78</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2/310.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tier I Capital<BR>
    (to Average Assets)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2/35.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-80
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>PART II</B>



<P align="center" style="font-size: 10pt"><B>INFORMATION NOT REQUIRED IN THE PROSPECTUS</B>



<P align="left" style="font-size: 10pt"><B>ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
commissions and fees of the underwriters. All of the amounts shown are
estimates, except the SEC registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="65%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="84%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Securities and Exchange Commission registration fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,235.50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">NASD filing fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000.00</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Printing and mailing expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nasdaq National Market listing fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Nasdaq National Market annual fee (prorated for 2004)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounting fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Legal fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Marketing expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Miscellaneous expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="center">*</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>

<div align="left" style="font-size: 10pt">
<hr size="1" noshade width="20%">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*To be filed by subsequent amendment.</div>


<P align="left" style="font-size: 10pt"><B>ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2602(b)(6) of the Puerto Rico General Corporations Law of 1995
(the &#147;PR-GCL&#148;), provides that a corporation may include in its certificate of
incorporation a provision eliminating or limiting the personal liability of its
directors or stockholders in cases of monetary claims for damages resulting
from the breach of a director&#146;s fiduciary duties. However, no such provision
may eliminate or limit the liability of a director for (1)&nbsp;a breach of his duty
of loyalty to the corporation or its stockholders; (2)&nbsp;any act or omission not
in good faith, or which involves intentional misconduct or a knowing violation
of the law; (3)&nbsp;the payment of an unlawful dividend, or the approval of an
unlawful stock repurchase or redemption; or (4)&nbsp;any transaction in which the
director derives an improper personal benefit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;6 of our amended and restated certificate of incorporation
provides that the personal liability of our directors for monetary claims for
damages resulting from the breach of their fiduciary duties as directors shall
be eliminated, provided that this provision does not eliminate or limit the
liability of any director for: (1)&nbsp;any breach of the duty of loyalty of the
director to us, or our stockholders; (2)&nbsp;acts or omissions not in good faith,
or which involve intentional misconduct or knowing violations of law; (3)
unlawful payments of dividends or purchase and redemption of our stock; or (iv)
any transaction where the director derives an improper personal benefit.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2728 of the PR-GCL authorizes a Puerto Rico corporation, under
certain circumstances, to indemnify its officers and directors who are, have
been or are under threat of becoming a party to any imminent, pending or
resolved civil, criminal, administrative or investigative action, suit or
proceeding; indemnification may include expenses incurred in a reasonable
manner (including attorneys&#146; fees), provided that the director or officer acted
in good faith and in a manner reasonably deemed to be in the best interests of
the corporation or not opposed thereto (and with respect to any criminal
action, the director or officer did not have reasonable cause to believe his
conduct was unlawful). The PR-GCL does not allow indemnification for a claim
in which it has been determined that a director or officer is liable to the
corporation, unless the court presiding over such claim determines through a
motion to that effect that, in light of all of the circumstances, such person
has the fair and reasonable right to be compensated for those expenses which
the court deems proper. These rights of indemnification are not exclusive of
any other rights to which such officers or directors may be entitled under any
bylaw, agreement, vote of uninvolved stockholders or directors, or otherwise.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation provides for indemnification of agents
including directors, officers and employees to the maximum extent allowed by
Puerto Rico law. Article&nbsp;13 of our amended and restated certificate of
incorporation requires indemnification of any person who was or is a party, or
is threatened to be made a party, to any imminent, pending or resolved action,
suit or proceeding, whether civil, criminal, administrative or


<P align="center" style="font-size: 10pt">II-1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="font-size: 10pt">investigative, by reason of the fact that he is or was a director,
officer, employee or agent if the Board of Directors (or other committee or
entity empowered to make such a determination) formally determines that he
acted in good faith and in a manner reasonably deemed consistent with, or not
opposed to, our best interests. With respect to any criminal action or
proceeding, the Board of Directors (or other committee or entity empowered to
make such a determination) must formally determine that he had no reasonable
cause to believe his conduct was unlawful. In the case of any action, suit or
proceeding by or in the right of the Company, no indemnification shall be made
if such person is determined to be liable to us, unless and only to the extent
that the court in which such proceeding was brought determines upon application
that such person is fairly and reasonably entitled to indemnity. To the extent
that a director, officer, employee or agent has prevailed in defense of any
such action, suit or proceeding, he shall be indemnified against expenses
(including attorneys&#146; fees) actually and reasonably incurred by him. The
indemnification provided by our certificate of incorporation is not exclusive
of any other rights to which those seeking indemnification may be entitled
under any statute, bylaw, agreement, vote of uninvolved stockholders, directors
or otherwise.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2728(g) of the PR-GCL authorizes a Puerto Rico corporation to
purchase and maintain insurance on behalf of any person who is or has been an
officer or director of the corporation against any liability assertible against
such person, or which arises out of his status as such, regardless of whether
the corporation has the power to indemnify such person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;13 of our amended and restated certificate of incorporation
provides that we may purchase and maintain insurance covering certain
liabilities of our officers, directors, employees and agents, regardless of
whether we would have the power to indemnify them against such liabilities
under Article&nbsp;13 or applicable law.


<P align="left" style="font-size: 10pt"><B>ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the three-year period ended May&nbsp;3, 2004, we have sold the following
unregistered securities:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;3, 2004, we issued 357,747 shares of our common stock and 429,507
shares of our Series&nbsp;A Preferred Stock to the former stockholders of BankTrust
as partial consideration for our acquisition of all of the outstanding shares
of the capital stock of BankTrust. The value of the consideration deemed
received by us for each share of our common stock issued was $16.25 per share,
and for each share of our Series&nbsp;A Preferred Stock issued was $25.00 per share.
The shares of our common stock and our Series&nbsp;A Preferred Stock exchanged in
the BankTrust acquisition were issued in reliance upon certain exemptions from
federal, Puerto Rico, and other applicable registration requirements, including
Section&nbsp;3(a)(11) of the Securities Act and Rule&nbsp;147 of the regulations
promulgated thereunder and Section 881(j) of the Puerto Rico Securities Act.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;12, 2004, we issued 369,231 shares of our common stock in a private
placement at a price of $16.25 to our common stockholders, and to holders of
options to purchase our common stock who were not otherwise stockholders. The
issuance of our common stock in the private placement was made in reliance upon
the exemption from compliance with the registration requirements contained in
Section&nbsp;3(a)(11) of the Securities Act and Section&nbsp;882(b)(11) of the Puerto
Rico Securities Act. The net proceeds of the private placement were $6.0
million and these proceeds were used to fund the cash portion of the purchase
price for our acquisition of BankTrust.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;26, 2004, our Board voted and agreed to issue 1,850 shares of our
common stock (valued at $16.25 per shares) to certain of our officers and
employees in consideration for prior service to us. These stock grants were
effected pursuant to the terms of certain Restricted Stock Purchase Agreements
between us and the officers and employees. Under the terms of these Restricted
Stock Purchase Agreements the stock remains unvested until the 5th anniversary
of the date of the grant. In the event the restricted stock grantee leaves
prior to the 5th anniversary, the restricted stock grantee forfeits all right,
title and interest in the restricted stock. These shares were issued pursuant
to the exemption from registration requirements of the Securities Act provided
by Rule&nbsp;701 of the Securities Act.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;15, 2004, we granted options to purchase an aggregate of 100,000
shares of our common stock to certain of our directors, executive officers and
employees under our 2002 Stock Option Plan. The options were granted for
services provided by the grantees during the year ended December&nbsp;31, 2003.
These options were granted pursuant to the exemption from registration
requirements of the Securities Act provided by Rule&nbsp;701 of the Securities Act.
The options have an exercise price of $16.25 per share. None of these options
has been exercised.


<P align="center" style="font-size: 10pt">II-2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;24, 2003, we granted options to purchase an aggregate of 285,000
shares of our common stock to certain of our directors, executive officers and
employees under our 2002 Stock Option Plan. The options were granted for
services provided by the grantees during the year ended December&nbsp;31, 2002.
These options were granted pursuant to the exemption from registration
requirements of the Securities Act provided by Rule&nbsp;701 of the Securities Act.
The options have an exercise price of $10.00 per share. 50,000 of these
options have been exercised.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;15, 2002, we issued 122,228 shares of our common stock to
former stockholders of Banco Financiero as partial consideration for our
acquisition of all of the outstanding shares of the capital stock of Banco
Financiero. The value deemed received by us for each share of our common stock
issued in the Banco Financiero acquisition was $10.00 per share. The shares of
our common stock were issued in reliance upon certain exemptions from federal,
Puerto Rico, and other applicable registration requirements, including Section
4(2) of the Securities Act and regulations promulgated thereunder and Section
881(j) of the Puerto Rico Securities Act.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;1, 2002, we issued 6,788,421 shares of our common stock to certain
former stockholders of Eurobank as consideration for our acquisition of all of
the outstanding shares of capital stock of Eurobank in connection with the
establishment of EuroBancshares as the bank holding company for Eurobank. The
value of the consideration deemed received by us for each share of our common
stock issued was $9.00 per share. The shares of our common stock issued in the
establishment of the bank holding company were issued in reliance upon certain
exemptions from federal, Puerto Rico and other applicable registration
requirements, including Section&nbsp;3(a)(11) of the Securities Act and Rule&nbsp;147 of
the regulations promulgated thereunder and Section 881(j) of the Puerto Rico
Securities Act.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;March&nbsp;18, 2002, our Board of Directors adopted the 2002 Stock Option Plan,
which became effective when we became the parent holding company for Eurobank.
At that time, all of the Eurobank options granted under Eurobank&#146;s previous
1997 Stock Option Plan were assumed by EuroBancshares under the 2002 Stock
Option Plan and became options to purchase shares of EuroBancshares common
stock. Our executive officers, senior management and directors are eligible to
participate in the 2002 Stock Option Plan. Under the 2002 Stock Option Plan a
maximum of 750,000 shares of common stock may be issued upon the exercise of
options granted under the plan. As of March&nbsp;15, 2004, 578,432 shares of our
common stock were issuable in connection with the exercise of outstanding
options and &#091;363,000&#093; shares of our common stock remain available for option
grants. Options granted under the 2002 Stock Option Plan are exempt from the
registration requirements of the Securities Act pursuant to Rule&nbsp;701 of the
Securities Act.


<P align="left" style="font-size: 10pt"><B>ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.</B>


<P align="left" style="font-size: 10pt">(a)&nbsp;Exhibits


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description of Exhibits</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Underwriting Agreement*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement and Plan of Merger, dated as of February&nbsp;24, 2004, by and among
EuroBancshares, Inc., Eurobank, and The Bank &#038; Trust of Puerto Rico</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Certificate of Incorporation of EuroBancshares, Inc.</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Bylaws of EuroBancshares, Inc.</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designation of EuroBancshares, Inc. Noncumulative Preferred
Stock, Series&nbsp;A</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen stock certificate representing EuroBancshares,
Inc. Common Stock*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indenture, dated as of December&nbsp;18, 2001, between EuroBancshares, Inc. and
U.S. Bank National Association (f/k/a State Street Bank &#038; Trust Company of
Connecticut, National Association)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Declaration of Trust, dated as of December&nbsp;18, 2001,
by and among EuroBancshares, Inc. and U.S. Bank National Association (f/k/a
State Street Bank &#038; Trust</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">II-3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description of Exhibits</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Company of Connecticut, National Association),
and Rafael Arrillaga-Torr&#233;ns, Jr., Jorge Calder&#243;n Drowett, and William
Torres-Torres, as Administrators</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guarantee Agreement, dated as of December&nbsp;18, 2001, between EuroBancshares,
Inc. and U.S. Bank National Association (f/k/a State Street Bank &#038; Trust
Company of Connecticut, National Association)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indenture, dated as of December&nbsp;19, 2002, between EuroBancshares, Inc. and
U.S. Bank National Association (f/k/a State Street Bank &#038; Trust Company of
Connecticut, National Association)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Declaration of Trust, dated as of December&nbsp;19, 2002,
by and among EuroBancshares, Inc. and U.S. Bank National Association (f/k/a
State Street Bank &#038; Trust Company of Connecticut, National Association),
and Jose Martinez Recondo, Isabella Arrillaga, as Administrators</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guarantee Agreement, dated as of December&nbsp;19, 2002, between EuroBancshares,
Inc. and U.S. Bank National Association (f/k/a State Street Bank &#038; Trust
Company of Connecticut, National Association)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Jenkens &#038; Gilchrist, a Professional Corporation, related to the
shares of common stock being sold in the initial public offering*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Fiddler, Gonzalez &#038; Rodriguez, P.S.C., related to the shares of
common stock being sold in the initial public offering*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Jenkens &#038; Gilchrist, a Professional Corporation, regarding
certain tax matters*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Acosta &#038; Ramirez, LLP, regarding certain tax matters*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EuroBancshares, Inc. 2002 Stock Option Plan</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of EuroBancshares, Inc. Incentive Stock Option Award Agreement</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of EuroBancshares, Inc. Non-Qualified Stock Option Award Agreement</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Severance Compensation Agreement, dated as of April&nbsp;12, 1999,
between Eurobank and Ms.&nbsp;Yadira R. Mercado</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Eurobank Master Trust Retirement Plan Program</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of EuroBancshares, Inc. Restricted Stock Purchase Agreement</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement and Plan of Merger, dated as of September&nbsp;6, 2002, by and among
EuroBancshares, Inc. and Banco Financiero de Puerto Rico</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of Subsidiaries of EuroBancshares, Inc.</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of KPMG LLP, independent auditors</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Jenkens &#038; Gilchrist, a Professional Corporation (contained in
Exhibits 5.1 and 8.1)*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Fiddler, Gonzalez &#038; Rodriguez, P.S.C. (contained in Exhibit&nbsp;5.2)*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Acosta &#038; Ramirez, LLP (contained in Exhibit&nbsp;8.2)*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (included on signature page of the Registration Statement)</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">To be filed by subsequent amendment.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">II-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<P align="left" style="font-size: 10pt">(b)&nbsp;Financial Statement Schedules


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Schedules have been omitted because the information required to be shown
in the schedules is not applicable or is included elsewhere in our financial
statements or accompanying notes.


<P align="left" style="font-size: 10pt"><B>ITEM 17. UNDERTAKINGS.</B>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned Registrant hereby undertakes:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;To provide the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;For purposes of determining any liability under the Securities Act of
1933, that the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule&nbsp;430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;For the purpose of determining any liability under the Securities Act
of 1933, that each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.


<P align="center" style="font-size: 10pt">II-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in San Juan, Puerto Rico, on
the 14th
day of May, 2004.

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>

<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>EUROBANCSHARES, INC</B>.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/&nbsp;Rafael Arrillaga-Torr&#233;ns, Jr.</TD>
</TR>

<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><HR size="1" noshade>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rafael Arrillaga-Torr&#233;ns, Jr.,<BR>
Chairman of the Board, President and<BR>
Chief Executive Officer</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><B>POWER OF ATTORNEY</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Rafael Arrillaga-Torr&#233;ns, Jr. and Yadira
R. Mercado, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution, for him and in his name place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and proposes as he might or could
do in person, hereby ratifying and confirming all that each said
attorneys-in-fact and agents, or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>SIGNATURE</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>TITLE</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>DATE</B><HR size="1" noshade></TD>
</TR>
<!-- End Table Head -->

<!-- Begin Table Body -->

<TR valign="bottom">
    <TD align="center" nowrap valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" nowrap valign="top">/s/&nbsp;Rafael Arrillaga-Torr&#233;ns, Jr.<BR>
<HR size="1" noshade>
Rafael Arrillaga-Torr&#233;ns, Jr.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>

<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">/s/&nbsp;Yadira R. Mercado<BR>
<HR size="1" noshade>
Yadira R. Mercado</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Executive Vice
President, Chief
Financial Officer and
Corporate Secretary
(Principal Financial
and Accounting
Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>

<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">/s/&nbsp;Pedro Feliciano Ben&#237;tez<BR>
<HR size="1" noshade>
Pedro Feliciano Ben&#237;tez</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director and Vice
Chairman of the Board
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>

<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">/s/&nbsp;Juan Ram&#243;n G&#243;mez-Cu&#233;tara Aguilar<BR>
<HR size="1" noshade>
Juan Ram&#243;n G&#243;mez-Cu&#233;tara Aguilar</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">II-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>SIGNATURE</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>TITLE</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>DATE</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">/s/&nbsp;Antonio Pav&#237;a Bibiloni<BR>
<HR size="1" noshade>
Antonio Pav&#237;a Bibiloni</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>

<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">/s/&nbsp;Pl&#225;cido Gonz&#225;lez C&#243;rdova<BR>
<HR size="1" noshade>
Pl&#225;cido Gonz&#225;lez C&#243;rdova</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>

<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">/s/&nbsp;Jorge Calder&#243;n Drowett<BR>
<HR size="1" noshade>
Jorge Calder&#243;n Drowett</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>

<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">/s/&nbsp;Ricardo Levy Echeand&#237;a<BR>
<HR size="1" noshade>
Ricardo Levy Echeand&#237;a</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>

<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">/s/&nbsp;Diana L&#243;pez-Feliciano<BR>
<HR size="1" noshade>
Diana L&#243;pez-Feliciano</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>

<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">/s/&nbsp;William Torres Torres<BR>
<HR size="1" noshade>
William Torres Torres</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May 10, 2004</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">II-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><B>EXHIBIT INDEX</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description of Exhibits</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Underwriting Agreement*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement and Plan of Merger, dated as of February&nbsp;24, 2004, by and among
EuroBancshares, Inc., Eurobank, and The Bank &#038; Trust of Puerto Rico</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Certificate of Incorporation of EuroBancshares, Inc.</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Bylaws of EuroBancshares, Inc.</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designation of EuroBancshares, Inc. Noncumulative Preferred
Stock, Series&nbsp;A</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen stock certificate
representing EuroBancshares, Inc. Common Stock*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indenture, dated as of December&nbsp;18, 2001, between EuroBancshares, Inc. and
U.S. Bank National Association (f/k/a State Street Bank &#038; Trust Company of
Connecticut, National Association)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Declaration of Trust, dated as of December&nbsp;18, 2001,
by and among EuroBancshares, Inc. and U.S. Bank National Association (f/k/a
State Street Bank &#038; Trust Company of Connecticut, National Association),
and Rafael Arrillaga-Torr&#233;ns, Jr., Jorge Calder&#243;n Drowett, and William
Torres-Torres, as Administrators</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guarantee Agreement, dated as of December&nbsp;18, 2001, between EuroBancshares,
Inc. and U.S. Bank National Association (f/k/a State Street Bank &#038; Trust
Company of Connecticut, National Association)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indenture, dated as of December&nbsp;19, 2002, between EuroBancshares, Inc. and
U.S. Bank National Association (f/k/a State Street Bank &#038; Trust Company of
Connecticut, National Association)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Declaration of Trust, dated as of December&nbsp;19, 2002,
by and among EuroBancshares, Inc. and U.S. Bank National Association (f/k/a
State Street Bank &#038; Trust Company of Connecticut, National Association),
and Jose Martinez Recondo, Isabella Arrillaga, as Administrators</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guarantee Agreement, dated as of December&nbsp;19, 2002, between EuroBancshares,
Inc. and U.S. Bank National Association (f/k/a State Street Bank &#038; Trust
Company of Connecticut, National Association)</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Jenkens &#038; Gilchrist, a Professional Corporation, related to the
shares of common stock being sold in the initial public offering*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Fiddler, Gonzalez &#038; Rodriguez, P.S.C., related to the shares of
common stock being sold in the initial public offering*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Jenkens &#038; Gilchrist, a Professional Corporation, regarding
certain tax matters*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Acosta &#038; Ramirez, LLP, regarding certain tax matters*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">EuroBancshares, Inc. 2002 Stock Option Plan</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of EuroBancshares, Inc. Incentive Stock Option Award Agreement</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of EuroBancshares, Inc. Non-Qualified Stock Option Award Agreement</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Severance Compensation Agreement, dated as of April&nbsp;12, 1999,
between Eurobank and Ms.&nbsp;Yadira R. Mercado</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Eurobank Master Trust Retirement Plan Program</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">II-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">

<!-- Begin Table Head --><TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit Number</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description of Exhibits</B><HR size="1" noshade></TD>
</TR>


<!-- End Table Head -->

<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of EuroBancshares, Inc. Restricted Stock Purchase Agreement</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement and Plan of Merger, dated as of September&nbsp;6, 2002, by and among
EuroBancshares, Inc. and Banco Financiero de Puerto Rico</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of Subsidiaries of
EuroBancshares, Inc.</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of KPMG LLP, independent auditors</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Jenkens &#038; Gilchrist, a Professional Corporation (contained in
Exhibits 5.1 and 8.1)*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Fiddler, Gonzalez &#038; Rodriguez, P.S.C. (contained in Exhibit&nbsp;5.2)*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Acosta &#038; Ramirez, LLP (contained in Exhibit&nbsp;8.2)*</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (included on signature page of the Registration Statement)</TD>
</TR>


<!-- End Table Body -->
</TABLE>
</DIV>




<P>

<HR size="1" width="18%" align="left" noshade>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top">
    <TD width="1%" nowrap align="right">*</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="96%">To be filed by subsequent amendment.</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt">II-9
</DIV>

</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "y96993sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 2361199}]
{"company-data": {"conformed-name": "EUROBANCSHARES INC", "cik": "0001164554"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-115510", "film-number": "04807191"}, "mail-address": {"street1": "270 MUNOZ RIVERA AVE", "city": "HATO REY", "state": "NY", "zip": "00918"}}
FORM S-1
Table of Contents
As filed with the
Securities and Exchange Commission on May 14, 2004
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
EUROBANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Commonwealth of Puerto Rico
(State or other jurisdiction
of incorporation or organization)
6712
(Primary Standard Industrial
Classification Code Number)
66-0608955
(I.R.S. Employer
Identification No.)
270 Muñoz Rivera Avenue
San Juan, Puerto Rico 00918
(787) 751-7340
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Rafael Arrillaga-Torréns, Jr.
President And Chief Executive Officer
EuroBancshares, Inc.
270 Muñoz Rivera Avenue
San Juan, Puerto Rico 00918
(787) 751-7340
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Peter G. Weinstock, Esq.
Ronald J. Frappier, Esq.
Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Telephone: (214) 855-4500
Facsimile: (214) 855-4300
Frank Ed Bayouth II, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
1600 Smith Street, Suite 4400
Houston, Texas 77002
Telephone: (713) 655-5100
Facsimile: (713) 655-5200
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box.
o
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
o
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
o
CALCULATION OF REGISTRATION FEE
Proposed
Title of Each Class of Securities
Maximum Aggregate
Amount of
to be Registered
Offering Price
(1)(2)
Registration Fee
Common Stock, $0.01 par value per share
$
65,000,000
$
8,235.50
(1)
Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(o) promulgated under the Securities Act of 1933,
as amended.
(2)
Includes the offering price of shares that the underwriters have the
option to purchase to cover over-allotments, if any.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
Table of Contents
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state or jurisdiction where
the offer or sale is not permitted.
Subject to completion,
dated May 14, 2004
PROSPECTUS
Shares
Common Stock
EuroBancshares, Inc. is a Puerto Rico chartered financial holding company
headquartered in San Juan, Puerto Rico. We are offering to the public
[
] shares of our common stock and three of our stockholders under the
heading "
Selling Stockholders
" are offering [
] shares of our common
stock.
This is an initial public offering of our common stock. The initial
public offering price of our common stock is expected to be between $[
]
and $[
] per share. We will not receive any proceeds from the sale of
common stock by the selling stockholders. We have applied for quotation of our
common stock on the Nasdaq National Market under the symbol "
."
Investing in our common stock involves risks. For additional information,
see the section of this prospectus captioned "
Risk Factors
," beginning on page
9.
Neither the Securities and Exchange Commission, the Office of the
Commissioner of Financial Institutions of Puerto Rico nor any state securities
commission or regulatory authority has approved or disapproved of these
securities or passed the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
These securities are not savings accounts, deposits or other obligations
of Eurobank or any of our non-banking subsidiaries, and are not insured by the
Federal Deposit Insurance Corporation or any other governmental agency and may
lose value.
Per Share
Total
Initial public offering price of common stock
$
$
Underwriting discounts and commissions
$
$
Proceeds before expenses to us
$
$
Proceeds before expenses to the selling stockholders
$
$
We and the selling stockholders have also granted the underwriters a
30-day option to purchase up to an aggregate of an additional [
] shares
to cover over-allotments, if any, at the public offering price per share less
the underwriting discounts and commissions.
The underwriters are offering the shares of our common stock as described
in the "
Underwriting
" section of this prospectus. The underwriters expect to
deliver the shares on or about
, 2004.
Keefe, Bruyette & Woods
UBS Investment Bank
Brean Murray & Co., Inc.
The date of this prospectus
is ____________, 2004.
[Map of the island of Puerto Rico identifying locations of EuroBancshares' branch office locations]
As a prospective investor, you should rely only on the information
contained in this prospectus. Neither we nor any underwriter has authorized
anyone to provide prospective investors with information different from that
contained in this prospectus. If anyone provides you with additional,
different or inconsistent information, you should not rely on it. This
prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information included in this prospectus is accurate
as of any date other than the date of this prospectus. Our business, financial
condition, results of operations, cash flows and/or future prospects may have
changed since that date.
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
9
Special Note Regarding Forward-Looking Statements
22
Business
23
Use of Proceeds
35
Dividend Policy
36
Dilution
36
Capitalization
37
Selected Consolidated Financial Data
39
Unaudited Pro Forma Condensed Combined Financial Information
40
Management's Discussion and Analysis of Financial Condition and Results of Operations
46
Management
73
Certain Relationships and Related Transactions
85
Principal and Selling Stockholders
86
Supervision and Regulation
88
Description of EuroBancshares Capital Stock
101
Taxation
107
Shares Eligible for Future Sale
117
Underwriting
119
Legal Matters
122
Experts
122
Where You Can Find More Information
122
Index to Financial Statements
F-1
AGREEMENT AND PLAN OF MERGER
CERTIFICATE OF INCORPORATION
BYLAWS
CERTIFICATE OF DESIGNATION
INDENTURE
DECLARATION OF TRUST
GUARANTEE AGREEMENT
INDENTURE
AMENDED AND RESTATED DECLARATION OF TRUST
GUARANTEE AGREEMENT
2002 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AWARD AGREEMENT
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
EXECUTIVE SEVERANCE COMPENSATION AGREEMENT
RETIREMENT PLAN PROGRAM
RESTRICTED STOCK PURCHASE AGREEMENT
AGREEMENT AND PLAN OF MERGER
SUBSIDIARIES
CONSENT OF KPMG LLP
i
Table of Contents
PROSPECTUS SUMMARY
This summary highlights only some of the information contained in this
prospectus and does not contain all of the information you should consider in
making your investment decision. You should read carefully the entire
prospectus, including the "Risk Factors" section and the financial statements
and notes to those financial statements appearing elsewhere in this prospectus,
before making an investment decision. When we refer in this prospectus to
"EuroBancshares," "we," "our," and "us," we are referring to EuroBancshares,
Inc. and its subsidiaries, unless the context indicates otherwise. When we
refer to "Eurobank," "our banking subsidiary," or the "Bank," we are referring
to Eurobank unless the context indicates otherwise. When we refer to
"BankTrust," we are referring to The Bank & Trust of Puerto Rico. Unless the
context indicates otherwise, all information in this prospectus assumes no
exercise of the underwriters' over-allotment option.
EuroBancshares, Inc.
We are a diversified financial holding company headquartered in San Juan,
Puerto Rico, offering a broad array of financial services through our wholly
owned banking subsidiary, Eurobank, and our wholly owned insurance agency
subsidiary, EuroSeguros, Inc. As of December 31, 2003, we had, on a
consolidated basis, total assets of $1.3 billion, net loans and leases of
$890.0 million, total deposits of $984.5 million, and stockholders' equity of
$65.1 million. We currently operate through a network of 21 branch offices
located throughout Puerto Rico. On May 3, 2004, we acquired all of the capital
stock of BankTrust, a commercial bank headquartered in San Juan, Puerto Rico
with $567.2 million in assets as of December 31, 2003. On a pro forma basis,
as of December 31, 2003, giving effect to the acquisition and our recent
issuance of shares of our common stock in a private placement offering related
to that acquisition, we had total assets of $1.8 billion, net loans and leases
of $1.2 billion, total deposits of $1.4 billion and stockholders' equity of
$87.6 million.
Our primary business objectives are to maintain strong asset growth,
enhance profitability, and to be the premier small and middle market commercial
bank in Puerto Rico. Our core customers are small and mid-sized businesses,
real estate development companies and the owners, executives and employees of
these businesses.
We believe that Puerto Rico's small and mid-sized businesses prefer
locally owned and managed banking institutions that provide responsive,
personalized service, customized products and quick decision making. We
believe that this segment of the Puerto Rican market is underserved by the
larger local banks, continental United States-based banks and foreign banks
that continue to focus on larger commercial customers and on the mass retail
market.
We market our products and services through four business groups and two
operating subsidiaries:
•
Commercial Banking Group.
Our commercial banking group
focuses primarily on small and mid-sized businesses located in
Puerto Rico. Products offered by our commercial banking group
include commercial loans, residential construction loans and
consumer credit and personal secured loans, as well as a broad range
of deposit products and other non-deposit banking services,
including internet banking and cash management services tailored to
meet the needs of these businesses.
•
Leasing Group.
EuroLease, our leasing group, primarily
originates automobile leases through a network of sales
representatives located throughout Puerto Rico. We originate leases
to hold for investment and from time to time sell them to other
financial institutions. We retain the servicing rights on the
leases that we sell.
•
Mortgage Banking Group.
EuroMortgage, our mortgage banking
group, originates mortgage loans in Puerto Rico and sells the
majority of these mortgages to other financial institutions and in
the secondary market
.
•
Trust and Wealth Management Group.
Our trust and wealth
management group offers retirement benefit plans, personal trust
services and wealth management services. This group is a relatively
new endeavor for us, having commenced operations in the third
quarter of 2002. The acquisition of BankTrust will significantly
add to our assets under management and our expertise in this area.
Eurofinancial, our brokerage unit, offers a full array of investment
products and services through our association with Financial
Networks, Inc., a registered broker-dealer.
1
Table of Contents
•
Insurance Agency Subsidiary.
EuroSeguros, our general
insurance agency, primarily offers automobile, property and
casualty, and guaranteed auto protection insurance (which pays the
difference between the insured value of an automobile and the
outstanding loan or lease balance if the automobile is stolen or
totaled in an accident) to customers in our market area. While
EuroSeguros represents several insurance companies in Puerto Rico,
it primarily offers its insurance products through its association
with Marsh-Saldaña, Inc., Puerto Rico's largest insurance brokerage
firm, and a subsidiary of Marsh & McLennan, Inc. EuroSeguros is
licensed by the Office of the Commissioner of Insurance of Puerto
Rico.
•
International Banking Entities.
Puerto Rico international
banking entities, or IBEs, are tax advantaged special purpose
entities that may be operated as a division of a bank or as a
separate operating subsidiary. Typically, we borrow funds in the
United States through repurchase obligations or brokered deposits
and invest those funds primarily in United States government
securities. These activities are considered foreign under the
International Banking Center Regulatory Act, or the IBE Act, and
accordingly the income earned from these activities is tax exempt.
We have an IBE that operates as a division of Eurobank under the
name Eurobank International, and are in the process of organizing a
new IBE that will operate as a subsidiary of Eurobank under the name
EBS Overseas. We intend to transfer substantially all of the assets
of Eurobank International to EBS Overseas. In connection with the
acquisition of BankTrust, we also acquired another IBE, BT
International, which we will continue to operate as a division of
Eurobank.
Our Strategy
We target the small to middle market business community and have developed
a strategy that focuses on providing superior service through highly qualified
and relationship-oriented employees who are committed to their respective
communities. Through this strategy we intend to grow our business, expand our
customer base and improve profitability. We believe this strategy has already
proven successful as evidenced by our five year compounded growth in earnings
of 267.1% and earnings per share of 204.6%. The key elements of our strategy
are:
•
Focus on Our Targeted Customers
. We focus our time and
resources on the following targeted customer segments: small and
mid-sized businesses, real estate development companies and the
owners, executives and employees of these businesses. In this
regard, we seek to leverage our business banking relationships by
cross-selling to the personal financial needs of these business
owners, executives and employees.
•
Provide Superior and Convenient Service to Our Customers.
We
strive to provide superior customer service through convenient
access to our branches and personalized relationship banking. We
have 21 branch offices strategically located throughout Puerto Rico.
We intend to open six additional branches by the end of 2007.
After the addition of these new branch offices, we will have a
branch office located within a 10-minute drive of approximately 80%
of the Island's population. Under our business model we provide
each commercial customer with its own relationship manager for all
its banking needs. These relationship managers and our executive
management team regularly visit customers at their places of
business.
•
Hire and Retain Well-Trained and Qualified Employees.
We are
continuing to grow our franchise by providing superior customer
service through committed, qualified and relationship-oriented
employees. We seek to hire experienced and qualified employees that
prefer our relationship banking approach. These employees are
specifically incented through our compensation program to leverage
our commercial relationships by cross-selling our products and
services to the owners, executives and employees of our business
customers.
•
Use the Lease Financing Business to Mitigate Interest Rate
Risk.
We use our lease financing business to mitigate our interest
rate risk by offsetting the variable rate nature of our commercial
portfolio with a short to medium-term fixed rate product. We plan
to maintain the approximate size of the lease portfolio relative to
the size of the total loan portfolio, while increasing the volume of
leases originated for resale to other financial institutions.
•
De Novo Branching and Acquisitions
. We seek to increase our
presence throughout the Island through selective acquisitions and
the opening of de novo branches in attractive locations. Our de
novo
2
Table of Contents
expansion outside of the San Juan metropolitan market has followed
Puerto Rico's primary traffic arteries to areas that have been growing.
•
Maximize Growth of our International Banking Entity
. Because
EBS Overseas, as our subsidiary IBE, will generally not be subject
to federal or Puerto Rico income tax, we will seek to maximize the
growth of this IBE as interest rates and applicable law permit.
Recent Events
Acquisition of BankTrust
On May 3, 2004, we acquired all of the capital stock of BankTrust, a
Puerto Rico chartered commercial bank, through the merger of BankTrust with and
into Eurobank. The aggregate purchase price was $23.5 million, and consisted
of the issuance of 357,747 shares of our common stock, 429,507 shares of our
Noncumulative Preferred Stock, Series A, which we refer to throughout this
prospectus as our Series A Preferred Stock, and $6.7 million in cash. The
BankTrust acquisition is consistent with our growth strategy. BankTrust's
product offering and customer mix complement our existing product offering and
customer mix. In addition, the acquisition of BankTrust provides us with a
significant trust and wealth management group that enhances our own efforts in
this area. For additional information regarding the acquisition, see the
section of this prospectus captioned
"Business – Our De Novo Branch and
Acquisition Strategy — Mergers and Acquisitions."
Prior to the acquisition, BankTrust operated five branch offices, two were
located in San Juan, with the other three located in Guaynabo, Mayagüez and
Ponce, respectively. BankTrust also had one loan production office in San Juan
and operated an IBE under the name "BT International." We are in the process
of closing four of the five BankTrust branches, as well as the loan production
office, and consolidating these operations into our existing branch network.
Eurobank will continue to operate BT International as a division of Eurobank
and the Guaynabo branch office as a branch of Eurobank.
As of December 31, 2003, BankTrust had total assets of $567.2 million,
total deposits of $429.6 million, and stockholders' equity of $29.4 million.
BankTrust also had approximately $334 million in assets under management in its
asset management and trust division.
Private Placement
On May 12, 2004, we completed a private placement of our common stock
pursuant to which we issued 369,231 shares of our common stock at a price of
$16.25 to our common stockholders and to holders of options to purchase our
common stock who were not otherwise stockholders. Under the terms of the
private placement, each of our existing stockholders had the right to subscribe
to purchase one share of our common stock, at a price of $16.25 per share, for
every 11.95 shares of our common stock that he or she owned. In addition, each
holder of options to purchase our common stock who did not already own shares
of our common stock was granted the right to purchase, at a price of $16.25 per
share, one share of our common stock for every four shares of our common stock
into which the optionholder's options would be exercisable. Each of the common
stockholders and optionholders also had the right to subscribe for additional
shares of common stock that were not subscribed for by other current
stockholders and optionholders pursuant to their basic subscription right. The
offering was made in reliance upon the exemption from compliance with the
registration requirements contained in Section 3(a)(11) of the Securities Act
of 1933, or the Securities Act, and Section 882(b)(11) of the Puerto Rico
Securities Act. This offering was oversubscribed; however, we only accepted
subscriptions for the minimum amount we needed to fund the cash portion of the
BankTrust purchase price. The net proceeds received from the private placement
of our common stock were $6.0 million.
Other Information
Eurobank, our principal subsidiary, is a full-service Puerto Rico
commercial bank headquartered in San Juan, Puerto Rico. It was originally
chartered as a trust company under the laws of the Commonwealth of Puerto Rico
in 1979, and commenced operations under the name "Española de Finanzas Trust
Company." Subsequently, Eurobank obtained authority to conduct banking
activities and in December 1988 obtained FDIC insurance for its deposits and
3
Table of Contents
changed its name to "First Community Trust Company." In 1992, Eurobank
amended its charter in order to become a commercial bank regulated by the
banking laws of Puerto Rico and its name was changed to Eurobank. Eurobank is
regulated by the Commissioner of Financial Institutions of Puerto Rico and the
FDIC.
Our principal executive office is located at 270 Muñoz Rivera Avenue, San
Juan, Puerto Rico 00918, and our telephone number is (787) 751-7340. Our
website address is www.eurobankpr.com. Information contained on our website is
not incorporated by reference into this prospectus and you should not consider
information contained on our website as part of this prospectus.
4
Table of Contents
The Offering
Common stock offered by us.
[
] shares
Common stock offered by the selling
stockholders.
[
] shares
Common stock to be outstanding
immediately after this offering.
[
] shares
Use of proceeds.
The estimated net proceeds
from this offering
(approximately $[
]
million) will be used for
general corporate purposes, de
novo branching and future
acquisitions. We will not
receive any proceeds from the
sale of shares of common stock
by the selling stockholders.
For additional information,
see the section of this
prospectus captioned "
Use of
Proceeds
."
Dividend policy.
We have not paid cash
dividends historically, nor do
we anticipate paying any cash
dividends in the foreseeable
future. Instead, we
anticipate that all of our
earnings, if any, in the
foreseeable future will be
used for working capital, to
support our operations and to
finance the growth and
development of our business.
Any future determination
relating to dividend policy
will be made at the discretion
of our Board of Directors and
will depend on a number of
factors, including our future
earnings, capital
requirements, financial
condition, future prospects
and other factors that our
Board of Directors may deem
relevant. For additional
information , see the section
of this prospectus captioned
"
Dividend Policy
."
Proposed Nasdaq National Market
symbol.
"
"
Risk factors.
For a discussion of risks
relating to our business and
an investment in our common
stock, see the section of this
prospectus captioned
"Risk
Factors."
The number of shares to be offered by us and the selling stockholders
excludes the issuance of [
] additional shares of common stock that we may
issue if the underwriters exercise, in full, the over-allotment option that we
and the selling stockholders have granted them. The number of shares of our
common stock outstanding immediately after this offering is based on the number
of shares outstanding as of [
], 2004. This number does not take
into account (1) [
] shares of common stock reserved for issuance upon the
exercise of outstanding options at a weighted average exercise price of $[
]
per share, and (2) [
] shares of common stock reserved for issuance
pursuant to future grants under our 2002 Stock Option Plan.
5
Table of Contents
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data shown below for the five-year
period ended December 31, 2003 has been derived from our audited financial
statements. EuroBancshares was incorporated on November 21, 2001 and became
the parent bank holding company for Eurobank on July 1, 2002. As a result, the
financial information below for the years 2003 and 2002 includes consolidated
information for both EuroBancshares and Eurobank. Financial data shown for the
years 2001, 2000, and 1999 includes the financial information for Eurobank
only.
You should read this information in conjunction with "
Management's
Discussion and Analysis of Financial Condition and Results of Operations
" and
our consolidated financial statements and the related notes included elsewhere
in this prospectus. Results from past periods are not necessarily indicative
of results that may be expected for any future period. Average balances have
been computed using daily averages.
As of or for the year ended December 31,
2003
2002
2001
2000
1999
(dollars in thousands, except per share data)
Summary Income Data:
Total interest income
$
71,516
$
54,968
$
44,590
$
34,788
$
20,729
Total interest expense
31,922
25,124
21,379
16,872
9,391
Net interest income
39,594
29,844
23,211
17,916
11,338
Provision for loan and lease losses
6,451
3,354
2,377
1,343
1,103
Total noninterest income
9,047
4,021
4,724
3,413
2,783
Total noninterest expense
28,875
21,934
17,607
14,047
10,064
Income before income taxes
13,315
8,577
7,951
5,939
2,954
Income tax expense
3,432
2,724
2,147
1,908
1,170
Extraordinary gain
–
1,081
–
–
–
Net income
9,883
6,934
5,804
4,031
1,784
Common Share Data:
Earnings per common share – basic:
Income before extraordinary item
$
1.42
$
0.86
$
0.94
$
0.80
$
0.36
Extraordinary item
–
0.16
–
–
–
Net income
1.42
1.02
0.94
0.80
0.36
Earnings per common share – diluted:
Income before extraordinary item
1.39
0.85
0.93
0.80
0.36
Extraordinary item
–
0.16
–
–
–
Net income
1.39
1.01
0.93
0.80
0.36
Cash dividends declared
–
–
–
–
–
Book value per common share
9.33
8.26
7.05
5.98
4.81
Common shares outstanding at end of period
6,973,698
6,939,685
6,778,497
6,027,002
5,027,002
Average diluted shares outstanding
7,117,084
6,862,124
6,213,820
5,063,629
5,021,702
Selected Balance Sheet Data:
Total assets
$
1,320,934
$
1,035,305
$
607,715
$
452,009
$
305,712
Securities available-for-sale
324,938
145,795
88,709
103,737
81,047
Investment securities held to maturity
–
–
225
228
228
Gross loans and leases
899,392
767,792
458,680
312,197
185,991
Allowance for loan and lease losses
9,394
6,918
4,513
3,050
2,143
Deposits
984,549
843,045
485,663
350,395
251,235
Other borrowings
264,616
127,963
67,614
61,313
27,805
Stockholders' equity
65,075
57,335
47,806
36,063
24,160
Performance Ratios:
Return on average common stockholders' equity
(1)
16.50
%
13.56
%
14.34
%
15.39
%
7.48
%
Return on average assets
(2)
0.87
0.92
1.10
1.04
0.65
Net interest margin
(3)
3.75
4.29
4.97
5.53
5.06
Efficiency ratio
(4)
57.86
62.85
59.70
59.86
65.43
6
Table of Contents
As of or for the year ended December 31,
2003
2002
2001
2000
1999
(dollars in thousands, except per share data)
Asset Quality Ratios:
Nonperforming assets to total assets
2.51
%
2.87
%
2.18
%
2.05
%
2.26
%
Nonperforming loans to total loans
2.98
2.87
2.23
2.44
3.29
Allowance for loan and lease losses to
nonperforming loans
35.07
31.35
44.18
40.00
35.03
Allowance for loan and lease losses to total loans
1.04
0.90
0.98
0.98
1.15
Net charge-offs to average loans
0.48
0.52
0.24
0.18
0.62
Capital Ratios:
Leverage ratio
6.76
%
7.93
%
8.27
%
8.15
%
8.43
%
Tier 1 risk-based capital
8.30
8.63
9.57
10.86
11.64
Total risk-based capital
11.60
12.79
15.26
11.78
12.68
Tangible common equity to tangible assets
4.93
5.54
7.87
7.98
7.90
(1)
Return on average common equity is determined by dividing net income
by average common equity.
(2)
Return on average assets is determined by dividing net income by
average assets.
(3)
Net interest margin is determined by dividing net interest income
(fully taxable equivalent) by average interest-earning assets.
(4)
The efficiency ratio is determined by dividing total noninterest
expense by an amount equal to net interest income (fully taxable
equivalent) plus noninterest income.
7
Table of Contents
SUMMARY PRO FORMA FINANCIAL INFORMATION
The summary pro forma financial information set forth below gives effect
to the following transactions as if they had occurred on January 1, 2003, in
the case of statements of operations data, and December 31, 2003, in the case
of balance sheet data:
•
the sale of 369,231 shares of common stock in the private
placement on May 12, 2004 and the application of $6.0 million of net
proceeds from such sale; and
•
our acquisition of BankTrust on May 3, 2004.
The pro forma financial information does not purport to be indicative of
the operating results or financial position that would have actually occurred
or existed if the transactions had occurred on the dates indicated, nor is it
indicative of our future operating results or our financial position. The pro
forma adjustments are based on the information and assumptions available at the
date of this prospectus. This summary information should be read in
conjunction with the unaudited pro forma combined condensed financial
information contained elsewhere in this prospectus. This pro forma information
does not include any cost savings or revenue enhancements that may be achieved
or realized as a result of the BankTrust acquisition.
For the Year Ended
December 31, 2003
(in thousands, except
per share data)
Consolidated Statements of Income Data:
Interest income
$
110,066
Interest expense
53,171
Net interest income before provision for loan and lease losses
56,895
Provision for loan and lease losses
11,906
Net interest income
44,989
Noninterest income
15,025
Noninterest expenses
46,186
Income before unusual recovery and income taxes
13,828
Unusual recovery
2,304
Income taxes
11,350
Net income
$
4,782
Earnings per common share – basic
$
0.62
Earnings per common share – diluted
0.61
As of
December 31, 2003
(in thousands)
Consolidated Balance Sheet Data:
Loans and leases, net of unearned interest
$
1,287,426
Investment securities
458,437
Total assets
1,879,738
Total deposits
1,418,120
Total stockholders' equity
87,625
8
Table of Contents
RISK FACTORS
An investment in our common stock involves a number of risks. You should
read carefully and consider the following risks as well as the other
information contained in this prospectus, including the financial statements
and the notes to those financial statements, before making an investment
decision. The realization of any of the risks described below could have a
material adverse affect on our business, financial condition, results of
operations, cash flows and/or future prospects. The trading price of our
common stock could decline due to any of these risks, and you could lose part
or all of your investment.
Risks Relating to Our Business
Our decisions regarding credit risk could be inaccurate and our allowance for
loan and lease losses may be inadequate, which could materially and adversely
affect our business, financial condition, results of operations, cash flows
and/or future prospects.
Our loan and lease portfolio and investments in marketable securities
subject us to credit risk. Inherent risks in lending also include fluctuations
in collateral values and economic downturns. Making loans and leases is an
essential element of our business, and there is a risk that our loans and
leases will not be repaid. The risk of nonpayment is affected by a number of
factors, including:
•
the duration of the loan or the lease;
•
credit risks of a particular borrower or lessee;
•
changes in economic or industry conditions; and
•
in the case of collateralized loans and leases, risks
resulting from uncertainties about the future value of the
collateral.
We attempt to maintain an appropriate allowance for loan and lease losses
to provide for losses inherent in our loan and lease portfolio. In 2003, we
recorded a provision for loan and lease losses of $6.5 million based on our
overall evaluation of the risks of our loan portfolio. As of December 31,
2003, our allowance for loan and lease losses totaled $9.4 million, which
represents approximately 1.0% of our total loans and leases. There is no
precise method of predicting loan and lease losses, and therefore, we always
face the risk that charge-offs in future periods will exceed our allowance for
loan and lease losses and that we would need to make additional provisions to
our allowance for loan and lease losses. In addition, the FDIC as well as the
Commissioner of Financial Institutions of Puerto Rico may require us to
establish additional reserves. Additions to the allowance for loan and lease
losses will result in a decrease in our net earnings and capital and could
hinder our ability to grow our assets.
We have a concentration of exposure to a number of individual borrowers and
certain forms of collateral.
Under applicable law, there are quantitative limitations on the amount of
loans we can make to one borrower or a group of related borrowers. As of
December 31, 2003, our legal lending limit was approximately $10.2 million in
the unsecured category, and approximately $22.4 million in the secured
category. As of December 31, 2003, we had two loans to individual borrowers
with a principal balance of more than $10.0 million per borrower and 12 loans
to individual borrowers with a principal balance of more than $5.0 million per
borrower. Given the size of these current outstanding loans relative to our
capital levels and earnings, a significant loss on any one of these credits
could materially and adversely affect our business, financial condition,
results of operations, cash flows and/or future prospects.
A significant portion of our leases are secured by automobiles. As of
December 31, 2003, the total amount of automobile leases was $302.1 million or
22.9% of our total assets. We sometimes sell our leases to other financial
institutions in order to manage our lease financing concentration. The loss of
purchasers of our leases could cause us to reduce our lease originations,
reducing our net income. Alternatively, we may increase the portion of the
leases that we retain for our portfolio with the result that our exposure to
automobile leases will increase. In addition, a downturn in automobile
purchases could have a material adverse effect on our business, financial
condition, results of operations, cash flows and/or future prospects.
9
Table of Contents
Our profitability is vulnerable to interest rate fluctuations.
Our profitability, like that of most financial institutions, is dependent
to a large extent on our net interest income, which is the difference between
our interest income on interest-earning assets, such as loans, leases and
investment securities, and our interest expense on interest-bearing
liabilities, such as deposits and borrowings. When interest-bearing
liabilities mature or reprice more quickly than interest-earning assets in a
given period, a significant increase in market rates of interest could
adversely affect our net interest income. Conversely, when interest-earning
assets mature or reprice more quickly than interest-bearing liabilities,
falling interest rates could result in a decrease in net interest income.
In periods of increasing interest rates, loan originations may decline,
depending on the performance of the overall economy, which may adversely affect
income from these lending activities. Also, increases in interest rates could
adversely affect the market value of our fixed income assets.
We cannot predict fluctuations of market interest rates, which are
affected by, among other factors, changes in inflation rates, levels of
business activity, unemployment levels, monetary and fiscal policies of the
United States and its agencies, particularly the Board of Governors of the
Federal Reserve System, money supply and domestic and foreign financial
markets.
We rely heavily on short-term funding, which can be adversely affected by local
and general economic conditions.
Based on our experience, we believe that our savings, transaction and
noninterest bearing accounts are relatively stable sources of funds.
Historically, a majority of non-brokered certificates of deposit are renewed
upon maturity as long as we pay competitive interest rates. These customers
are, however, interest-rate conscious and may be willing to move funds into
higher-yielding investment alternatives. Our ability to attract and maintain
deposits, as well as our cost of funds, has been, and will continue to be
significantly affected by money market and general economic conditions. In the
event that we increase interest rates paid to retain deposits, our earnings may
be adversely affected.
In addition, we have frequently utilized as a source of funds certificates
of deposit obtained through deposit brokers that solicit funds from their
customers for deposit with us, or brokered deposits. Brokered deposits
amounted to $228.2 million, or approximately 23.2% of our total deposits, as of
December 31, 2003. Approximately $64.8 million of these brokered deposits, or
approximately 6.6% of our total deposits, mature within one year. In addition,
we assumed additional brokered deposits as a result of our acquisition of
BankTrust, which relied heavily on these funding sources. Consequently, on a
pro forma basis giving effect to the brokered deposits assumed in the BankTrust
acquisition as of December 31, 2003, our balance of brokered deposits amounted
to $498.5 million, or approximately 36.1% of our total deposits.
Brokered deposits, when compared to retail deposits attracted through a
branch network, are generally more sensitive to changes in interest rates and
volatility in the capital markets. In addition, these funding sources may be
more sensitive to significant changes in our financial condition. Our ability
to continue to acquire brokered deposits is subject to our ability to price
these deposits at competitive levels, which may substantially increase our
funding costs. In addition, if our capital levels were to fall below
"well-capitalized" under the Prompt Corrective Action standards of the FDIC,
our ability to accept, renew or roll over these deposits would be subject to
our receiving a waiver from the FDIC. Furthermore, we would be limited on the
rate that we could pay for these deposits to 75 basis points over the effective
yield on deposits that we offer in our normal market area or the national rate
for deposits of comparable maturity. Failure to receive a waiver from the FDIC
would have a material adverse impact on our business, financial condition,
results of operations, cash flows and/or future prospects. While currently
these regulatory limitations are not applicable to us, we cannot assure you
that they will not become applicable to us in the future.
We also have borrowings in the form of repurchase obligations with the
Federal Home Loan Bank, or the FHLB, and other broker-dealers. These
agreements are collateralized by some of our investment securities. As of
December 31, 2003, our repurchase obligations totaled $207.5 million, of which
$181.9 million, or approximately 87.7% of the total repurchase obligations,
mature within one year.
10
Table of Contents
We also rely on advances from the FHLB. As of December 31, 2003, we had
$10.7 million in FHLB advances outstanding with 23.4% maturing in less than one
year. FHLB advances are limited by specific thresholds established by the FHLB
and/or the amount of eligible collateral available to be pledged. The FHLB's
obligation to release funds on advance commitments is subject to the continued
eligibility of the member bank for advances in accordance with the FHLB's
underwriting guidelines. If we are unable to attract and maintain deposits, or
to have access to FHLB advances, we may be required to seek higher cost funding
sources, which could materially and adversely effect our net interest income.
We have experienced rapid growth in recent quarters and we may be unable to
successfully continue to implement our growth strategy, which may adversely
affect our business, financial condition, results of operations, cash flows
and/or future prospects.
Our assets have grown rapidly in recent quarters. With the ultimate goal
of increasing net income, we have grown our assets from $607.7 million as of
December 31, 2001 to $1.3 billion as of December 31, 2003 ($1.9 million on a
pro forma basis giving effect to the BankTrust acquisition). The types of
assets on our balance sheet that have experienced the largest categorical
increases are commercial loans and lease financings. We have funded this
growth, in part, with brokered deposits, FHLB advances, and other borrowings.
These types of funds are generally more costly and volatile than traditional
retail deposits.
We may not be able to sustain our current growth rate. Throughout our
recent expansion, we have been successful in attracting new customers,
expanding new services to existing customers, adding new business lines,
engaging in acquisitions and increasing our deposit base. We cannot assure you
that we will be able to continue this trend, and it will become more difficult
to maintain sustained growth as we increase in size. Our ability to implement
our strategy for continued growth depends on our ability to attract and retain
customers in a highly competitive market, on the growth of those customers'
businesses, on entering and expanding in lines of business in which we do not
have significant past experience or for which we have only recently added
personnel with the requisite experience, on our ability to continue to identify
new acquisition targets and on our ability to increase our deposit base. Many
of these growth prerequisites may be affected by circumstances that are beyond
our control. Our inability to meet any of these growth prerequisites could
have a material adverse effect on our business, financial condition, results of
operations, cash flows and/or future prospects.
Taxation of our international banking entities may reduce our earnings.
Puerto Rico IBEs are generally exempt from taxation under federal and
Puerto Rico law. Recently, the Legislature of Puerto Rico and the Governor of
Puerto Rico approved a law amending the IBE Act. This law imposes income taxes
at normal statutory rates on each IBE that operates as a unit of a bank, if the
IBE's net income generated after December 31, 2003 exceeds 40.0% of the bank's
net income in the taxable year commenced on July 1, 2003, 30.0% of the bank's
net income in the taxable year commencing on July 1, 2004, and 20.0% of the
bank's net income in the taxable year commencing on July 1, 2005, and
thereafter. It does not impose income taxation on an IBE that operates as a
subsidiary of a bank.
We are in the process of organizing a new IBE subsidiary, EBS Overseas,
and will transfer all of the assets and liabilities of our existing IBE,
Eurobank International, to EBS Overseas. Although this transfer of IBE assets
will allow us to continue enjoying tax benefits, we cannot give you any
assurance that the IBE Act will not be modified in the future in a manner to
reduce the tax benefits available to our new IBE subsidiary. A reduction of
such tax benefits may reduce our earnings.
We also acquired another IBE, BT International, in connection with the
acquisition of BankTrust. We have continued to operate the acquired IBE as a
division rather than a subsidiary of Eurobank and will not immediately transfer
its assets to EBS Overseas. As a result of the recent amendment to the IBE
Act, we may incur income tax on the operations of BT International.
11
Table of Contents
We have geographic risks in that an economic downturn or a natural disaster,
especially one affecting our market area, could adversely affect our business,
financial condition, results of operations, cash flows and/or future prospects.
Except for the securities investment activities of our IBEs, all of our
business and lending activities are conducted in Puerto Rico. Accordingly, we
are at risk from adverse economic, political or business developments,
including a downturn in real estate values, and natural hazards such as
tropical storms and hurricanes that affect Puerto Rico. If Puerto Rico's
economy experiences an overall decline as a result of these adverse
developments or natural hazards, the rates of delinquencies, foreclosures,
bankruptcies and losses on loan and lease portfolios would probably increase
substantially. Moreover, the value of real estate or other collateral that
secures the loans and leases could be adversely affected by an economic
downturn or a natural disaster. An economic downturn or a natural disaster
could, therefore, result in losses that may materially and adversely affect our
business, financial condition, results of operations, cash flows and/or future
prospects.
We rely heavily on our management team and the unexpected loss of key officers
could adversely affect our business, financial condition, results of
operations, cash flows and/or future prospects.
Our success has been and will continue to be greatly influenced by our
ability to retain the services of existing senior management and, as we expand,
to attract and retain qualified additional senior and middle management.
Rafael Arrillaga-Torréns, Jr., our President and Chief Executive Officer, has
been instrumental in managing our business affairs. Our other senior executive
officers have had, and will continue to have, a significant role in the
development and management of our business. The loss of the services of Mr.
Arrillaga or any of our other senior executive officers could have an adverse
effect on our business, financial condition, results of operations, cash flows
and/or future prospects. We have not established a formal management
succession plan. Accordingly, should we lose the services of Mr. Arrillaga,
our Board of Directors may have to search outside of EuroBancshares for a
qualified permanent replacement. This search may be prolonged and we cannot
assure you that we will be able to locate and hire a qualified replacement. We
do not maintain key man life insurance policies on any of our senior executive
officers. We currently do not have any employment agreements with our senior
executive officers, with the exception of a Severance Payment Agreement with
Yadira R. Mercado, our Executive Vice President and Chief Financial Officer.
If any of our senior executive officers leaves his or her respective position,
our business, financial condition, results of operations, cash flows and/or
future prospects may suffer.
We also depend upon the experience of the non-executive officers of our
subsidiaries, the managers of our banking facilities and on their relationships
with the communities they serve. We may not be able to retain our current
personnel or attract additional qualified key persons as needed.
The regulatory capital treatment of our junior subordinated debentures and
related trust preferred securities is uncertain.
Financial holding companies with more than $150.0 million in assets, like
us, must maintain minimum capital ratios. In particular, we must maintain a
leverage ratio of Tier 1 capital to average assets of 5.0%; a Tier 1 risk-based
capital ratio of 6.0% of risk-weighted assets; and a total risk-based capital
ratio (Tier 1 and Tier 2 capital) of 10.0% of risk-weighted assets to be
considered "well-capitalized" for regulatory purposes.
The Federal Reserve Board's current rules regarding the capital treatment
of trust preferred securities allow us to count trust preferred securities as
Tier 1 capital up to 25.0% of our total Tier 1 capital for regulatory purposes.
The remaining portion counts as Tier 2 capital. As of December 31, 2003, we
had $45.0 million in trust preferred securities of which $20.9 million counted
as Tier 1 capital and $24.1 million counted as Tier 2 capital.
In December 2003, the Financial Accounting Standards Board issued a
revision to Financial Accounting Standards Board Interpretation No. 46,
Consolidation of Variable Interest Entities,
that required the deconsolidation
of certain "variable interest entities," such as our statutory trust
subsidiaries that issued the trust preferred securities. As a result, our
statutory trusts are not consolidated with us or Eurobank. Commencing on
December 31, 2003, we refer to the trust preferred securities we issued through
Eurobank Statutory Trust I and Eurobank Statutory Trust II as junior
subordinated debentures instead of trust preferred securities, as we had prior
to that date. In July 2003, the
12
Table of Contents
Federal Reserve Board issued a supervisory letter instructing bank holding
companies to continue to include the trust preferred securities in their Tier 1
capital for regulatory capital purposes until notice is given to the contrary.
On May 6, 2004, the Federal Reserve Board issued a notice of proposed
rulemaking and requested public comment on a proposed rule that would limit the
aggregate amount of trust preferred securities that bank holding companies
would be able to include in Tier 1 capital to 25.0% of their total Tier 1
capital, net of goodwill. Further, the amount of trust preferred securities
and certain other elements in excess of the limit that could be included in
Tier 2 capital would be limited to 50.0% of Tier 1 capital, net of goodwill and
certain other intangibles. Comments on the proposed rule are to be submitted
by July 11, 2004. There can be no assurance that the proposed rule will be
adopted in its current form, or that the Federal Reserve Board will continue to
allow institutions to include trust preferred securities issued by trust
subsidiaries or debentures issued to trust subsidiaries in Tier 1 capital for
regulatory capital purposes. A determination by the Federal Reserve Board not
to continue to allow the inclusion of our junior subordinated debentures or the
trust preferred securities in Tier 1 capital, or otherwise limiting the
inclusion of such debentures or securities in Tier 1 capital, could have a
material and adverse impact on our regulatory capital levels and cause our
capital ratios to fall below the levels necessary to be considered
"well-capitalized" under current regulatory guidelines. This could impact our
ability to grow our assets. In addition, inadequate regulatory capital levels
may result in the imposition of certain operating restrictions on us and
Eurobank.
Competition from other financial intermediaries may adversely affect our
profitability.
We face substantial competition in originating loans and leases and in
attracting deposits. The competition in originating loans and leases comes
principally from other United States, Puerto Rico and foreign banks, mortgage
banking companies, consumer finance companies, credit unions, insurance
companies and other institutional lenders and purchasers of loans and leases.
We will encounter greater competition as we expand our operations. A number of
institutions with which we compete have significantly greater assets, capital
and other resources. Increased competition could require us to increase the
rates we pay on deposits or lower the rates we offer on loans and leases, which
could adversely effect our profitability. This competition may also limit our
future growth and earnings prospects.
Our business, financial condition, results of operations, cash flows and/or
future prospects could be adversely affected by the highly regulated
environment in which we operate.
We, as a Puerto Rico incorporated financial holding company, and our
subsidiaries, are each subject to federal and Puerto Rico governmental
supervision and regulation. Federal and state regulation of the banking
industry, along with tax and accounting laws, regulations, rules and standards,
may limit our operations significantly and control the methods by which we
conduct business, as they do those of other banking organizations. Many of
these regulations are intended to protect depositors, the public, or the FDIC
insurance funds, not stockholders. Regulatory requirements affect our lending
practices, capital structure, investment practices, dividend policy and many
other aspects of our business. There are laws and regulations that restrict
transactions between us and our various subsidiaries. These requirements may
constrain our operations, and the adoption of new laws and changes to or repeal
of existing laws may have a further impact on our business, financial
condition, results of operations, cash flows and/or future prospects. Also,
the burden imposed by those federal and state regulations may place banks in
general, and Eurobank in particular, at a competitive disadvantage compared to
less regulated competitors.
We are also subject to requirements with respect to the confidentiality of
information obtained from customers concerning their identity, business and
personal financial information, employment and other matters. We have adopted
information security policies and procedures that require our personnel to
agree to keep all such information confidential and we monitor compliance with
these requirements; however, we cannot assure you that these requirements will
be complied with in all cases. Failure to comply with confidentiality
requirements could result in material liability and adversely affect our
business, financial condition, results of operations, cash flows and/or future
prospects.
Both EuroBancshares and Eurobank currently meet all applicable minimum
regulatory capital requirements. While it is expected that we will continue to
meet all regulatory capital requirements in the future, we cannot assure you in
this regard, and any failure to meet any of these requirements could have a
material adverse effect on our
13
Table of Contents
business, financial condition, results of operations, cash flows and/or
future prospects. Financial holding companies and financial institutions are
extensively regulated and currently face an uncertain regulatory environment.
Applicable laws, regulations, interpretations, enforcement policies and
accounting principles have been subject to significant changes in recent years,
and may be subject to significant future changes. We cannot assure you that
such future changes will not adversely affect our business, financial
condition, results of operations, cash flows and/or future prospects.
As a financial holding company, we are dependent on receiving dividends from
Eurobank in order to pay dividends and other obligations, and there are
restrictions on Eurobank's ability to pay dividends to us.
We are a financial holding company, and we conduct no business operations.
Our principal asset is the outstanding capital stock of Eurobank. As a
result, we must rely on dividend payments from Eurobank to meet our
obligations. Dividend payments from Eurobank are subject to Puerto Rico law
and to regulatory limitations, generally based on capital levels and current
and retained earnings, imposed by the various regulatory agencies with
authority over Eurobank. The ability of Eurobank to pay dividends, however, is
always subject to regulatory restrictions if paying dividends would impair its
profitability, financial condition or other cash flow requirements.
Furthermore, our acquisition of BankTrust could also adversely effect
Eurobank's ability to pay dividends to us. Although Eurobank is considered
"well-capitalized" under applicable FDIC guidelines, we cannot assure you that
Eurobank will continue to meet the criteria under these regulatory guidelines,
in which case Eurobank may stop paying dividends or reduce the amount of
dividends paid to us.
Monetary policy and other economic factors could affect our profitability
adversely.
The following factors will affect the demand for, and the pricing of,
loans and leases and our ability to attract deposits:
•
changes in governmental economic and monetary policies;
•
the Puerto Rico Internal Revenue Code of 1994, as amended, and banking and credit regulations;
•
national and local economic growth rates;
•
employment rates; and
•
population trends.
Our success will depend in significant part upon our ability to maintain a
sufficiently large interest spread between the rates of interest we receive on
loans, leases and other investments and the rates we pay out on deposits and
other liabilities. The monetary and economic factors listed above, and the
need to pay rates sufficient to attract deposits, may adversely affect our
ability to maintain an interest spread sufficient to result in operating
profits. We do not anticipate significant risk from foreign currency
transactions.
We have certain risks associated with our lease servicing activities.
We retain the responsibility for servicing the automobile leases that we
sell, and are therefore entitled to an ongoing fee based on the outstanding
principal balances of the leases we service. The value of these servicing
assets are subject to credit, prepayment and interest rate risk. Significant
decreases in interest rates may lead to increases in the prepayment of leases
by borrowers, which may reduce the value of our servicing asset. If
prepayments increase above the expected levels, the value of our servicing
assets will decrease. We may be required to recognize this decrease in value
by taking a charge against our current earnings.
Future terrorist activities and United States military involvement in the
Middle East and elsewhere may adversely affect the financial markets and our
business, financial condition, results of operations, cash flows and/or future
prospects.
The aftermath of the war with Iraq, the continuing occupation of Iraq,
instability in the Middle East and terrorist attacks in the United States and
around the world have had a substantial impact on the United States and world
14
Table of Contents
economies and securities markets. The nature, scope and duration of the
war and the occupation cannot be predicted with any certainty. Terrorist
attacks on the World Trade Center and the Pentagon on September 11, 2001 closed
some of the United States securities markets for a four day period and similar
events cannot be ruled out. The Iraq war and occupation, terrorism and related
geopolitical risks have led, and may in the future lead, to increased
short-term market volatility and may have adverse long-term effects on United
States and world economies and markets generally. Those events could adversely
affect our business, financial condition, results of operations, cash flows
and/or future prospects.
We rely heavily on technology and computer systems and computer failure could
result in loss of business and adversely affect our earnings.
Advances and changes in technology could significantly affect our business
and operations. We may face many challenges, including the increased demand
for providing customers access to their accounts and the systems to perform
banking transactions electronically. Our ability to compete depends on our
ability to continue to adapt technology on a timely and cost-effective basis to
meet these demands. In addition, our business and operations are susceptible
to negative effects from computer system failures, communication and energy
disruption, and unethical individuals with the technological ability to cause
disruptions or failures of our data processing systems.
We are subject to litigation, which could result in substantial judgment or
settlement costs.
We are regularly involved in litigation matters in the ordinary course of
our business. We believe that current litigation matters should not have a
material adverse effect on our business, financial condition, results of
operations, cash flows and/or future prospects. We cannot assure you, however,
that we will be able to successfully defend or resolve any current or future
litigation matters, in which case those litigation matters could have a
material and adverse effect on our business, financial condition, results of
operations, cash flows and/or future prospects.
The properties that we own and our foreclosed real estate assets could subject
us to environmental risks and associated costs.
There is a risk that hazardous substances or wastes, contaminants,
pollutants or other environmentally restricted substances could be discovered
on our properties or our foreclosed assets (particularly in the case of real
estate loans). In this event, we might be required to remove the substances
from the affected properties or to engage in abatement procedures at our sole
cost and expense. Besides being directly liable under applicable federal and
Commonwealth statutes for our own conduct, we may also be held liable under
certain circumstances for actions of borrowers or other third parties on
property that collateralizes one or more of our loans or on property that we
own. Potential environmental liability could include the cost of remediation
and also damages for any injuries caused to third-parties. We cannot assure
you that the cost of removal or abatement will not substantially exceed the
value of the affected properties or the loans secured by those properties, that
we would have adequate remedies against the prior owners or other responsible
parties or that we would be able to resell the affected properties either prior
to or following completion of any such removal or abatement procedures. If
material environmental problems are discovered prior to foreclosure, we
generally will not foreclose on the related collateral or will transfer
ownership of the loan to a subsidiary. It should be noted, however, that the
transfer of the property or loans to a subsidiary may not protect us from
environmental liability. Furthermore, despite these actions on our part, the
value of the property as collateral will generally be substantially reduced
and, as a result, we may suffer a loss upon collection of the loan. Currently,
we are not, and none of our subsidiaries is, a party to any pending legal
proceeding under any environmental statute, nor are we aware of any instances
that may give rise to such liability.
We rely on third-party professionals to provide certain financial services to
our customers.
We rely on selected outside investment managers to provide specialized
investment advice and asset management services to our customers. We cannot
assure you that any of these providers will be able to continue to provide
these services to our customers or that they will be able to adequately meet
our customers' or our needs. Further, we cannot be sure that our customers
will continue to utilize the services of these investment managers through us,
rather than directly from the investment management firms themselves. The loss
of any of these outside investment managers may impact our ability to provide
customers with quality service or some types of portfolio management without
incurring the cost of replacing them.
15
Table of Contents
Risks Relating to an Investment in Our Common Stock
Our common stock does not have a trading history and you may not be able to
trade our common stock if an active trading market does not develop.
Additionally, the price of our common stock may fluctuate significantly.
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest in us will lead
to an active trading market in our common stock or how liquid that market might
become. A public trading market having the desired characteristics of depth,
liquidity and orderliness depends upon the presence in the marketplace of
willing buyers and sellers of the common stock at any given time, which
presence is dependent upon the individual decisions of investors over which
neither we nor any market maker has any control.
The initial public offering price of our common stock will be determined
by negotiation between the representatives of the underwriters and us. This
price may not be indicative of prices that will prevail in any future trading
market. You may not be able to sell shares of our common stock at or above our
initial public offering price.
Additionally, the market price of our common stock may be highly volatile
and subject to wide fluctuations in response to numerous factors, including but
not limited to the following:
•
actual or anticipated fluctuations in our operating results;
•
changes in interest rates;
•
the public's reaction to our press releases, announcements and filings with the SEC;
•
changes in earnings estimates or recommendations by research analysts;
•
future sales of our common stock;
•
changes in general conditions in the United States or Puerto
Rico economy, financial markets or the banking industry; and
•
other developments affecting our competitors or us.
The stock markets, from time to time, experience extreme price and volume
fluctuations that may be unrelated or disproportionate to the operating
performance of companies. These broad fluctuations may adversely affect the
market price of our common stock, regardless of our trading performance.
In the past, stockholders have often brought securities class action
litigation against a company following periods of volatility in the market
price of their securities. We may be the target of similar litigation in the
future, which could result in substantial costs and divert management's
attention and resources.
As a new investor, you will incur immediate and substantial dilution in the
tangible book value per share of your investment in our common stock.
If you purchase shares of our common stock in this offering, you will
experience an immediate and substantial dilution of $[   ] net tangible book
value per share of your investment. This means that the price you pay for the
shares you acquire in this offering will be higher than their net tangible book
value per share. For more information regarding dilution, see the section of
this prospectus captioned "
Dilution
."
Your share ownership may be diluted by the issuance of additional shares of our
common stock in the future.
Your share ownership may be diluted by the issuance of additional shares
of our common stock in the future. First, we have adopted a stock option plan
that provides for the granting of stock options to our directors, executive
officers and other employees. As of March 15, 2004, 578,432 shares of our
common stock were issuable under options granted in connection with our stock
option plan. In addition, [363,000] shares of our common stock are reserved
for future issuance to directors, officers and employees under our stock option
plan. It is probable that the
16
Table of Contents
stock options will be exercised during their respective terms if the fair
market value of our common stock exceeds the exercise price of the particular
option. If the stock options are exercised, your share ownership will be
diluted.
In addition, our amended and restated certificate of incorporation
authorizes the issuance of up to 150,000,000 shares of common stock, but does
not provide for preemptive rights to the holders of our common stock. Any
authorized but unissued shares following the offering will be available for
issuance by our Board of Directors. Therefore, persons who purchase shares in
the offering will not automatically have the right to subscribe for additional
shares of common stock issued at any time in the future. As a result, if we
issue additional shares of common stock to raise additional capital or for
other corporate purposes, you may be unable to maintain your pro rata ownership
in EuroBancshares.
Future sales of common stock by existing stockholders may have an adverse
impact on the market price of our common stock.
Sales of a substantial number of shares of our common stock in the public
market following this offering, or the perception that large sales could occur,
could cause the market price of our common stock to decline or limit our future
ability to raise capital through an offering of equity securities. After
completion of this offering, there will be [   ] shares of our common
stock outstanding. All of the shares of common stock sold in this offering
will be freely tradable without restriction or further registration under the
federal securities laws unless purchased by our "affiliates" within the meaning
of Rule 144 under the Securities Act, which shares will be subject to the
resale limitations of Rule 144, or purchased under the directed share program,
which shares will be subject to a 180-day lock-up period. [   ] of the
remaining shares of outstanding common stock, representing approximately [   ]%
of the outstanding common stock upon completion of this offering, will be
"restricted securities" under the Securities Act, subject to restrictions on
the timing, manner and volume of sales of those shares. We, our directors and
officers, the selling stockholders and substantially all of our existing
stockholders have entered into lock-up agreements (and the purchasers of shares
of our common stock under the directed share program will agree to
restrictions) generally providing, subject to limited exceptions, that they
will not, without the prior written consent of Keefe, Bruyette & Woods, Inc.,
directly or indirectly, during the period ending 180 days after the date of
this prospectus, offer to sell, or otherwise dispose of any shares of our
common stock. Following the closing of this offering, we also intend to file a
registration statement on Form S-8 under the Securities Act covering the
[363,000] shares of our common stock reserved for issuance under our stock
option plan as of March 15, 2004. Accordingly, subject to applicable vesting
requirements and exercise with respect to options, shares registered under that
registration statement will be available for sale in the open market
immediately after the 180-day lock-up agreements expire.
Holders of our junior subordinated debentures have rights that are senior to
those of our stockholders.
On December 18, 2001, we issued $25.8 million of floating rate junior
subordinated debentures in connection with a $25.0 million trust preferred
securities issuance by our subsidiary, Eurobank Statutory Trust I. The 2001
junior subordinated debentures mature in 2031. On December 19, 2002, we issued
$20.6 million of floating rate junior subordinated interest debentures in
connection with a $20.0 million trust preferred securities issuance by our
subsidiary, Eurobank Statutory Trust II. The 2002 junior subordinated
debentures mature in 2032. The purpose of these transactions was to raise
additional capital to fund our continued growth.
Payments of the principal and interest on the trust preferred securities
of Eurobank Statutory Trust I and Eurobank Statutory Trust II are conditionally
guaranteed by us. The 2001 and 2002 junior subordinated debentures are senior
to our shares of common stock. As a result, we must make payments on the
junior subordinated debentures before any dividends can be paid on our common
stock and, in the event of our bankruptcy, dissolution or liquidation, the
holders of the junior subordinated debentures must be satisfied before any
distributions can be made on our common stock. We have the right to defer
distributions on the 2001 and 2002 junior subordinated debentures (and the
related trust preferred securities) for up to five years, during which time no
dividends may be paid on our common stock.
17
Table of Contents
Holders of our Series A Preferred Stock have rights senior to those of our
common stockholders.
In connection with our acquisition of BankTrust, we issued 429,507 shares
of our Series A Preferred Stock to certain stockholders of BankTrust in
exchange for their shares of the Series A and Series B preferred stock of
BankTrust. Our Series A Preferred Stock has rights and preferences that could
adversely affect holders of our common stock. For example, we generally are
unable to declare and pay dividends on our common stock if there are any
accrued and unpaid dividends on our Series A Preferred Stock for the preceding
twelve months. Additionally, upon any voluntary or involuntary liquidation,
dissolution, or winding up of our business, the holders of our Series A
Preferred Stock are entitled to receive distributions out of our available
assets before any distributions can be made to holders of our common stock.
Provisions of our amended and restated certificate of incorporation and amended
and restated bylaws, as well as state and federal banking regulations, could
delay or prevent a takeover of us by a third party.
Our amended and restated certificate of incorporation and amended and
restated bylaws could delay, defer or prevent a third party from acquiring us,
despite the possible benefit to our stockholders, or could otherwise adversely
affect the price of our common stock. For example, our bylaws contain advance
notice requirements for nominations for election to our Board of Directors and
for proposing matters that stockholders may act on at stockholder meetings. We
also have a staggered board of directors, which means that only one-third of
our Board of Directors can be replaced by stockholders at any annual meeting.
Any individual, acting alone or with other individuals, who is seeking to
acquire, directly or indirectly, 10.0% or more of our outstanding common stock
must comply with the Change in Bank Control Act, which requires prior notice to
the Federal Reserve for any acquisition. Additionally, any entity that wants
to acquire 5.0% or more of our outstanding common stock, or otherwise to
control us, may need to obtain the prior approval of the Federal Reserve under
the Bank Holding Company Act of 1956, as amended. As a result, prospective
investors in our common stock need to be aware of and to comply with those
requirements, to the extent applicable. Approval for an acquisition may also
be required by the Commissioner of Financial Institutions of Puerto Rico.
We currently do not intend to pay dividends on our common stock. In addition,
our future ability to pay dividends is subject to restrictions. As a result,
capital appreciation, if any, of our common stock will be your sole source of
gains for the foreseeable future.
We have not historically and we currently do not intend to pay any
dividends on our common stock. In addition, since we are a financial holding
company with no significant assets other than Eurobank, we have no material
source of income other than dividends that we receive from Eurobank.
Therefore, our ability to pay dividends to our stockholders will depend on
Eurobank's ability to pay dividends to us. Moreover, banks and bank holding
companies are both subject to federal and Puerto Rico regulatory restrictions
on the payment of cash dividends. We intend to retain the earnings of Eurobank
to support growth and build equity capital. Accordingly, you should not expect
to receive dividends from us in the foreseeable future.
The banking laws of Puerto Rico require that a reserve fund be created and
that annual transfers of at least 10.0% of Eurobank's annual net income be made
to that reserve fund, until the reserve fund equals total paid-in capital.
Such transfers restrict retained earnings, which would otherwise be available
for dividends. If net losses are experienced, however, such losses will
initially be charged to retained earnings before reducing the reserve fund.
We are also restricted from paying dividends on our common stock if we
have deferred payments of the interest on, or an event of default has occurred
with respect to, our junior subordinated debentures. In addition, we generally
are unable to declare and pay dividends on our common stock if there are any
accrued and unpaid dividends on our Series A Preferred Stock for the preceding
12 months.
18
Table of Contents
Your shares are not an insured deposit.
Your investment in our common stock will not be a bank deposit and will
not be insured or guaranteed by the FDIC or any other government agency. Your
investment will be subject to investment risk, and you must be capable of
affording the loss of your entire investment.
Risks Related to United States Taxation
If we or any of our subsidiaries are determined to be a passive foreign
investment company, certain U.S. holders of our stock could be subject to
adverse tax consequences.
The United States Internal Revenue Code provides special rules for
distributions received by certain U.S. stockholders on the stock of a passive
foreign investment company, known as a "PFIC," as well as amounts received from
the sale or other disposition of such stock. If either we or any of our
subsidiaries are determined to be a PFIC for any taxable year, certain of our
U.S. stockholders would generally be subject to taxation under special rules,
regardless of whether we or any of our subsidiaries remains a PFIC, with
respect to (1) any "excess distribution" made by us to the stockholder, and (2)
any gain realized on the sale, pledge or other disposition of our common stock
or the stock of the subsidiary that was determined to be a PFIC. We believe
that neither we nor any of our subsidiaries will be determined to be a PFIC in
our current taxable year, and we expect to continue to conduct our affairs in a
manner so that neither we nor any of our subsidiaries qualifies as a PFIC in
the foreseeable future. However, we can give no assurance in this regard. For
a more detailed explanation of the tax consequences of PFIC classification to
U.S. stockholders and U.S. stockholders who are also bona fide residents of
Puerto Rico, see the section of this prospectus captioned
"Taxation—United
States Taxation—Passive Foreign Investment Company Rules."
If we or any of our subsidiaries are classified as a foreign personal holding
company, certain U.S. holders of our stock could be subject to adverse tax
consequences.
A non-United States corporation will be classified as a foreign personal
holding company, known as a "FPHC," for United States federal income tax
purposes if (1) at any time during the taxable year at issue, five or fewer
individuals who are United States citizens or residents, referred to as a
"United States group," own or are deemed to own (pursuant to certain
constructive ownership rules) more than 50% of all classes of the corporation's
stock measured by voting power or value, and (2) at least 60% of its gross
income for the taxable year is "FPHC income." If we or any of our subsidiaries
are classified as a FPHC in any taxable year, a portion of the applicable
"undistributed foreign personal holding company income" (as defined for United
States federal income tax purposes) would be imputed to certain of our U.S.
stockholders on the last day on which a United States group existed in the
applicable taxable year. If we are a FPHC, such income would be taxable as a
deemed dividend to these stockholders to the extent of our current and
accumulated earnings and profits even if no cash dividend were actually paid
and would not be eligible for a reduced rate of tax under recently enacted
legislation. Further, in such case, upon the death of any United States
individual owning shares in a FPHC, such individual's heirs or estate would not
be entitled to a "step-up" in the basis of the common shares which might
otherwise be available under United States federal income tax laws. If we are
not a FPHC and such income is from one or more of our subsidiaries that are
FPHCs, then the "undistributed foreign personal holding company income" of the
subsidiaries that are FPHCs could be taxable as a deemed dividend to these U.S.
stockholders in certain circumstances.
Prior to this offering, both we and our subsidiaries satisfied the stock
ownership test for classification as FPHCs in 2004 (
i.e
., 50% or more of the
shares of our stock have been owned or deemed owned by a United States group)
and the stock ownership test could continue to be satisfied after the initial
public offering. Unless Eurobank and its subsidiaries that are organized and
doing business under the banking and credit laws of Puerto Rico ("Banking
Subsidiaries") receive certificates from the Commissioner of the Internal
Revenue Service that they are not FPHCs, Eurobank and such subsidiaries would
likely meet the gross income test and be treated as FPHCs in 2004.
Furthermore, if Eurobank and its Banking Subsidiaries do not receive
certificates for 2004, it is likely that we would also meet the gross income
test and be treated as a FPHC in 2004. We expect, however, that neither we nor
any of our subsidiaries will be a FPHC, in our current taxable year based on
our expectation that the Internal Revenue Service will certify that Eurobank
and each of its Banking Subsidiaries are not FPHCs and on certain projections
we have made with respect to our gross income following this offering. Due to
certain legal and factual uncertainties,
19
Table of Contents
including that the Internal Revenue Service may not make such
certifications, we cannot be certain that either we or any of our subsidiaries
will not be considered a FPHC in 2004 and in the foreseeable future. For a
more detailed explanation of the tax consequences of FPHC classification to
U.S. stockholders and U.S. stockholders who are also bona fide residents of
Puerto Rico, see the section of this prospectus captioned
"Taxation—United
States Taxation—Foreign Personal Holding Company Rules."
Our former independent public accountant, Arthur Andersen LLP, has been found
guilty of federal obstruction of justice charges and you are unlikely to be
able to exercise effective remedies against them in any legal action.
Although we have dismissed Arthur Andersen LLP as our independent public
accountants and engaged KPMG LLP, Arthur Andersen LLP provided us with auditing
services for prior fiscal periods through December 31, 2001, including issuing
an audit report with respect to our audited consolidated financial statements
as of and for the year ended December 31, 2001 included in this prospectus. On
June 15, 2002, a jury in Houston, Texas found Arthur Andersen LLP guilty of a
federal obstruction of justice charge arising from the federal government's
investigation of Enron Corp. On August 31, 2002, Arthur Andersen LLP ceased
practicing before the SEC.
We were unable to obtain Arthur Andersen LLP's consent to the inclusion in
this prospectus of its report with respect to our audited consolidated
financial statements as of and for the year ended December 31, 2001. Rule
437(a) under the Securities Act permits us to dispense with the requirement to
file their consent. As a result, you may not have an effective remedy against
Arthur Andersen LLP in connection with a material misstatement or omission with
respect to our audited consolidated financial statements that are included in
this prospectus, including any claim under Section 1l of the Securities Act.
In addition, even if you were able to assert a claim, as a result of its
conviction and other lawsuits, Arthur Andersen LLP may fail or otherwise have
insufficient assets to satisfy claims made by investors or by us that might
arise under federal securities laws or otherwise relating to any alleged
material misstatement or omission with respect to our audited consolidated
financial statements.
Risks Related to Our Acquisition of BankTrust
There may be undiscovered risks or losses associated with the recent BankTrust
acquisition.
We acquired substantially all of the assets of BankTrust, including,
without limitation, its loan and lease portfolio. Although our management team
conducted due diligence with respect to BankTrust, we have not previously owned
or operated BankTrust and we do not have any detailed working experience
related to its operations. We may suffer losses or undisclosed liabilities
with respect to the assets and liabilities of BankTrust, including, with
respect to its loan and lease portfolio, impairment of the ability of borrowers
to repay loans and leases, declines in the value of the collateral securing
loans, or inadequacy of the allowances for loan and lease losses. One or more
of these factors might cause us to have additional losses or liabilities,
additional loan charge-offs, or increases in allowances for loan and lease
losses, which could have a material adverse effect on our business, financial
condition, results of operations, cash flows and/or future prospects.
We may not be able to integrate BankTrust operations with our business efficiently.
Our efforts to integrate the operations of BankTrust with our own are subject to risks, including:
•
possible loss of customers and deposits;
•
possible loss of key personnel of BankTrust;
•
difficulties assimilating the personnel and operations of BankTrust;
•
possible disruption of our ongoing business and additional burdens on our management team;
•
difficulties in maintaining uniform standards, controls, procedures and policies; and
•
difficulties in ensuring accurate and timely reporting of financial information.
20
Table of Contents
We cannot be certain that we will realize the benefits from the BankTrust
acquisition that we anticipate. If we fail to integrate the operations of
BankTrust efficiently, it could have a material adverse effect on our business,
financial condition, results of operations, cash flows and/or future prospects.
We may incur adverse accounting consequences due to the acquisition of
BankTrust.
We will account for our acquisition of BankTrust as a purchase transaction
in accordance with generally accepted accounting principles. Under this
accounting treatment, and in accordance with Statement of Financial Accounting
Standards No. 141,
Business Combinations
, the purchase price will be assigned
to the fair value of the net tangible and intangible assets acquired, with any
excess amounts assigned to "goodwill." In accordance with Statement of
Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets
,
qualifying intangibles, such as core deposit intangibles, will be amortized by
charges to future earnings over their expected useful lives. Amortization of
core deposit intangibles is non-deductible for tax purposes. The remaining
goodwill will be capitalized and evaluated for impairment (diminished value) on
an annual basis or if circumstances arise in which it is more likely than not
that the fair market value of the related reporting unit has been reduced. If
such goodwill were to be deemed impaired, that impairment would be measured,
and any such amount would be charged against current earnings.
We do not anticipate booking any goodwill or any core deposit intangible
in connection with the BankTrust acquisition. However, we will have one year
from the closing date of the BankTrust acquisition to determine the actual
amount of goodwill and/or any core deposit intangible that should be recorded
in connection with the BankTrust acquisition. If we determine that we are
required to record goodwill or a core deposit intangible, this will have a
negative impact on our tangible capital levels and could also have an impact on
our future earnings.
We may experience losses due to past due or problem assets acquired in the
BankTrust acquisition.
Some of the assets we acquired in the BankTrust acquisition have issues
regarding credit quality. Specifically, as of December 31, 2003, $9.3 million
in loans that we acquired from BankTrust were problem loans. Included in these
problem loan totals are nonaccrual loans and loans that are classified as
"Watch or Special Mention," "Substandard" and "Doubtful" on the watch list that
was presented monthly to the BankTrust Board of Directors. Taking into account
the consolidation of the BankTrust loans with Eurobank's pre-existing loans,
Eurobank would have had approximately $36.1 million in past due and
nonperforming loans, on a pro forma basis, as of December 31, 2003.
We analyze our loan and lease classification and review processes
regularly, and make modifications if needed, and report those results monthly
at Board of Directors meetings. However, we cannot assure you that regulators,
in reviewing our loan and lease portfolio, will not request us to materially
increase our allowance for loan and lease losses. Actual losses are dependent
upon future events and, as such, further additions to the level of specific and
general loan and lease loss allowances may become necessary.
We will have certain risks associated with the assumption of derivative
instruments and hedging activities of BankTrust.
In connection with our acquisition of BankTrust, we assumed a number of
derivative instruments previously utilized by BankTrust to mitigate risks
associated with changes in interest rates. The hedging strategies employed by
BankTrust may not be successful in mitigating our risks associated with changes
in interest rates. Under applicable accounting and reporting standards, every
derivative instrument is required to be recorded on the consolidated balance
sheet as either an asset or a liability measured at its fair value. As with
all of our derivative instruments, we may realize gains or losses associated
with changes in the fair value of the derivative instruments assumed in the
BankTrust acquisition depending on their hedge designation and whether the
hedge is effective in achieving offsetting changes in the fair value of cash
flows of the asset or liability hedged. The existence of derivatives might
mitigate somewhat, but will not offset, the risks related to changes in
interest rates. Moreover, all hedging instruments are subject to counter-party
risk.
21
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under the captions "
Prospectus Summary
," "
Risk
Factors
," "
Management's Discussion and Analysis of Financial Condition and
Results of Operations
," "
Business
," and elsewhere in this prospectus constitute
forward-looking statements. You can identify these statements from our use of
the words "may," "should," "could," "potential," "continue," "plan,"
"forecast," "estimate," "project," "believe," "intend," "anticipate," "expect,"
"target," "is likely," "will," or the negative of these terms, and similar
expressions. These forward-looking statements may include, among other things:
•
statements and assumptions relating to projected growth,
earnings, earnings per share and other financial performance
measures, as well as management's short-term and long-term
performance goals;
•
statements relating to the anticipated effects on results of
operations or financial condition from recent and expected
developments or events, including the BankTrust acquisition;
•
statements relating to our business and growth strategies; and
•
any other statements, projections or assumptions that are not historical facts.
We believe that our expectations are based on reasonable assumptions.
However, these forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause our actual results,
performance or achievements, or industry results, to differ materially from our
expectations of future results, performance or achievements expressed or
implied by these forward-looking statements. In addition, our past results of
operations do not necessarily indicate our future results. We discuss these
and other uncertainties in the "
Risk Factors
" section of this prospectus.
You should not place undue reliance on any forward-looking statements.
These statements speak only as of the date of this prospectus. Except as
otherwise required by federal securities laws, we undertake no obligation to
publicly update or revise any forward-looking statements or the risk factors
described in this prospectus, whether as a result of new information, future
events, changed circumstances or any other reason after the date of this
prospectus.
22
Table of Contents
BUSINESS
Overview
We are a diversified financial holding company headquartered in San Juan,
Puerto Rico, offering a broad array of financial services through our wholly
owned banking subsidiary, Eurobank, and our wholly owned insurance agency
subsidiary, EuroSeguros. As of December 31, 2003, we had, on a consolidated
basis, total assets of $1.3 billion, net loans and leases of $890.0 million,
total deposits of $984.5 million, and stockholders' equity of $65.1 million.
We currently operate through a network of 21 branch offices located throughout
Puerto Rico. On May 3, 2004, we acquired all of the capital stock of
BankTrust, a commercial bank headquartered in San Juan, Puerto Rico with $567.2
million in assets as of December 31, 2003. On a pro forma basis, as of
December 31, 2003, giving effect to the acquisition and our recent issuance of
shares of our common stock in a private placement offering related to that
acquisition, we had total assets of $1.8 billion, net loans and leases of $1.2
billion, total deposits of $1.4 billion and stockholders' equity of $87.6
million.
We are a relationship-driven financial services company focused on
providing personalized banking services. We established our position in the
small and middle market business community as a secondary alternative to our
larger competitors, who we believed were underserving the market. Today, we
compete head to head with all Puerto Rico commercial banks for the primary
banking relationship of these customers. Our personalized customer service and
experienced and focused management team are at the core of our strategy. While
we have grown in size, we remain focused on providing services with a personal
touch. Additionally, we have sought to further develop our footprint
throughout the entire Island by opening branches along the main vehicular
arteries that circle Puerto Rico. By the year 2007, we intend to have a branch
located within a 10-minute drive of approximately 80% of the population of
Puerto Rico, achievable with a 27 branch network.
Our niche is to provide one-on-one services to small and mid-sized
commercial businesses in Puerto Rico. Most of these businesses are involved in
service industries, wholesale and retail distribution, dairy farming,
construction, manufacturing, transportation and professional services, and have
annual sales between $2.0 and $40.0 million. However, we also provide
responsive customer service and convenient banking products to smaller
companies with sales ranging from $500,000 to $2.0 million, consisting of
lawyers, healthcare providers, CPAs, engineers and small contractors. While we
do not mass market to the retail segment, we do provide retail banking services
to the owners and families of our targeted commercial and small business
customers, their employees and individuals who reside or work near our branch
offices. These customers are usually also depositors of Eurobank. We seek to
provide all of our customers with quick, responsive service and foster a
culture in which customers are valued and respected.
Because of the recent robust housing demand in Puerto Rico, we target
experienced real estate developers and provide them with acquisition
development and construction loans. We place particular emphasis on
single-family homes, townhouses and walk-up developments throughout the Island.
We also finance commercial real estate development and construction projects,
particularly if they are owner-occupied, generally limiting our maximum credit
exposure to $7.5 million for these types of credits. Our mortgage banking
group, EuroMortgage, was initially organized to support these activities by
providing financing to the purchasers of these real estate units. However,
through a staff of salespeople, today we also provide mortgages to our branch
customers and the general public. On a selective basis, we provide financing
to owner-occupied properties and to a lesser extent to income producing
properties.
To reduce interest rate risk, in 1999 we organized EuroLease, a
specialized group within Eurobank, which provides open-end lease financing
pursuant to which the lessee is responsible for the residual value, if any, of
the leased asset. The short to medium-term fixed rate financing provided by
EuroLease blends well with the primarily floating rate financing provided by
our commercial lending group.
Long-term, it is our objective to leverage our relationships with our
primary customers by cross-selling to them a complete array of banking products
and services directly or through third-party providers. Through our trust
department, EuroSeguros, and Eurofinancial, we seek to assist our customers
with a full array of wealth management products and services.
23
Table of Contents
Eurobank
Eurobank, our principal subsidiary, is a full-service Puerto Rico
commercial bank with its main office located in San Juan, Puerto Rico.
Eurobank has 21 branches located throughout Puerto Rico. It was originally
chartered as a trust company under the laws of the Commonwealth of Puerto Rico
in 1979, and commenced operations under the name "Española de Finanzas Trust
Company." Subsequently, Eurobank obtained authority to conduct banking
activities and in December 1988 obtained FDIC insurance for its deposits and
changed its name to "First Community Trust Company." In December 1990, Banco
Europeo de Finanzas, S.A., a bank organized under the laws of the Kingdom of
Spain, purchased 65.0% of Eurobank's stock, and shortly thereafter the Bank's
name was changed to Eurobank and Trust Company. Banco Europeo sold or optioned
all of its remaining shares in Eurobank in 1997, and is no longer a stockholder
of Eurobank. In 1992, the Bank amended its charter in order to become a
commercial bank regulated by the banking laws of Puerto Rico and its name was
changed to Eurobank. Eurobank is regulated by the Commissioner of Financial
Institutions of Puerto Rico and the FDIC.
Our Strategic Plan
Our primary business objectives are to maintain our strong asset growth
and enhance profitability, becoming the premier small and middle market
commercial bank in Puerto Rico. Our core customers are small and mid-sized
businesses, real estate development companies and the owners, executives and
employees of these businesses. Our success is largely based on our
personalized services philosophy. We specifically target customers who want to
deal directly with people they know and trust. As convenience remains an
overriding factor in customer choice, we have continued to establish de novo
branches throughout the Island to provide such convenience, and at the same
time we have continued to enhance our technology platform.
We have developed a strategy that focuses on providing superior service
through highly qualified and relationship-oriented employees who are committed
to their respective communities. Through this strategy we intend to grow our
business, expand our customer base and improve profitability. We believe this
strategy has already proven successful as evidenced by our five year compounded
growth in earnings of 267.1% and earnings per share of 204.6%. The key
elements of our strategy are:
•
Focus on Our Targeted Customers
. We focus our time and
resources on the following targeted customer segments: small and
mid-sized businesses, real estate development companies and the
owners, executives and employees of these businesses. In this
regard, we seek to leverage our business banking relationships by
cross-selling to the personal financial needs of these business
owners, executives and employees.
•
Provide Superior and Convenient Service to Our Customers.
We
strive to provide superior customer service through convenient
access to our branches and personalized relationship banking. We
have 21 branch offices strategically located throughout Puerto Rico.
We intend to open six additional branches by the end of 2007.
After the addition of these new branch offices, we will have a
branch office located within a 10-minute drive of approximately 80%
of the Island's population. Under our business model we provide
each commercial customer with its own relationship manager for all
its banking needs. These relationship managers and our executive
management team regularly visit customers at their places of
business.
•
Hire and Retain Well-Trained and Qualified Employees.
We are
continuing to grow our franchise by providing superior customer
service through committed, qualified and relationship-oriented
employees. We seek to hire experienced and qualified employees that
prefer our relationship banking approach. These employees are
specifically incented through our compensation program to leverage
our commercial relationships by cross-selling our products and
services to the owners, executives and employees of our business
customers.
•
Use the Lease Financing Business to Mitigate Interest Rate
Risk.
We use our lease financing business to mitigate our interest
rate risk by offsetting the variable rate nature of our commercial
portfolio with a short to medium-term fixed rate product. We plan
to maintain the approximate size of the lease portfolio relative to
the size of the total loan portfolio, while increasing the volume of
leases originated for resale to other financial institutions.
24
Table of Contents
•
De Novo Branching and Acquisitions
. We seek to increase our
presence throughout the Island through selective acquisitions and
the opening of de novo branches in attractive locations. Our de
novo expansion outside of the San Juan metropolitan market has
followed Puerto Rico's primary traffic arteries to areas that have
been growing.
•
Maximize Growth of our International Banking Entity
. Because
EBS Overseas, as our subsidiary IBE, will generally not be subject
to federal or Puerto Rico income tax, we will seek to maximize the
growth of this IBE as interest rates and applicable law permit.
Our De Novo Branch and Acquisition Strategy
Our growth strategy is concentrated on increasing our banking presence
throughout the island of Puerto Rico. Our recent expansion has been the result
of internal growth, acquisitions and the opening of de novo branch offices.
Consistent with our operating philosophy and growth strategy, we regularly
evaluate opportunities to acquire other banks or bank branches, expand our
market coverage and share through de novo branching and enhance our product and
service offerings. Eurobank's expansion out of the San Juan metropolitan area
has followed Puerto Rico's primary traffic arteries to new locations poised for
growth. We believe that the Puerto Rico banking environment, which is
dominated by large banks, has afforded us a continuing opportunity to gain new
customer relationships and to expand existing relationships. The growth in our
branch network has expanded our presence throughout the Island and increased
our customer base, providing tangible benefits that include an increase of
total deposits of 16.8%, core deposits of 26.9% and earnings of 42.5% for the
year ended 2003 as compared to the levels for the year ended 2002. Each branch
now has the ability to sell not only traditional products such as commercial
credit, leasing, construction, mortgages, consumer credit and personal secured
loans, but also to cross-sell our entire product line, including insurance
through EuroSeguros, and investment products through our trust department and
through Eurofinancial account representatives.
De Novo Branches
During the past three years, we have opened four new banking offices in
Humacao, Manatí, Mayagüez and Luquillo. Furthermore, in March 2004, we opened
our newest branch in Hatillo, Puerto Rico. We are currently planning to open
branches in the following municipalities: Aguadilla, Cabo Rojo/San Germán,
Yauco, Canóvanas and Cayey. Our newer branches are located along the major
vehicular arteries that encircle the island of Puerto Rico. By the year 2007,
we expect to have a branch located within a ten minute drive of 80% of the
population of Puerto Rico.
Mergers and Acquisitions
Since 1997, we have completed acquisitions of three banks in Puerto Rico
with combined assets of approximately $675.1 million. In the early 1990s, we
acquired two branches from Banco Financiero and certain assets and liabilities
of a failed bank from the FDIC. The following is a summary of our material
acquisitions since 1997.
BankTrust Acquisition
On May 3, 2004, we acquired all of the capital stock of BankTrust, a
Puerto Rico chartered commercial bank, through the merger of BankTrust with and
into Eurobank. The aggregate purchase price for the capital stock of BankTrust
was $23.5 million, and consisted of the issuance of 357,747 shares of our
common stock, 429,507 shares of our Series A Preferred Stock, and $6.7 million
in cash. There were no changes in our Board of Directors or our senior
management team as a result of the BankTrust acquisition. We funded a portion
of the purchase price with proceeds we received from the issuance of 369,231
shares of our common stock at $16.25 per share in a private placement of our
common stock to our existing stockholders and optionholders. In connection
with the private placement and the acquisition of BankTrust, our Board of
Directors engaged an independent third-party financial advisor, Feldman
Financial Advisors, Inc., to determine the fairness, from a financial point of
view, to our stockholders of the merger consideration paid to BankTrust's
stockholders and the terms of the private placement. The acquisition was
accounted for using the purchase method of accounting under generally accepted
accounting principles.
25
Table of Contents
BankTrust provided a broad range of financial products and services to its
customers, including commercial, mortgage and personal loans, financial leases,
checking and savings accounts, asset management and trust services. BankTrust
operated five branch offices – two were located in San Juan and the other
three were located in Guaynabo, Mayagüez and Ponce. BankTrust also had one
loan production office in San Juan and operated an IBE under the name "BT
International." We are in the process of closing four of the five BankTrust
branches, as well as the loan production office, and consolidating these
operations into our existing branch network. Eurobank will continue to operate
BT International as a division of Eurobank and the Guaynabo branch office as a
branch of Eurobank. Prior to our acquisition, BankTrust was operating under a
cease and desist order issued by the FDIC and the Commissioner of Financial
Institutions of Puerto Rico dated as of September 16, 2003. This order was
lifted in connection with the acquisition. As of December 31, 2003, BankTrust
had total assets of $567.2 million, total deposits of $429.6 million,
stockholders' equity of $43.8 million and $334.0 million in assets under
management. On the closing date, the estimated fair value of the assets
acquired was $517.8 million and the estimated fair value of the deposits and
other liabilities assumed was $494.3 million.
The BankTrust acquisition is consistent with our growth strategy. Its
product offering and customer mix complement our existing product offering and
customer mix. We believe the acquisition affords us certain revenue synergies.
A substantial portion of the assets we acquired are of high quality with
yields that are at or above market rates. Likewise, we have the opportunity to
cross-sell our other products and services to the newly acquired customers of
BankTrust. This acquisition also provides us with a significant trust and
wealth management group that enhances our own efforts in this area. BankTrust
had a highly-trained staff of trust and wealth management officers. The key
managers and employees of this group remained with us after the closing. We
believe that this will allow us to grow our trust business faster than if we
had grown it organically.
In connection with the BankTrust acquisition, we expect to retain
approximately 35 of the 180 BankTrust employees and close four of the five
branches, which will result in immediate cost savings to us. Under the terms
of the merger agreement, a substantial portion of the costs and expenses
associated with the branch closings, the liquidation of its operations, and
employee reductions were effectively borne by the stockholders of BankTrust
through a reduction in the aggregate purchase price. In addition, a
substantial portion of the problem assets of BankTrust were transferred to a
special purpose vehicle for the benefit of the BankTrust stockholders. All of
these factors will result in immediate cost savings to us and reduced the level
of problem assets we acquired from BankTrust.
Banco Financiero de Puerto Rico and Banco del Commercio de Puerto Rico
Acquisitions
On December 15, 2002, we acquired all of the issued and outstanding
capital stock of Banco Financiero de Puerto Rico for an aggregate purchase
price of $1.5 million, consisting of the issuance of common stock valued at
$1.2 million and $326,000 in cash. Banco Financiero was merged with and into
Eurobank. Banco Financiero operated through three branch offices in Ponce,
Puerto Rico. The acquisition was accounted for using the purchase method of
accounting under generally accepted accounting principles. The estimated fair
value of the assets acquired and liabilities assumed of $2.8 million exceeded
the acquisition price of $1.8 million including additional cost associated with
the acquisition of $214,000. The Banco Financiero acquisition was accretive to
our earnings for the year ended December 31, 2003, as we reduced the
pre-closing level of noninterest expense associated with its operations by more
than 75.0% within the first 60 days after closing.
On October 26, 1997, we acquired all of the issued and outstanding capital
stock of Banco del Commercio de Puerto Rico through a share exchange and the
merger of Banco del Commercio with and into Eurobank. Prior to our
acquisition, Banco del Commercio operated six branch offices in the San Juan,
Carolína and Caguas regions. On the closing date, the net book value of the
assets and liabilities of Banco del Commercio were $69.3 million and $65.6
million, respectively. The acquisition was accounted for as a pooling of
interests under generally accepted accounting principles. The Banco del
Commercio acquisition was accretive to our earnings for the year ended December
31, 1998, as we reduced the pre-closing level of noninterest expense associated
with its operations by more than 70.0% within the first 60 days after closing.
Both Banco Financiero and Banco del Commercio were also operating subject
to cease and desist orders issued by the FDIC prior to their acquisition by
Eurobank. Nevertheless, we were able to integrate the operations of both
26
Table of Contents
banks with our operations and, in both instances, achieve significant cost
savings within a short period of time after the respective closing dates of
each acquisition.
Products and Services
We are a full service financial services company. We meet our commercial
and retail customers' banking needs with an encompassing range of financial
services. We are a locally owned, independent financial institution and are
engaged in substantially all of the business operations customarily conducted
by independent financial institutions in Puerto Rico, including the acceptance
of checking, savings and time deposits and the making of commercial and
consumer loans, mortgage loans, real estate loans, lease financing, and other
installment and term loans. In addition, we offer our customers internet
banking, electronic funds transfers through ACH services, cash management,
vault services, loan and deposit sweep accounts and lock box services.
Eurobank does a substantial amount of business with individuals, as well as
with customers in commercial, industrial and professional businesses. Eurobank
also offers trust and wealth management services.
For the convenience of our customers, we offer drive through banking
facilities, automated teller machines, night depository, personalized checks,
credit cards, debit cards, internet banking, cash management and safe deposit
boxes. Our services also include cashier's checks, travelers' checks, domestic
and foreign wire transfers, account research, stop payment orders and telephone
transfers between accounts.
We operate and market our products and services primarily through four
business groups and two operating subsidiaries. The following provides a
summary description of our core business groups and operating subsidiaries:
Commercial Banking Group
Our primary lending focus is providing commercial loans and owner-occupied
real estate loans to local businesses with annual sales ranging from $2.0
million to $40.0 million. Typically, our customers have financing requirements
between $1.0 million and $5.0 million.
Our commercial banking services are concentrated in two categories:
commercial and construction. Our strategy has been to target small and
mid-sized commercial businesses and to build relationships by providing
individualized attention. In the construction category, we seek to develop
relationships with experienced developers who develop units throughout the
Island in the $125,000 to $185,000 price range and whose peak maximum credit
needs for a particular project generally are less than $7.5 million.
We focus on a broad line of financial products and services to small and
mid-sized businesses through full service banking offices. Each commercial
lending branch has senior management with extensive lending experience. These
managers exercise substantial authority over credit presentation and pricing
initiatives, subject to centralized loan approvals for most credits over
$200,000. This decentralized management approach, coupled with continuity of
service by the same staff members, enables us to develop long-term customer
relationships, maintain high quality service and respond quickly to customer
needs. The centralized approval process, however, provides credit control. We
believe that our emphasis on local relationship banking, together with a
conservative approach to lending, are important factors in our success and
growth. As a result of the development of broad banking relationships with
customers and the convenience and service of our banking offices, we have
experienced growth in core deposits.
We centralize most credit and support functions in order to achieve credit
quality consistency and cost efficiencies in the delivery of products and
services by each banking office. The central office provides services such as
data processing, bookkeeping, accounting, treasury management, credit approval,
loan review, compliance, risk management and internal auditing to enhance our
delivery of quality service. We also provide overall direction in the areas of
credit policy and administration, strategic planning, marketing, investment
portfolio management and other financial and administrative services. The
branch offices work closely with our central office to develop new products and
services needed by our customers and to introduce enhancements to existing
products and services.
27
Table of Contents
Over the last five years, our commercial and construction loans have grown
40.3% on a compounded basis. The following table shows end of period balances
of commercial and construction loans for the periods indicated below:
As of December 31,
2003
2002
2001
2000
1999
(in thousands)
$525,251
$
435,322
$
276,447
$
198,923
$
135,517
Leasing Group
EuroLease is engaged in the lease financing business. The leases offered
by EuroLease are open-ended pursuant to which the lessee is responsible for the
residual value of the leased unit. At December 31, 2003, approximately 97.3%
of all originations were automobile leases. The remaining originations were
primarily medical equipment and construction equipment leases.
Approximately 75.4% of our new automobile leases are financed on a no
residual value basis because the automobiles are transferred to the lessee at
the end of the lease term. For those that do have a residual value, the lessee
is contractually responsible for the full residual amount at the end of the
lease term. We do not have the risk of fluctuations in automobile values
relative to residual value. Instead, our risk is a credit risk regarding
whether the lessee will perform on its obligation to purchase the automobile at
the end of the contract at residual value. In addition, in some instances
EuroLease will refinance the automobile purchased at the residual value.
New automobile leases are offered for terms of up to 72 months. Leases
with terms of 72 months will be financed based on no residual value. Lessees
may also choose a 60-month lease term, in which case we offer financing with a
maximum of a 35.0% residual value. This higher residual value product is
usually offered only on high-end European and Japanese automobiles based on
historical used automobile resale values.
Under current Puerto Rican law, the lessee is deemed to be the title
holder of a leased automobile and therefore responsible for all tort liability
associated with the operation and possession of the automobile.
We entered the automobile leasing business in order to assist us in
managing our interest rate risk. We determined that a short to medium-term
fixed rate product, such as lease financings, was needed to mitigate our
interest rate risk resulting from our high volume of variable rate commercial
loans. Our entry into the lease financing market was facilitated by our
ability to attract a veteran management team, low entry costs and the
opportunity to gain market share.
We have developed procedures designed to facilitate the success of our
lease financing business. Our salespeople generate the leases at the
automobile dealer level. We are highly selective with respect to our
customers, and are aided in this selection by referrals from the automobile
dealers. We also market this service to our targeted customers. While most of
our leases are for automobiles, in some cases we have been willing to provide
equipment lease financing for our commercial customers.
We believe the collection process is an integral component to a successful
leasing business. Our collection efforts at EuroLease start 10 days after the
due date of each lease. A collections staff of eight internal collectors and
four outside collectors is managed by a Collections Manager and three
supervisors. Our internal collectors are responsible for all efforts to
collect on leases under 30 days past due. If a customer cannot be reached by
phone, the account is then assigned to the outside collectors staff. When the
account reaches 60 days past due, repossession efforts are started. If a
customer does not deliver the automobile voluntarily, the case is referred to
our outside collections lawyers. Most of our repossessions are voluntary.
Court proceedings for repossession take approximately 60 days. The loss on the
sale of repossessed assets as a percentage of the lease balance at the date of
repossession was 14.2% in 2003, 7.5% in 2002 and 4.5% in 2001. The ratio of
loss on the sale of repossessed assets to our leasing portfolio calculated
using the year end balance was 0.82% in 2003, 0.51% in 2002 and 0.10% in 2001.
28
Table of Contents
As of December 31, 2003, we held $314.2 million in leases. The following
table sets forth the dollar volume of leases originated by EuroLease and the
end of period balances of leases, net of unearned interest, for the periods
indicated below:
As of or for the year ended December 31,
2003
2002
2001
2000
1999
(in thousands)
Originations
$
185,321
$
138,922
$
78,835
$
64,138
$
4,576
End of period balance
314,201
253,250
134,474
75,589
15,394
EuroLease intends to continue to increase its origination volume by
expanding the number of full-time representatives and increasing its marketing
efforts to its existing portfolio of more than 13,000 lease customers. It also
intends to focus on improving the overall quality and service to its network of
dealers. We seek to avoid an excess concentration of leases as a percentage of
interest-earning assets. We plan to maintain the approximate size of the lease
portfolio relative to the size of the total loan portfolio, while increasing
the volume of leases originated for resale to other financial institutions.
Typically, we retain the right to service the leases we sell. During 2003, we
sold approximately $50.0 million in leases.
Mortgage Banking Group
In 1999, we centralized our mortgage lending operation into a dedicated
group known as EuroMortgage. EuroMortgage offers Federal National Mortgage
Association, or FNMA, Veterans Affairs, or VA, and Federal Housing
Administration, or FHA, and Freddie Mac loans, as well as conforming and
non-conforming mortgage loans. In 2003, EuroMortgage increased mortgage
production significantly, taking advantage of prevailing low mortgage rates to
continue boosting loan originations, as well as refinancing existing mortgages.
We are an approved seller/servicer for FNMA and Freddie Mac. EuroMortgage has
continued to make inroads in the market by providing for the efficient and
expeditious turnaround of new loan applications and by establishing certain
strategic relationships that allow access to secondary mortgage markets on a
best price basis.
Our targeted market for mortgage banking is the financing of the homes or
units financed by our construction lending department. We also provide
mortgage banking services to our retail customers and to the owners, executives
and employees of our targeted commercial customers. In addition, our
salespeople engage in marketing and direct selling efforts to the general
community. A majority of the loans originated through EuroMortgage are sold
into the secondary market with servicing released. We have been authorized by
FNMA and Freddie Mac to create mortgage loan pools to be sold in the secondary
market or marketed in connection with our wealth management activities.
However, as of March 15, 2004, we had not created any such pool. It is our
intention to create such pools in the near future.
All mortgages originated by EuroMortgage are fixed-rate mortgages with a
maximum term of 30 years. Recently, EuroMortgage has purchased mortgage loans
from approved small mortgage bankers to complement its originations. We intend
to pursue this segment of the business in the future as a complement to our
intention to create mortgage pools. All purchased loans will be underwritten
under the same standards used to underwrite internally originated loans.
The following table sets forth the dollar volume of mortgage originations
by Eurobank and the end of period balances of mortgages for the periods
indicated below:
As of or for the year ended December 31,
2003
2002
2001
2000
1999
(in thousands)
Originations
$
53,880
$
32,635
$
30,862
$
15,701
$
1,944
End of period balance
15,941
34,198
18,567
15,117
15,152
29
Table of Contents
Our strategy is to sell conforming FNMA and Freddie Mac mortgages either
as whole loans or in the form of mortgage-backed securities. We also sell the
servicing rights to the mortgage loans that we originate except for those
mortgage loans we hold for long-term investment.
Trust and Wealth Management Group
Eurobank's trust and wealth management group offers retirement benefits,
personal trust and wealth management services. This group was established in
2002, and as of December 31, 2003, had approximately $344.2 million in assets
under management giving effect to the $334.0 million of trust assets which were
acquired in the BankTrust merger. We anticipate that there will be some
run-off of this acquired trust business; however, we expect to retain a
substantial portion of the acquired core trust business. Historically, the
revenues associated with our trust and wealth management group have not been
material, but as a result of the BankTrust acquisition, we expect a significant
increase in revenues generated by this group.
Eurofinancial, our brokerage unit, is part of our trust and wealth
management group and commenced operations during the fourth quarter of 2002.
Eurofinancial, which offers a full array of investment products and services
through a third-party broker dealer, was created to serve our customers'
investment needs. It is part of our strategy of creating financial centers in
which each customer may access a variety of integrated financial products and
services. Investment products are offered through an association with
Financial Networks, Inc., a registered broker-dealer. In relation to our
wealth management efforts, we offer financial planning and investment
management/brokerage services through third-party providers to the owners or
executives of our targeted customers. During 2003, Eurofinancial sold
approximately $10.0 million in investments to our customers. Eurofinancial
currently has three registered brokers.
Insurance Agency Subsidiary
EuroSeguros, our general insurance agency, was organized in the fourth
quarter of 2002 as a wholly owned subsidiary of EuroBancshares. EuroSeguros
primarily offers automobile, property and casualty, and guaranteed auto
protection insurance to customers in our market area. While EuroSeguros
represents several insurance companies in Puerto Rico, it primarily offers its
insurance products through its association with Marsh-Saldaña, Inc., Puerto
Rico's largest insurance brokerage firm, and a subsidiary of Marsh & McLennan,
Inc. EuroSeguros is licensed and regulated by the Office of the Commissioner
of Insurance of Puerto Rico.
EuroSeguros' goals for the year 2004 are to expand to offer title
insurance products and to continue to work closely with the real estate
department's mortgage customers, leasing customers, and branch professionals,
while continuing to enhance personalized service to all of these customers.
International Banking Entities
We have an IBE that operates as a division of Eurobank under the name
Eurobank International, and are in the process of organizing a new IBE that
will operate as a subsidiary of Eurobank under the name EBS Overseas. We
intend to transfer substantially all of the assets of Eurobank International to
EBS Overseas. We also have an IBE that operates as a division of Eurobank
under the name BT International. We acquired this IBE in connection with the
acquisition of BankTrust. We will continue to operate BT International as a
division of Eurobank and will not immediately transfer its assets to our new
subsidiary IBE, EBS Overseas.
IBEs are limited under the IBE Act with respect to the types of activities
they can undertake. In general terms, IBEs may accept deposits or borrow money
from other IBEs and from "foreign persons." For the purposes of the IBE Act, a
"foreign person" is defined as anyone who is not a resident of Puerto Rico.
IBEs are also permitted to engage in any activity that is financial in nature
outside of Puerto Rico that is permissible for a bank holding company or a
foreign office or subsidiary of a United States bank under applicable United
States law. Typically, we borrow funds in the United States in the form of
repurchase obligations or brokered deposits (considered foreign under the IBE
Act) and invest those funds primarily in United States government securities.
The income earned from this activity is tax exempt. For more information
regarding the regulation of IBEs, see the section of this prospectus captioned
"
Supervision and Regulation – International Banking Center Regulatory Act."
30
Table of Contents
Eurobank International is authorized to invest in notes and bonds issued
by the U.S. government, the Commonwealth of Puerto Rico, other foreign
governments and their agencies, and U.S. and foreign corporations. As of
December 31, 2003, Eurobank International's investment portfolio consisted
of the following: 58.14%, mortgage-backed securities issued or guaranteed by
government or government sponsored agencies, 26.53% U.S. Treasury obligations,
12.28% U.S. government agency obligations, 1.46% mortgage-backed securities
issued by U.S. Corporations, 0.93% in other debt securities issued by U.S.
Corporations, and 0.66% in PR Public Authorities.
We have structured Eurobank International's investment portfolio so that
it can perform well in different interest rate environments. The interest and
market risk of Eurobank International's investment portfolio is generally lower
than that of other IBE's in Puerto Rico. The typical IBE investment portfolio
includes debt securities with maturities of up to 10 years and mortgage-backed
securities with expected average maturities of up to 12 years funded primarily
with short-term brokerage deposits and loans secured by repurchase obligations
("repos"). The maturities on debt obligations in Eurobank International's
investment portfolio range from 1.5 to seven years with an estimated average
maturity as of December 31, 2003 of 39 months. The maturities of mortgage-backed
securities in the portfolio also range from 1.5 to seven years, with an
average maturity as of December 31, 2003 of approximately 5.31 years. In order
to reduce the effective duration of the portfolio, we generally amortize the
premiums associated with mortgage-backed securities for a time period two years
less than the estimated average maturity at purchase date.
Assuming the organization of EBS Overseas and the transfer of assets from
Eurobank International, we estimate that, as of May 31, 2004, EBS Overseas
will have total assets of approximately $400.0 million, repurchase obligations
of approximately $250.0 million, borrowings from BT International of
approximately $140.0 million and stockholders equity of approximately $10.0
million. Further, we estimate that, as of May 31, 2004, BT International will
have total assets of approximately $150.0 million, deposits of approximately
$129.0 million, repurchase agreements of approximately $20.0 million and
stockholders equity of approximately $1.0 million.
Eurobank Statutory Trust I and II
On November 11, 2001, Eurobank Statutory Trust I, a special purpose
statutory trust subsidiary of EuroBancshares, was formed for the purpose of
issuing $25.0 million in trust preferred securities, which were issued on
December 18, 2001. On December 10, 2002, Eurobank Statutory Trust II, a
special purpose statutory trust subsidiary of EuroBancshares was formed for the
purpose of issuing $20.0 million in trust preferred securities, which were
issued on December 19, 2002. For additional information, see the sections of
this prospectus captioned "
Management's Discussion and Analysis of Financial
Condition and Results of Operations – Other Sources of Funds,"
and
"Description
of EuroBancshares Capital Stock – Junior Subordinated Debentures; Trust
Preferred Securities."
Market
We consider our primary market area to be the island of Puerto Rico. We
serve this market through our main office and branches in the greater
metropolitan area of San Juan and our branches in Bayamón, Caguas, Carolína,
Cidra, Condado, Guaynabo, Hatillo, Ponce, Humacao, Luquillo, San Lorenzo,
Manati and Mayagüez, Puerto Rico. Puerto Rico is the fourth largest of the
Caribbean Islands and is located approximately 1,100 miles southeast of Miami.
It is approximately 100 miles long and 35 miles wide.
Puerto Rico came under United States sovereignty in 1898 and obtained
commonwealth status in 1952. Puerto Ricans have been citizens of the United
States since 1917. The United States and Puerto Rico share a common defense,
market and currency. The Commonwealth of Puerto Rico exercises virtually the
same control over its internal affairs as do the fifty states. Most federal
taxes, except those such as Social Security taxes which are imposed by mutual
consent, are not levied in Puerto Rico. No federal income tax is collected
from Puerto Rico residents on income earned in Puerto Rico, except for certain
federal employees who are subject to taxes on their salaries. According to the
United States Census Bureau, the population of Puerto Rico was 3.8 million in
2000, compared to 3.5 million in 1990. As of 2000, the population of San Juan,
the Island's capital and largest city, was approximately 434,000.
31
Table of Contents
The economy of Puerto Rico is closely linked to that of the United States.
As such, factors affecting the United States economy usually have a
significant impact on the performance of the Puerto Rico economy. These
include exports, direct investment, the amount of federal transfer payments,
the level of interest rates, the level of oil prices, the rate of inflation and
tourist expenditures. Consequently, the economic slowdowns in the United
States in 2001 and 2002 and the subsequent recovery in 2003, which continues in
2004, have also been reflected in the Puerto Rico economy. During the fiscal
year 2003, preliminary reports of the Puerto Rico Planning Board indicated that
the economy registered an increase of 1.9% in real gross product. Gross
product was $47.4 billion in fiscal year 2003 compared to $45.0 billion in
fiscal year 2002. According to the Puerto Rico Department of Labor and Human
Resources, the average unemployment rate in Puerto Rico was 12.0% in fiscal
year 2003. However, this figure does not take into account the self-employment
rate of individuals in Puerto Rico which is estimated to be approximately
15.0%, more than double the level in the United States.
The dominant sectors of the Puerto Rico economy are manufacturing and
services. The manufacturing sector has undergone fundamental changes over the
years as a result of increased emphasis on higher wages, high technology
industries, such as pharmaceuticals, biotechnology, electronics, computers,
microprocessors, professional and scientific instruments and certain high
technology machinery and equipment. The services sector, including finance,
insurance, real estate, wholesale and retail trade and tourism, also plays a
major role in the economy. It ranks second only to manufacturing in
contribution to the gross domestic product and leads all sectors in providing
employment. The other material sectors of the Puerto Rican economy include
government, transportation and agriculture.
As of December 31, 2003, there were 16 commercial bank and trust companies
operating in Puerto Rico. Total assets of these institutions as of December
31, 2003 were $61.0 billion. As of December 31, 2003, there were 35
International Banking Entities operating in Puerto Rico licensed to conduct
offshore banking transactions, with total assets of $56.5 billion. As of June
30, 2003, the latest date for which statistics are available, Eurobank held
2.4% of the deposits held by financial institutions in Puerto Rico. As a
result of the BankTrust acquisition, as of December 31, 2003, we estimate that
we held approximately 3.3% of deposits held by all commercial banks in Puerto
Rico.
Properties
Our principal offices, including the principal offices of the Bank, are
located in our main office building at 270 Muñoz Rivera Avenue in San Juan,
Puerto Rico. In addition to the main office, we operate at 25 locations.
While all of Eurobank's 21 branch facilities provide full banking services, we
consider 16 of these to be primarily commercial loan generating facilities. In
connection with the BankTrust acquisition we added one additional branch office
located in Guaynabo, Puerto Rico. All other branches acquired in the BankTrust
acquisition are in the process of being closed and their operations
consolidated with our other branches. A substantial portion of the expenses
associated with these branch closings were effectively borne by the
stockholders of BankTrust through a reduction in the aggregate purchase price.
The following is a list of our operating locations:
Lease Expiration
Location
Date
(1)
Owned or Leased
Main Office:
270 Muñoz Rivera Avenue
N/A
Owned
(2)
San Juan, Puerto Rico 00918
Departments:
EuroLease
8/31/2007
Leased
State Road #2, Km. 2.5
Kennedy Avenue
San Juan, Puerto Rico 00920
32
Table of Contents
Lease Expiration
Location
Date
(1)
Owned or Leased
EuroMortgage
5/31/2007
Leased
State Road
#190
Lot #1, Km. 0.7
La Cerámica Industrial Park
Carolína, Puerto Rico 00983
Credit Administration:
1302 Jesús T. Piñero Avenue
12/31/2011
Leased
San Juan, Puerto Rico 00918
Operations:
Old Corona Building
8/31/2007
Leased
Building #5,
Second Floor, Local #3
Santurce, Puerto Rico 00907
Branches:
Bayamón Branch
9/30/2017
Leased
Comerío
Avenue, corner of Sierra Bayamón
Bayamón, Puerto Rico 00961
Caguas I Branch
5/31/2007
Leased
A-1
Muñoz Rivera Avenue
Caguas, Puerto Rico 00725
Caguas II Branch
6/30/2005
Leased
32 Acosta Street, corner of Ruiz Belvis
Caguas, Puerto Rico 00725
Carolína Branch
9/30/2007
Leased
State Road #190
Lot #1, Km. 0.7
La Cerámica Industrial Park
Carolína, Puerto Rico 00983
Cidra Branch
4/30/2006
Leased
Luis Muñoz Rivera Street
corner of José de Diego
Cidra, Puerto Rico 00739
Condado Branch
Expired
(3)
Leased
1408 Magdalena
Avenue
Santurce, Puerto Rico 00907
Hato Rey Branch
N/A
Owned
(2)
270
Muñoz Rivera Avenue
San Juan, Puerto Rico 00918
Humacao Branch
5/31/2026
Leased
Plaza Mall
Lot #3, State Road No. PR52
Corner State Road No. PR3
Humacao, Puerto Rico 00791
33
Table of Contents
Lease Expiration
Location
Date
(1)
Owned or Leased
Luquillo Branch
4/29/2006
Leased
State Road
No. PR3, Km. 36.2
Luquillo, Puerto Rico 00773
Manatí Branch
8/30/2011
Leased
State Road
No. PR2, Km. 49.5
Manatí, Puerto Rico 00674
Ponce Plaza Branch
12/31/2006
Leased
Mayor Street,
corner of Isabel Street
Ponce, Puerto Rico 00731
Ponce Hostos Branch
10/31/2008
Leased
26 Hostos
Avenue
Ponce, Puerto Rico 00731
Ponce Morell Campos Branch
12/31/2005
Leased
State Road
#10, Km. 1.5
Ponce, Puerto Rico 00731
Ponce Marvesa Branch
Expired
(4)
Leased
Marvesa
Building #100
La Rambla
Ponce, Puerto Rico 00731
Puerto Nuevo Branch
12/31/2011
Leased
1302 Jesús T. Piñero
corner de Diego Avenue
San Juan, Puerto Rico 00921
San Francisco Branch
4/30/2006
Leased
Villas de
San Francisco Shopping Center
85 de Diego Avenue
Río Piedras, Puerto Rico 00927
San Lorenzo Branch
8/01/2008
Leased
155 South Luis
Muñoz Rivera Street
San Lorenzo, Puerto Rico 00754
San Patricio Branch
2/15/2010
Leased
San Patricio
Office Center
8 Tabonuco Street
Guaynabo, Puerto Rico 00969
Villa Palmera Branch
12/31/2008
Leased
Eduardo Conde
Avenue
corner of Tapia Street
Santurce, Puerto Rico 00915
Mayagüez Branch
11/30/2025
Leased
State Road
No. PR2, Km. 153.2
Mayagüez, Puerto Rico 00681
34
Table of Contents
Lease Expiration
Location
Date
(1)
Owned or Leased
Hatillo Branch
11/30/2007
Leased
State Road
No. PR2, Km. 87.0
Hatillo, Puerto Rico 00659
(1)
Most of these leases have options for extensions. In
addition, several have early termination clauses.
(2)
The properties owned by EuroBancshares located at 270 Muñoz
Rivera Avenue are part of a 180,000 square foot commercial
office building. EuroBancshares owns a portion of the lobby
area on the ground floor where it operates a branch and also
owns the first floor of this office building where its
headquarters are located. In addition, EuroBancshares also owns
certain parking spaces and a portion of the common areas of this
office building.
(3)
The lease at this location expired on March 21, 2004, but
Eurobank continues to pay rent to the lessor on a month-to-month
basis. Eurobank is currently in the process of negotiating with
the landlord the lease rate on our option to renew for a
five-year term. We believe this issue will be resolved in the
near future.
(4)
The lease at this location expired on January 1, 1997, but
Eurobank continues to pay rent to the lessor on a month-to-month
basis. Eurobank believes that the lessor will not require
Eurobank to vacate the premises in the immediate future.
Environmental Compliance
In addition to our obligations under environmental laws with respect to
property that we own, there are several federal and state statutes that govern
the rights and obligations of financial institutions with respect to
environmental issues. In addition to being directly liable under these
statutes for its own conduct, a financial institution may also be held liable
under certain circumstances for the actions of borrowers or other third parties
on property that collateralizes a loan held by the institution. This potential
liability may far exceed the original amount of the loan made by the financial
institution, which is secured by the property. Currently, we are not a party
to any legal proceedings involving potential liability under applicable
environmental laws.
Legal Proceedings
We are currently the defendant in a suit filed on November 14, 1994 by
Carlos Gonzalez Jusino in the Superior Court of Puerto Rico, Ponce Section
(
Carlos Gonzalez Jusino v. Eurobank & Trust Company
– Civil #JAC 1994-0608).
The complaint alleges that money was permitted to be withdrawn from a corporate
account at the Bank without full written authorization, and seeks restoration
of $890,075.99 in funds, interest thereon, and attorney's fees. While the
trial court found in favor of the plaintiff, we have appealed the ruling and
believe that we should ultimately prevail based on legal precedent we feel
favors our position.
Except for the foregoing, there are no material pending legal proceedings
to which we or Eurobank is a party or to which any of our properties are
subject; nor are there material proceedings known to us, in which any director,
officer or affiliate or any principal stockholder is a party or has an interest
adverse to us or Eurobank.
Employees
We had approximately 377 full-time equivalent employees as of December 31,
2003. Our future success will depend in part on our ability to attract, retain
and motivate highly qualified management and other personnel. We provide
health, life and disability coverage for our employees and make contributions
on behalf of eligible employees under a plan intended to qualify as a
simplified employee pension plan under the Puerto Rico Internal Revenue Code.
Our employees are not represented by a collective bargaining agreement and we
have never experienced a strike or similar work stoppage. We consider our
relationship with our employees to be good.
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of our common stock
in this offering, assuming an initial public offering price of $[   ] per
share, the midpoint of the range shown on the cover of this prospectus, will be
approximately $[   ] million. If the underwriters exercise their
over-allotment option in full, we estimate our net
35
Table of Contents
proceeds will be $[    ] million. Net proceeds are what we expect to
receive after paying the underwriters' discount and other expenses of the
offering. We will not receive any proceeds from the sale of shares of our
common stock by the selling stockholders. We intend to use our net proceeds
for general corporate purposes, which may include:
•
making capital contributions and loans to our banking and non-banking subsidiaries;
•
increasing capital ratios to support our asset growth;
•
establishing de novo branches;
•
increasing working capital;
•
leveraging the growth of our subsidiary IBE; and
•
making acquisitions.
Pending the optimal investment of the net proceeds, we intend to invest
such proceeds in short-term, interest-bearing securities, certificates of
deposit or guaranteed obligations of the United States.
DIVIDEND POLICY
We have not paid cash dividends historically, nor do we anticipate paying
any cash dividends in the foreseeable future. Instead, we anticipate that all
of our earnings in the foreseeable future will be used for working capital, to
support our operations and to finance the growth and development of our
business. Any future determination relating to dividend policy will be made at
the discretion of our Board of Directors and will depend on a number of
factors, including our future earnings, capital requirements, financial
condition, future prospects and other factors that our Board of Directors may
deem relevant.
As a holding company, we ultimately depend on Eurobank to provide funding
for our noninterest expenses and dividends. Various banking laws applicable to
Eurobank limit the payment of dividends, management fees and other
distributions by Eurobank to us, and may therefore limit our ability to pay
dividends on our common stock. We are also restricted from paying dividends on
our common stock if we have deferred payments of the interest, or if an event
of default has occurred, on our junior subordinated debentures. In addition,
we generally are unable to declare and pay dividends on our common stock if
there are any accrued and unpaid dividends on our Series A Preferred Stock for
the preceding twelve months. For additional information, see the sections of
this prospectus captioned "
Supervision and Regulation – EuroBancshares –
Regulatory Restrictions on Dividends; Source of Strength" and "Supervision and
Regulation – Eurobank – Dividends.
"
DILUTION
Net tangible book value per share is determined at any date by subtracting
our total liabilities and preferred stock from the total book value of our
tangible assets and dividing the difference by the number of shares of common
stock deemed to be outstanding as of that date. Our net tangible book value,
as of December 31, 2003, was approximately $[   ] million, or $[   ] per
share of common stock. After giving effect to adjustments relating to: (1) the
issuance of 357,747 shares of common stock in connection with the acquisition
of BankTrust, (2) the receipt of $6.0 million upon the sale of 369,231 shares
of common stock in the May 12, 2004 private placement, (3) the receipt of
$[   ] upon the exercise of stock options to purchase [   ] shares of
our common stock, and (4) the sale of the [   ] shares of our common stock in
this offering at an assumed initial public offering price of $[   ] per share,
the midpoint of the range shown on the cover of this prospectus, and after
deducting estimated underwriting discounts and commissions paid by us and our
estimated offering expenses, our pro forma net tangible book value as of
December 31, 2003 would have been approximately $[   ] million, or $[   ] per
share. This represents an immediate increase in pro forma net tangible book
value of $[   ] per share to our stockholders as of December 31, 2003, and an
immediate dilution in pro forma net tangible book value of $[   ] per share
to new investors.
The following table illustrates the per share dilution to the new
investors:
36
Table of Contents
Per Share
Initial public offering price per share
$
—
Net tangible book value per share as of December
31, 2003
$
Increase per share attributable to the issuance
of 369,231 shares of common stock in the private
placement
$
Increase per share attributable to the issuance
of [_________] shares of common stock in
connection with the BankTrust acquisition
$
Increase per share attributable to the issuance
of [_________] shares of common stock upon the
exercise of outstanding options
$
Pro forma net tangible book value per share
$
Increase per share attributable to this offering
$
Pro forma as adjusted net tangible book value per
share after this offering
$
Dilution per share to new investors in this offering
$
The following table summarizes, on a pro forma basis as of December 31,
2003, after giving effect to (1) the sale of common stock in the private
placement, (2) the issuance of common stock in connection with the BankTrust
acquisition, and (3) the exercise of stock options, the differences for (1)
stockholders owning shares as of December 31, 2003, (2) stockholders purchasing
shares of common stock in the private placement, (3) stockholders receiving
shares of common stock in the BankTrust acquisition, (4) stockholders receiving
shares of common stock upon the exercise of stock options, and (5) investors in
this offering, with respect to the total number of shares of common stock
purchased from us, the total consideration paid to us, and the average price
per share paid before deducting fees and expenses. With respect to the
options, the amounts shown assume that each holder paid cash for such
securities.
Shares Purchased
Total Consideration
Average
Price Per
Number
Percent
Amount
Percent
Share
Stockholders existing as of December 31, 2003
Stockholders from private placement
Stockholders from BankTrust acquisition
Stockholders from exercise of stock options
New investors for this offering
Total
The tables and calculations above, dated as of December 31, 2003, do not
take into account (1) [   ] shares of our common stock issuable upon
exercise of options granted under our existing stock incentive plan since
December 31, 2003 with an exercise price equal to the initial public offering
price of our common stock; and (2) [   ] shares of our common stock
currently available for future grant or issuance under our stock incentive
plan.
CAPITALIZATION
Set forth below is our capitalization as of December 31, 2003:
•
on an actual basis;
37
Table of Contents
•
on a pro forma basis to give effect to the following events,
as if each event had occurred on December 31, 2003:
•
the issuance and sale of 369,231 shares of common stock
in the May 12, 2004 private placement and the application of the
net proceeds therefrom;
•
the acquisition of BankTrust on May 3, 2004 and the
issuance of 357,747 shares of common stock, 429,507 shares of
Series A Preferred Stock, and the payment of $6.7 million in
cash in connection therewith; and
•
on a pro forma as adjusted basis to give effect to the
issuance and sale of the [   ] shares of common stock offered
by us in this offering at an assumed initial public offering price
of $[   ] per share, the midpoint of the range shown on the cover of
this prospectus and the application of the net proceeds therefrom as
if it had occurred as of December 31, 2003.
The outstanding share information as of December 31, 2003 excludes (1)
[   ] shares of common stock reserved for issuance upon the exercise of
outstanding options at a weighted average exercise price of $[   ] per share,
and (2) [   ] shares of common stock reserved for issuance pursuant to
future option grants under our 2002 Stock Option Plan.
You should read the following table in conjunction with "
Management's
Discussion and Analysis of Financial Condition and Results of Operations
,"
"
Description of EuroBancshares Capital Stock
" and our consolidated financial
statements and related notes appearing elsewhere in this prospectus.
As of December 31, 2003
Actual
Pro Forma
Pro Forma As
Adjusted
(dollars in thousands)
Long-term Indebtedness:
(1)
Junior subordinated debentures due December 18, 2031
$
25,774
$
25,774
$
25,774
Junior subordinated debentures due December 19, 2032
20,619
20,619
20,619
Stockholders' Equity:
Common stock, par value $0.01 per share, 150,000,000
shares authorized, 6,973,698 shares issued and
outstanding, actual; [_______] shares issued and
outstanding on a pro forma basis; [_______] shares
issued and outstanding on a pro forma basis and as
adjusted
70
Noncumulative Preferred Stock, Series A, par value
$0.01 per share, 20,000,000 shares authorized, no
shares issued and outstanding, actual; [_______]
shares issued and outstanding on a pro forma basis
and as adjusted
—
Paid in capital
42,943
Retained earnings reserve fund
2,349
Undivided profits
20,521
Accumulated other comprehensive income (loss)
(807
)
Total stockholders' equity
$
65,075
$
$
Capital Ratios:
(2)
Leverage ratio
(3)
6.76
%
Tier 1 risk-based capital ratio
8.30
Total risk-based capital ratio
11.60
Tangible total stockholders' equity to tangible assets
4.93
(1)
Excludes FHLB advances, which were approximately $10.7
million as of December 31, 2003.
(2)
As of December 31, 2003, $20.9 million of our junior
subordinated debentures associated with the trust preferred
securities issuance counted as Tier 1 capital and $24.1 million
counted as Tier 2 capital under current Federal Reserve Board
guidelines.
38
Table of Contents
(3)
The leverage ratio is Tier 1 capital divided by average
quarterly assets, after deducting goodwill, intangible assets and net
deferred assets in excess of regulatory maximum limits.
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data shown below for the five-year period ended
December 31, 2003 has been derived from our audited financial statements.
EuroBancshares was incorporated on November 21, 2001. As a result, the
financial information below for the years 2003 and 2002 includes consolidated
information for both EuroBancshares and Eurobank. Financial data shown for the
years 2001, 2000, and 1999 includes the financial information for Eurobank
only.
You should read this information in conjunction with "
Management's
Discussion and Analysis of Financial Condition and Results of Operations
" and
the financial statements and the related notes included elsewhere in this
prospectus. Results from past periods are not necessarily indicative of
results that may be expected for any future period. Average balances have been
computed using daily averages.
As of or for the year ended December 31,
2003
2002
2001
2000
1999
(dollars in thousands, except per share data)
Income Statement Data:
Total interest income
$
71,516
$
54,968
$
44,590
$
34,788
$
20,729
Total interest expense
31,922
25,124
21,379
16,872
9,391
Net interest income
39,594
29,844
23,211
17,916
11,338
Provision for loan and lease losses
6,451
3,354
2,377
1,343
1,103
Net interest income after provision for loan and lease losses
33,143
26,490
20,834
16,573
10,235
Noninterest income:
Service charges and other fees
5,456
4,331
3,641
3,059
2,783
Gain on sale of loans and leases, net
3,547
–
975
–
–
Gain on sale of securities, net
707
–
195
354
–
Loss on sale of other real estate owned and
repossessed assets
(663
)
(310
)
(86
)
–
–
Total noninterest income
9,047
4,021
4,724
3,413
2,783
Noninterest expense:
Salaries and benefits
15,434
11,943
9,375
7,640
5,039
Professional fees
1,402
1,055
951
576
548
Other noninterest expense
12,039
8,936
7,281
5,831
4,477
Total noninterest expense
28,875
21,934
17,607
14,047
10,064
Income before income taxes
13,315
8,577
7,951
5,939
2,954
Income taxes
3,432
2,724
2,147
1,908
1,170
Extraordinary gain
–
1,081
–
–
–
Net income
$
9,883
$
6,934
$
5,804
$
4,031
$
1,784
Common Share Data:
Earnings per common share – basic:
Income before extraordinary item
$
1.42
$
0.86
$
0.94
$
0.80
$
0.36
Extraordinary item
–
0.16
–
–
–
Net income
1.42
1.02
0.94
0.80
0.36
Earnings per common share – diluted:
Income before extraordinary item
1.39
0.85
0.93
0.80
0.36
Extraordinary item
–
0.16
–
–
–
Net income
1.39
1.01
0.93
0.80
0.36
Cash dividends declared
–
–
–
–
–
Book value per common share
9.33
8.26
7.05
5.98
4.81
Common shares outstanding at end of period
6,973,698
6,939,685
6,778,497
6,027,002
5,027,002
Average diluted shares outstanding
7,117,084
6,862,124
6,213,820
5,063,629
5,021,702
39
Table of Contents
As of or for the year ended December 31,
2003
2002
2001
2000
1999
Balance Sheet Data (at end of period):
Total assets
$
1,320,934
$
1,035,305
$
607,715
$
452,009
$
305,712
Securities available for sale
324,938
145,795
88,709
103,737
81,047
Investment securities held to maturity
–
–
225
228
228
Gross loans and leases
899,392
767,792
458,680
312,197
185,991
Allowance for loan and lease losses
9,394
6,918
4,513
3,050
2,143
Deposits
984,549
843,045
485,663
350,395
251,235
Other borrowings
264,616
127,963
67,614
61,313
27,805
Total stockholders' equity
65,075
57,335
47,806
36,063
24,160
Performance Ratios:
Return on average common stockholders' equity
(1)
16.50
%
13.56
%
14.34
%
15.39
%
7.48
%
Return on average assets
(2)
0.87
0.92
1.10
1.04
0.65
Net interest margin
(3)
3.75
4.29
4.97
5.53
5.06
Efficiency ratio
(4)
57.86
62.85
59.70
59.86
65.43
Loans to deposits
91.35
91.07
94.44
89.10
74.03
Asset Quality Data:
Nonperforming loans and leases
$
26,786
$
22,066
$
10,216
$
7,625
$
6,118
Other real estate owned and repossessed assets
6,417
7,644
3,036
1,657
790
Total nonperforming assets
33,203
29,710
13,252
9,282
6,908
Nonperforming assets to total assets
2.51
%
2.87
%
2.18
%
2.05
%
2.26
%
Nonperforming loans to total loans
2.98
2.87
2.23
2.44
3.29
Allowance for loan and lease losses to nonperforming loans
35.07
31.35
44.18
40.00
35.03
Allowance for loan and lease losses to total loans
1.04
0.90
0.98
0.98
1.15
Net charge-offs to average loans
0.48
0.52
0.24
0.18
0.62
Capital Ratios:
Leverage ratio
6.76
%
7.93
%
8.27
%
8.15
%
8.43
%
Tier 1 risk-based capital
8.30
8.63
9.57
10.86
11.64
Total risk-based capital
11.60
12.79
15.26
11.78
12.68
Tangible common equity to tangible assets
4.93
5.54
7.87
7.98
7.90
(1)
Return on common average equity is determined by dividing net income
by average common equity.
(2)
Return on average assets is determined by dividing net income by
average assets.
(3)
Net interest margin is determined by dividing net interest income
(fully taxable equivalent) by average interest-earning assets.
(4)
The efficiency ratio is determined by dividing total noninterest
expense by an amount equal to net interest income (fully taxable
equivalent) plus noninterest income.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated balance sheet as of
December 31, 2003 and the unaudited pro forma condensed consolidated statements
of income for the year ended December 31, 2003 combine the audited historical
financial statements of EuroBancshares with BankTrust after giving effect to
the following transactions:
•
the sale of 369,231 shares of common stock in the private
placement on May 12, 2004 and the application of $6.0 million of net
proceeds from such sale; and
•
our acquisition of BankTrust on May 3, 2004.
Pro forma adjustments to the balance sheet are computed as if the
transactions occurred at December 31, 2003, while the pro forma adjustments to
the statements of income are computed as if the transactions occurred on
January 1, 2003, the earliest period presented. These statements were prepared
giving effect to the purchase accounting adjustments and other assumptions
described in the accompanying notes.
40
Table of Contents
The pro forma condensed combined financial statements contain adjustments
relating to (1) the transfer of certain net assets not subject to the merger to
a special purpose vehicle for the benefit of the BankTrust stockholders prior
to the effective time of the merger; (2) estimated fair values of assets and
liabilities acquired; and (3) estimated transaction and integration costs.
The combined entity expects to achieve certain consolidation benefits in
the form of operating expense reductions and revenue enhancements. However,
the selected unaudited pro forma combined statement of income does not reflect
any of these anticipated cost savings and benefits expected to result from the
merger. Management cannot assure you either that those benefits and cost
reductions will actually occur or what will be the ultimate level of operating
expense reductions or revenue enhancements. The selected unaudited pro forma
combined statement of income also shows other noninterest income and an unusual
recovery that will not be recurring. Income taxes for BankTrust for the year
ended December 31, 2003 includes charges amounting to $7.5 million which result
from establishing a valuation allowance for net deferred tax assets at that
date. Such charges will also not be recurring. Therefore, the pro forma
combined statement of income shown are not indicative of the results of future
operations.
The unaudited pro forma information is presented for informational
purposes only. This information should be read in conjunction with, and is
qualified in its entirety by, the historical consolidated financial statements
and accompanying notes of EuroBancshares, included with this prospectus. The
unaudited pro forma financial information should not be construed as indicative
of the actual operations that would have occurred had the merger occurred at
the date or at the beginning of the periods indicated.
Given the information regarding the acquisition, the actual consolidated
financial position and results of operations will differ, perhaps even
significantly, from the pro forma amounts reflected below because, among other
things, assumptions used in preparing the pro forma financial information may
be revised in the future due to changes in values of assets, including the
finalization of the calculation of the market valuation of the assets and
liabilities acquired, resulting goodwill, the core deposit intangible and
changes in operating results between the dates of the unaudited pro forma
financial information and the date on which the acquisition was completed, as
well as related tax effects.
41
Table of Contents
Unaudited Pro Forma Condensed Balance Sheet
The following unaudited pro forma condensed balance sheet as of December
31, 2003 has been prepared to reflect the acquisition by EuroBancshares of all
of the capital stock of BankTrust after giving effect to the adjustments
described in the notes to the pro forma condensed financial statements. The
acquisition has been accounted for as a purchase transaction. These statements
should be read in conjunction with the other financial statements and notes
thereto included elsewhere in this prospectus.
For the Year Ended
December 31, 2003
EuroBancshares
BankTrust
Adjustments
Pro Forma Combined
(in thousands)
Assets:
Cash and equivalents
$
62,330
$
38,773
$
(3,490)
(a)
$
97,613
Investment securities
328,280
130,157
458,437
Loans and leases
899,392
395,213
(7,179)
(b)
1,287,426
Less: allowance
(9,394
)
(9,992
)
3,127
(c)
(16,259
)
Real estate owned and repossessed assets
6,375
1,535
7,910
Furniture, fixtures and equipment
10,531
2,703
(2,690)
(d)
10,544
Other assets
23,420
8,835
1,812
(e)
34,067
Total assets
$
1,320,934
$
567,224
$
(8,420
)
$
1,879,738
Liabilities:
Deposits
$
984,549
$
429,571
$
4,000
(f)
$
1,418,120
Borrowings
218,223
85,738
4,924
(f)
308,885
Subordinated notes and debentures
46,393
–
46,393
Other liabilities
6,694
8,143
3,878
(g)
18,715
Total liabilities
$
1,255,859
$
523,452
$
12,802
$
1,792,113
Stockholders' Equity:
Term preferred stock
$
–
$
14,378
$
(14,378)
(h)
$
–
Perpetual preferred stock
–
1,508
9,229
(i)
10,737
Common equity
43,013
41,964
(30,151)
(j)
54,826
Retained earnings
22,869
(15,215
)
15,215
(k)
22,869
Accumulated other comprehensive income
(807
)
1,137
(1,137)
(k)
(807
)
Total stockholders' equity
$
65,075
$
43,772
$
(21,222
)
$
87,625
Total liabilities and stockholders' equity
$
1,320,934
$
567,224
$
(8,420
)
$
1,879,738
42
Table of Contents
Unaudited Pro Forma Condensed Statements of Income
The following unaudited pro forma condensed statements of income have been
prepared to reflect the acquisition by EuroBancshares of all of the capital
stock of BankTrust after giving effect to the adjustments described in the
notes to the pro forma condensed financial statements. The acquisition has
been accounted for as a purchase transaction. These statements should be read
in conjunction with the other financial statements and notes thereto included
elsewhere in this prospectus.
For the Year Ended
December 31, 2003
EuroBancshares
BankTrust
Adjustments
Pro Forma Combined
(in thousands, except per share data)
Interest Income:
Loans and leases
$
64,952
$
33,566
$
(554)
(l)
$
97,964
Investment securities
6,009
5,294
11,303
Interest bearing deposits and other assets
555
244
799
Total interest income
71,516
39,104
(554
)
110,066
Interest Expense:
Deposits
27,384
17,541
(500)
(m)
44,425
Securities sold under agreements to repurchase
1,577
283
1,860
Notes payable and other liabilities
2,961
4,628
(703)
(m)
6,886
Total interest expense
31,922
22,452
(1,203
)
53,171
Net interest income
39,594
16,652
649
56,895
Provision for loan and lease losses
6,451
5,455
–
11,906
Net interest income after provision for
loan and lease losses
33,143
11,197
649
44,989
Noninterest Income:
Service charges and fees
5,456
4,553
10,009
Net gain on sale of securities available-for-sale
707
1,491
2,198
Net loss on sale of other real estate owned,
repossessed assets, and on disposition of other
(663
)
(671
)
(1,334
)
Gain on sale of loans and leases
3,547
605
4,152
Total noninterest income
9,047
5,978
15,025
Noninterest Expense:
Salaries and benefits
15,434
6,502
21,936
Professional services
1,402
1,816
3,218
Other expenses
12,039
8,993
21,032
Total noninterest expense
28,875
17,311
46,186
Income (loss) before unusual recovery
13,315
(136
)
649
13,828
Unusual recovery
–
2,304
2,304
Net income before taxes
13,315
2,168
649
16,132
Income taxes
3,432
7,665
(o)
253
(n)
11,350
Net income (loss)
$
9,883
$
(5,497
)
$
396
$
4,782
Common Share Data:
Earnings per common share – basic
1.42
(0.97
)
0.62
Earnings per common share – diluted
1.39
*
0.61
Common shares outstanding at end of period
6,973,698
7,700,676
Average diluted shares outstanding
7,117,084
7,667,614
*
Not available.
43
Table of Contents
Notes to Unaudited Pro Forma Combined Consolidated Financial Information
Note 1- Basis of Presentation of BankTrust Acquisition
On May 3, 2004 we acquired all of the outstanding capital stock of
BankTrust. The unaudited pro forma combined consolidated balance sheet as of
December 31, 2003 and the unaudited pro forma condensed consolidated statements
of income for the year ended December 31, 2003 combine the historical financial
statements of EuroBancshares with BankTrust after giving effect to the
acquisition using the purchase method of accounting in accordance with
generally accepted accounting principles. Pro forma adjustments to the balance
sheet are computed as if the transaction occurred at December 31, 2003, while
the pro forma adjustments to the statements of income are computed as if the
transaction occurred on January 1, 2003, the earliest period presented.
Note 2- BankTrust Purchase Price
These unaudited pro forma combined consolidated financial statements are
based on the estimated aggregate purchase price for all of the issued and
outstanding capital stock of BankTrust of $23.6 million at December 31, 2003.
The actual price upon closing amounted to $23.5 which is comprised of cash in
the amount of $6.7 million, the issuance of 357,747 shares of our common stock
and the issuance of 429,507 shares of our Series A Preferred Stock. The
allocation of the purchase price between the classes of BankTrust stock is as
follows:
•
the holders of BankTrust common stock received a total of
$6.5 million, of which 11.26%, or $726,478, was paid in cash and
$5.7 million was paid through the issuance of 352,330 shares of our
common stock;
•
the holders of BankTrust Series A preferred stock received a
total of $1.8 million, of which 50%, or $899,923 was paid in
cash, $837,675 was paid through the issuance of 33,507 shares of our
of our Series A Preferred Stock; and $88,026 was paid through the
issuance of 5,417 shares of our common stock; and
•
the holders of BankTrust Series B preferred stock received a
total of $15.0 million, of which 34%, or $5.1 million was paid in
cash and $9.9 million was paid through the issuance of 396,000
shares of our Series A Preferred Stock.
Note 3- Allocation of BankTrust Purchase Price
Purchase Price
(in thousands)
Cash and equivalents
$
36,109
Investment securities
130,156
Loans and lease receivable
388,034
Less: Allowance for loan and lease losses
(6,865
)
Real estate owned and repossessed assets
1,535
Furniture, fixtures and equipment
17
Other assets
10,648
Deposits
(433,571
)
Borrowings
(90,662
)
Other liabilities
(11,821
)
Total estimated purchase price
$
23,580
44
Table of Contents
The purchase price adjustments are subject to further refinement,
including the determination of the final goodwill, the core deposit intangible
and its life for amortization purposes. For pro forma presentation purposes
only, we have estimated a core deposit intangible of $1.4 million and an other
intangible related to the value of the trust business acquired of $500,000.
Also, in the pro forma combined balance sheet the estimated fair value of the
assets acquired less liabilities assumed exceeded the acquisition price by $2.7
million, including additional costs associated with the acquisition. This
excess resulted in a negative goodwill, which was used to eliminate the value
of the core deposit intangible by $1.4 million, the value of trust business
intangible by $500,000 and certain assets acquired by $642,000.
In accordance with Statement of Financial Accounting Standards No. 141,
Business Combinations
and No. 142
Goodwill and Other Intangible Assets
,
goodwill and intangible assets with indefinite lives are not amortized for
acquisitions initiated after June 30, 2001; therefore, no goodwill amortization
is presented in the pro forma financial statements. Also, if there is a core
deposit intangible it should be amortized over the estimated life of the
deposit relationships acquired and recorded as a charge to operations. No
charge to operations was presented as amortization for the core deposit
intangible in the pro forma combined income statement because its value was
reduced by application of a portion of the negative goodwill mentioned in the
previous paragraph.
Note 4- Key to Pro Forma Adjustments for BankTrust Acquisition
Summarized below are the pro forma adjustments (in thousands) necessary to
reflect the acquisition of BankTrust based on the purchase method of
accounting:
(a)
Adjustment to cash to reflect:
Cash portion of purchase price paid for BankTrust capital stock
$
6,826
Proceeds received from sale of EuroBancshares common stock
6,000
Working capital transferred to special purpose vehicle prior to the closing
200
Costs of lease terminations to be paid by BankTrust per Merger Agreement
prior to the closing
2,464
Total
$
(3,490
)
(b)
Adjustment for loans and leases transferred to special purpose
vehicle prior to closing by BankTrust in the amount of $11.1 million
and a fair value adjustment for loans and leases in the amount of $3.9
million for amounts in excess of reserves.
(c)
Reduction of allowance for loan and lease losses for loans
transferred to special purpose vehicle.
(d)
Adjustment for transfer of furniture, fixtures and equipment to the
special purpose vehicle by BankTrust prior to the closing and
mark-to-market adjustment for furniture, fixtures and equipment
acquired.
(e)
Adjustment to establish deferred tax assets, net of certain other
assets transferred to the special purpose vehicle prior to the closing.
(f)
Fair value adjustment on deposits and borrowings.
(g)
Adjustment to reflect pre-closing merger related cost incurred by
BankTrust in the amount of $3.9 million associated with certain
severance payments, medical insurance payments, employment contract
cancellations, retention bonuses, insurance policies retained,
provision for payments on Series B preferred stock, service contracts
terminated and other assets.
(h)
Elimination of BankTrust Series B preferred stock.
(i)
Reflects elimination of BankTrust Series A preferred stock and
issuance of 429,507 shares of EuroBancshares Series A Preferred Stock
in connection with the BankTrust acquisition.
(j)
Reflects the elimination of the BankTrust common stock and the
issuance of 357,747 shares of EuroBancshares common stock in connection
with the BankTrust acquisition and the May 12, 2004 private placement.
(k)
Elimination of BankTrust retained earnings and accumulated other
comprehensive income account.
(l)
Adjustments made to reflect the amortization of the estimated fair
value adjustments on the loan portfolio.
45
Table of Contents
(m)
Adjustments made to reflect the amortization of estimated fair
value adjustments to deposits, borrowings and core deposit intangible.
(n)
Estimated effect of adjustment of 39% statutory rate.
(o)
Income taxes for BankTrust for the year ended December 31, 2003
includes charges amounting to $7.5 million which result from
establishing a valuation allowance for net deferred tax assets at that
date.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis presents our consolidated financial
condition and results of operations for the years ended December 31, 2003, 2002
and 2001. This discussion should be read together with the "
Selected
Historical Financial and Operating Data
," our financial statements and the
notes thereto, and other financial data included in this prospectus. In
addition to the historical information provided below, we have made certain
estimates and forward-looking statements that involve risks and uncertainties.
Our actual results could differ significantly from those anticipated in these
estimates and in the forward-looking statements as a result of certain factors,
including those discussed in the section of this prospectus captioned "
Risk
Factors
," and elsewhere in this prospectus.
Overview
We are a diversified financial holding company headquartered in San Juan,
Puerto Rico, offering a broad array of financial services through our wholly
owned banking subsidiary, Eurobank, and our wholly owned insurance agency
subsidiary, EuroSeguros. As of December 31, 2003, we had, on a consolidated
basis, total assets of $1.3 billion, net loans and leases of $890.0 million,
total deposits of $984.5 million, and stockholders' equity of $65.1 million.
We currently operate through a network of 21 branch offices located throughout
Puerto Rico. On May 3, 2004, we acquired all of the capital stock of
BankTrust, a commercial bank headquartered in San Juan, Puerto Rico with $567.2
million in assets as of December 31, 2003. On a pro forma basis, as of
December 31, 2003, giving effect to the acquisition and our recent issuance of
shares of our common stock in a private placement offering related to that
acquisition, we had total assets of $1.8 billion, net loans and leases of $1.2
billion, total deposits of $1.4 billion and stockholders' equity of $87.6
million.
We were incorporated on November 21, 2001 and became the parent bank
holding company for Eurobank on July 1, 2002. Thus, financial statements and
other data for the years 2001, 2000, and 1999 include financial information for
Eurobank only. Our consolidated financial statements for each of the years in
the two-year period ended December 31, 2003 include the results of operations
for each of our wholly owned subsidiaries: Eurobank, EuroSeguros, Eurobank
Statutory Trust I, and Eurobank Statutory Trust II. Eurobank Statutory Trust I
and Eurobank Statutory Trust II are special purpose vehicles that were used to
issue the trust preferred securities.
Over the past three years, we have experienced significant balance sheet
growth. Our management team has implemented a strategy of building our core
banking franchise by focusing on commercial loans, business transaction
accounts, our lease financing business and acquisitions. We believe that this
strategy will increase recurring revenue streams, enhance profitability,
broaden our product and service offerings and continue to build stockholder
value.
In 2001 and 2002, we raised an aggregate of $46.4 million through the
issuance of junior subordinated debentures in connection with the trust
preferred securities issuances. We believe that the supplemental capital
raised in connection with the issuance of these securities will allow us to
achieve and maintain our status as a well-capitalized institution and to
sustain our continued loan growth.
2003 Key Performance Indicators
We believe the following were key indicators of our performance and
results of operations in 2003:
•
our total assets grew to $1.3 billion at the end of 2003,
representing an increase of 27.6%, from $1.0 billion at the end of
2002;
46
Table of Contents
•
our total loans grew to $889.6 million at the end of 2003,
representing an increase of 16.7%, from $762.6 million at the end of
2002;
•
our total deposits grew to $984.5 million at the end of 2003,
representing an increase of 16.8%, from $843.0 million at the end of
2002;
•
our total revenue grew to $80.6 million for the year ended of
2003, representing an increase of 36.6%, from $59.0 million for the
year ended of 2002; and
•
our net income grew to $9.9 million for the year ended of
2003, representing an increase of 43.5%, from $6.9 million for the
year ended of 2002.
These items, as well as other factors, contributed to the increase in net
income for 2003 to $9.9 million, or $1.39 per common share, assuming dilution,
and are discussed in further detail throughout this "
Management's Discussion
and Analysis of Financial Condition and Results of Operations"
section of this
prospectus.
Critical Accounting Policies
This discussion and analysis of our financial condition and results of
operations is based upon our financial statements, which have been prepared in
accordance with United States generally accepted accounting principles. The
preparation of these consolidated financial statements requires management to
make estimates and judgments that effect the reported amounts of assets and
liabilities, revenues and expenses, and related disclosures of contingent
assets and liabilities at the date of our financial statements. Actual results
may differ from these estimates under different assumptions or conditions. The
following is a description of our significant accounting policies used in the
preparation of the accompanying consolidated financial statements.
Loans and Allowance for Loan and Lease Losses
Loans that management has the intent and ability to hold for the
foreseeable future, or until maturity or payoff, are reported at their
outstanding unpaid principal balances adjusted by any charge-offs, unearned
finance charges, allowance for loan and lease losses, and net deferred
nonrefundable fees or costs on origination. The allowance for loan and lease
losses is an estimate to provide for probable collection losses in our loan and
lease portfolio. Losses are charged and recoveries are credited to the
allowance account at the time a loss is incurred or a recovery takes place.
We follow a consistent procedural discipline and account for loan and
lease loss contingencies in accordance with Statement of Financial Accounting
Standards (SFAS) No. 5, Accounting for Contingencies, and SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118,
Accounting by Creditors for Impairment of a Loan – Income Recognition and
Disclosures. For a description of how each portion of the allowance for loan
and lease losses is determined, see the section of this discussion and analysis
captioned
"Allowance for Loan and Lease Losses."
We believe that our allowance for loan and lease losses is adequate;
however, regulatory agencies, including the Commissioner of Financial
Institutions of Puerto Rico and the FDIC, as an integral part of their
examination process, periodically review our allowance for loan and lease
losses and may from time to time require us to reclassify our loans and leases
or make additional provisions to our allowance for loan and lease losses.
We classify loans as nonperforming when they become 90 days past due.
Servicing Assets
We have no contracts to service loans for others, except for servicing
rights retained on lease sales. The total cost of loans or leases to be sold
with servicing assets retained is allocated to the servicing assets and the
loans or leases (without the servicing assets), based on their relative fair
values. Servicing assets are amortized in proportion to, and over the period
of, estimated net servicing income. In addition, we assess capitalized
servicing assets for impairment based on the fair value of those assets.
47
Table of Contents
To estimate the fair value of servicing assets we consider prices for
similar assets and the present value of expected future cash flows associated
with the servicing assets calculated using assumptions that market participants
would use in estimating future servicing income and expense, including discount
rates, anticipated prepayment and credit loss rates. For purposes of
evaluating and measuring impairment of capitalized servicing assets, we
evaluate separately servicing retained for each loan portfolio sold. The
amount of impairment recognized, if any, is the amount by which the capitalized
servicing assets exceed its estimated fair value. Impairment is recognized
through a valuation allowance with changes included in net income for the
period in which the change occurs. Servicing assets are included as part of
other assets in the balance sheets.
Other Real Estate Owned and Repossessed Assets
Other real estate owned, or OREO, and repossessed assets, normally
obtained through foreclosure or other workout situations, are initially
recorded at fair value at the date of foreclosure, establishing a new cost
basis. Any resulting loss is charged to the allowance for loan and lease
losses. An appraisal of other real estate properties and repossessed assets is
made periodically after its acquisition, and comparison between the appraised
value and the carrying value is performed. Additional declines in value after
acquisition, if any, are charged to current operations.
Results of operations as of and for the years ended December 31, 2003, 2002 and 2001
Net Interest Income and Net Interest Margin
Net interest income is the difference between interest income, principally
from loan, lease and investment securities portfolios, and interest expense,
principally on customer deposits and borrowings. Net interest income is our
principal source of earnings. Changes in net interest income result from
changes in volume, spread and margin. Volume refers to the average dollar
level of interest-earning assets and interest-bearing liabilities. Spread
refers to the difference between the average yield on interest-earning assets
and the average cost of interest-bearing liabilities. Margin refers to net
interest income divided by average interest-earning assets, and is influenced
by the level and relative mix of interest-earning assets and interest-bearing
liabilities.
Net interest income was $39.6 million during the year ended December 31,
2003, as compared to $29.8 million during the year ended December 31, 2002 and
$23.2 million during the year ended December 31, 2001, representing an increase
of $9.8 million, or 32.7%, in 2003 and an increase of $6.6 million, or 28.6%,
in 2002. These increases were primarily the result of higher volumes of
interest-earning assets. However, the level of increase was partially offset
by a decline in our net interest margin. Our net interest margin decreased to
3.75% for the year ended December 31, 2003 as compared to 4.29% during 2002,
and 4.97% during 2001. In the past two years, the Federal Reserve Board's
interest rate cuts deteriorated our net interest margin due to our asset
sensitive position. Our net interest spread also decreased to 3.41% in 2003,
from 3.73% in 2002, and from 4.12% in 2001.
Our average interest-earning assets were $1.1 billion in 2003, as compared
with $719.7 million in 2002 and $498.0 million in 2001, representing increases
of 51.3% in 2003 and 44.5% in 2002. Average net loans were $833.6 million in
2003, compared to $572.8 million in 2002 and $380.2 million in 2001,
representing increases of 45.5% and 50.6% in 2003 and 2002, respectively.
Primarily due to the eleven interest rate cuts by the Federal Reserve Board
during 2001, average yields on interest-earning assets decreased to 7.94% in
2002 from 9.44% in 2001. The Federal Reserve Board's interest rate cuts in
June 2003 and November 2002 further lowered the average yields on our
interest-earning assets to 6.80% in 2003. Prime interest rate reductions in
2002 and 2001 offset most of the improvements in portfolio composition that
would have otherwise resulted. However, due to the growth of interest-earning
assets in 2003 (attributable in part to our acquisition of Banco Financiero de
Puerto Rico on December 15, 2002), our total interest income significantly
increased by 30.1% to $71.5 million in 2003.
Average interest-bearing liabilities also increased by 57.2% to $979.6
million in 2003, compared to $623.2 million in 2002, after increasing by 49.0%
from $418.4 million in 2001. Total interest expense increased by 24.7% to
$31.9 million in 2003 from $25.1 million in 2002. The increase in our interest
expense is due mainly to the significant growth of our deposit portfolio,
which, in turn, is attributable in part to our acquisition of Banco Financiero
de Puerto Rico on December 15, 2002. Our interest expense also increased in
2002 by 17.5%, compared to $21.4 million in 2001, again due to our deposit
portfolio growth. The average interest rate we paid for interest-bearing
deposits decreased to 3.05% and 3.65% in 2003 and 2002, respectively, from
4.47% in 2001. This decline
48
Table of Contents
in our average interest rate was influenced by the fact that the prime
interest rate is the lowest it has been in 45 years.
The following table sets forth, for the periods indicated, our average
balances of assets, liabilities and stockholders' equity, in addition to the
major components of net interest income and our net interest margin:
Year Ended December 31,
2003
2002
2001
Average
Average
Average
Average
Rate/
Average
Rate/
Average
Rate/
Balance
Interest
Yield
(1)
Balance
Interest
Yield
(1)
Balance
Interest
Yield
(1)
(dollars in thousands)
ASSETS:
Interest earning assets:
Net loans and leases
(2)
$
833,557
$
64,952
5.99
%
$
572,750
$
48,959
6.83
%
$
380,216
$
37,719
7.61
%
Securities of U.S. government
agencies
187,070
5,135
0.66
97,602
4,858
0.93
97,565
5,942
1.61
Other investment securities
16,133
682
0.08
7,336
382
0.07
4,542
324
0.08
Puerto Rico government
obligations
4,679
192
0.02
2,294
102
0.02
248
19
0.01
Securities purchased under
agreements to resell and
federal funds sold
24,379
281
0.03
22,168
366
0.05
9,370
381
0.08
Interest-earning deposits
22,957
274
0.02
17,581
301
0.04
6,020
205
0.05
Total interest-earning assets
1,088,775
71,516
6.80
719,731
54,968
7.94
497,961
44,590
9.44
Total noninterest-earning assets
52,075
35,953
27,557
TOTAL ASSETS
$
1,140,850
$
755,684
$
525,518
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Interest-bearing liabilities:
Money market deposits
$
47,896
$
1,294
0.12
%
$
26,843
$
941
0.13
%
$
7,020
$
231
0.06
%
NOW deposits
26,579
570
0.05
18,939
569
0.09
15,867
497
0.10
Savings deposits
197,242
5,811
0.53
98,408
3,471
0.48
52,706
1,952
0.39
Time certificates of deposit in
denominations of $100,000 or
more
392,611
14,396
1.39
288,711
12,383
1.81
196,703
11,146
2.33
Other time deposits
161,811
5,313
0.49
102,230
4,103
0.57
87,486
4,646
0.93
Other borrowings
153,424
4,538
0.47
88,386
3,657
0.57
58,593
2,907
0.66
Total interest-bearing liabilities
979,563
31,922
3.05
623,517
25,124
3.65
418,375
21,379
4.47
Noninterest-bearing liabilities:
Noninterest-bearing deposits
92,643
73,189
60,673
Other liabilities
8,740
7,844
5,993
Total noninterest-bearing
liabilities
101,383
81,033
66,666
STOCKHOLDERS' EQUITY
59,904
51,134
40,477
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
$
1,140,850
$
755,684
$
525,518
Net interest income (tax
equivalent)
$
39,594
$
29,844
$
23,211
Net interest spread(3)
3.41
%
3.73
%
4.12
%
Net interest margin(4)
3.75
%
4.29
%
4.97
%
(1)
Yields on tax-exempt securities, loans and leases are calculated on a
fully taxable equivalent basis.
(2)
Loan fees (costs) have been included in the calculation of interest
income. Loan fees were approximately $1.7 million, $1.2 million, and $1.1
million for the years ended December 31, 2003, 2002, and 2001,
respectively. Loans are net of the allowance for loan and lease losses,
deferred fees, unearned income, and related direct costs.
(3)
Represents the average rate earned on interest-earning assets less the
average rate paid on interest-bearing liabilities.
(4)
Represents net interest income on a fully taxable equivalent basis as a
percentage of average interest-earning assets.
49
Table of Contents
The following table sets forth, for the periods indicated, the dollar
amount of changes in interest earned and paid for interest-earning assets and
interest-bearing liabilities and the amount of change attributable to changes
in average daily balances (volume) or changes in average daily interest rates
(rate) on a fully taxable equivalent basis. The impact of changes in the mix
of interest-earning assets and interest-bearing liabilities is reflected in our
net interest income.
Year Ended December 31,
2003 over 2002
2002 over 2001
Increases/(Decreases)
Increases/(Decreases)
Due to Change In
Due to Change In
Volume
Rate
Net
Volume
Rate
Net
(in thousands)
INTEREST EARNED ON:
Net loans
(1)
$
17,813
$
(7,002
)
$
10,811
$
14,652
$
(4,468
)
$
10,184
Securities of U.S. government
agencies
832
(505
)
327
1
(664
)
(663
)
Other investment securities
6
2
8
2
0
2
Puerto Rico government
obligations
0
–
0
0
0
0
Securities purchased under
agreements to resell and
federal funds sold
1
(5
)
(4
)
10
(6
)
4
Interest-earning deposits
3
(5
)
(2
)
6
(2
)
4
Total interest-earning assets
$
18,655
$
(7,515
)
$
11,140
$
14,671
$
(5,140
)
$
9,531
INTEREST PAID ON:
Money market deposits
$
27
$
(4
)
$
23
$
12
$
19
$
31
NOW deposits
7
(11
)
(4
)
3
(2
)
1
Savings deposits
474
99
573
178
89
267
Time certificates of deposit in
denominations of $100,000
or more
1,881
(1,649
)
232
2,144
(1,502
)
642
Other time deposits
340
(130
)
210
137
(368
)
(231
)
Other borrowings
371
(154
)
217
197
(80
)
117
Total interest-bearing liabilities
$
3,100
$
(1,849
)
$
1,251
$
2,671
$
(1,844
)
$
827
Net interest income
$
15,555
$
(5,666
)
$
9,889
$
12,000
$
(3,296
)
$
8,704
(1)
Loan fees (costs) have been included in the calculation of interest
income. Loan fees were approximately $1.7 million, $1.2 million, and $1.1
million for the years ended December 31, 2003, 2002, and 2001,
respectively. Loans are net of the allowance for loan and lease losses,
deferred fees, unearned income, and related direct costs.
Provision for Loan and Lease Losses
We determine a provision for loan and lease losses that we consider
sufficient to maintain an allowance to absorb probable losses inherent in our
portfolio as of the balance sheet date. For additional information concerning
this determination, see the section of this discussion and analysis captioned
"Allowance for Loan and Lease Losses."
Our provision for loan and lease losses increased to $6.5 million in 2003,
from $3.4 million and $2.4 million in 2002 and 2001, respectively. These
increases in our provisions were mainly due to the growth of our total loan and
lease portfolio, resulting in an increase in nonperforming loans and leases,
and an increase in our net credit losses to $4.0 million in 2003, from $3.0
million and $914,000 in 2002 and 2001, respectively. The increase in our
nonperforming loans and net credit losses was also, in part, a result of our
acquisition of Banco Financiero de Puerto Rico. We acquired a $72.2 million
loan portfolio as a result of the Banco Financiero merger.
Noninterest Income
The following table sets forth the various components of our noninterest
income for the periods indicated:
50
Table of Contents
Year Ended December 31,
2003
2002
2001
(Amount)
(%)
(Amount)
(%)
(Amount)
(%)
(dollars in thousands)
Service charges and other fees
$
5,456
60.3
%
$
4,331
107.7
%
$
3,641
77.1
%
Gain on sale of loans and leases, net
3,547
39.2
–
–
975
20.6
Gain on sale of securities, net
707
7.8
–
–
194
4.1
Loss on sale of other real estate
owned, repossessed assets, and on
disposition of other assets, net
(663
)
(7.3
)
(311
)
(7.7
)
(86
)
(1.8
)
Total noninterest income
$
9,047
100.0
%
$
4,020
100.0
%
$
4,724
100.0
%
Our total noninterest income was $9.0 million in 2003, and $4.0 million in
2002, as compared with $4.7 million in 2001, representing an annual growth rate
of 125.0% in 2003, and an annual decrease of 14.9% in 2002 from 2001 levels.
Noninterest income represented approximately 0.8%, 0.5% and 0.9% of average
assets in 2003, 2002 and 2001, respectively.
As a result of our efforts to diversify our revenue sources, we currently
earn noninterest income from various sources. Our largest noninterest income
source is service charges, primarily on deposit accounts, representing 60.3%,
107.7% and 77.1% of total noninterest income in 2003, 2002 and 2001,
respectively. This income source increased to $5.5 million in 2003, from $4.3
million in 2002, and $3.6 million in 2001. These increases were primarily due
to an increase in our number of transactional and savings accounts. We
constantly review service charge rates to maximize service charge income while
maintaining a competitive position.
Gain on the sale of loans and leases of $3.5 million was the second
largest source of noninterest income in 2003, as compared to $0 in 2002, and
$975,000 in 2001. Income from gain on sale of loans and leases as a percentage
of total noninterest income was 39.2%, 0.0% and 20.6% in 2003, 2002 and 2001,
respectively. This source of noninterest income is derived primarily from the
sale of lease financing contracts and mortgage loans. During June and December
2003, we sold lease financing contracts on a limited recourse basis with
carrying values of $30.0 and $20.0 million, respectively, to a third party. We
retained servicing responsibilities for the lease financing contracts sold. We
surrendered control of the lease financing receivables, as defined by SFAS No.
140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities, and accounted for these transactions as sales,
recognizing net gains of approximately $1.8 million for the June 2003 sale and
$1.0 million for the December 2003 sale. While no sales of our lease financing
contracts were made in 2002, in December 2001 we sold $9.0 million in lease
financing contracts, recognizing a gain of approximately $975,000. In
addition, in September 2003 we sold approximately $42.8 million in mortgage
loans to another financial institution. We did not retain the servicing rights
on these mortgage loans and we accounted for this transaction as a sale,
resulting in a gain of approximately $700,000. We did not sell any of our
mortgage loans in 2002 and 2001.
The third largest source of noninterest income during 2003 was the net
gain on the sale of securities. During the year ended December 31, 2003,
proceeds from sales of investment securities were approximately $83.2 million,
with approximately $707,000 in gains realized. While there were no sales of
investment securities during 2002, proceeds from sales of investment securities
during the fiscal year ended December 31, 2001 totaled approximately $16.5
million, with $194,000 in gross gains realized.
Our final component of noninterest income is the net gain/loss on the sale
of our OREO, repossessed assets and other assets. We experienced net losses in
this component of $663,000, $311,000 and $86,000 for the years ended December
31, 2003, 2002 and 2001, respectively. This trend of progressively greater
losses is attributable primarily to an increased volume of losses in our lease
financing portfolio as such portfolio has increased in size, which created net
losses on the sale of repossessed automobiles and equipment totaling $655,000,
$305,000 and $95,000 for the years 2003, 2002 and 2001, respectively. As our
volume of lease financings has increased, in order to avoid building our
inventory of repossessed automobiles, we have been more aggressive in our
disposition efforts. OREO and repossessed assets were $6.4 million, $7.6
million and $3.0 million for the years ended December 31, 2003, 2002 and 2001,
respectively. As a result, the volume of loss on sale of OREO and repossessed
assets has increased 14.2% in 2003, 7.5% in 2002 and 4.3% in 2001. There were
no losses on the sale of OREO for these years.
51
Table of Contents
The loss on the sale of repossessed assets as a percentage of the lease
balance at the date of repossession was 14.2% in 2003, 7.5% in 2002, and 4.3%
in 2001. The ratio of loss on the sale of repossessed assets to our year end
leasing portfolio balance was 0.82% in 2003, 0.51% in 2002, and 0.10% in 2001.
The increase in our loss ratio for the last three years is due in part to
increases in the size of our lease portfolio. Our lease portfolio increased
from $134.5 million at the end of fiscal 2001 to $314.2 at the end of fiscal
2003, an increase of 133.6%. When our inventory of repossessed assets is
larger, we are more aggressive in our disposition efforts. This strategy
permits us to move inventory at a faster pace, but increases our losses per
unit.
Noninterest Expense
The following table sets forth a summary of noninterest expenses for the
periods indicated:
Year Ended December 31,
2003
2002
2001
(Amount)
(%)
(Amount)
(%)
(Amount)
(%)
(dollars in thousands)
Salaries and employee benefits
$
15,434
53.4
%
$
11,943
54.4
%
$
9,375
53.2
%
Occupancy and equipment
5,910
20.5
4,592
20.9
3,972
22.6
Professional fees
1,244
4.3
914
4.2
816
4.6
Directors' fees
158
0.5
141
0.6
135
0.8
Office supplies
984
3.4
747
3.4
663
3.8
Other real estate owned and
other repossessed assets
expenses
693
2.4
516
2.4
226
1.3
Promotion and advertising
511
1.8
357
1.6
289
1.6
Lease expenses
565
2.0
247
1.1
–
–
Insurance
628
2.2
385
1.8
353
2.0
Municipal taxes
725
2.5
498
2.3
347
2.0
Commissions and service fees
credit and debit cards
1,051
3.6
765
3.5
824
4.7
Other noninterest expense
972
3.4
829
3.8
607
3.4
Total noninterest expense
$
28,875
100.0
%
$
21,934
100.0
%
$
17,607
100.0
%
Our total noninterest expense increased to $28.9 million in 2003, from
$21.9 million in 2002 and $17.6 million in 2001. This represents a year over
year increase in noninterest expense of 31.6% for 2003, 24.6% for 2002 and
25.3% for 2001. These increases can be attributed to the expanded personnel
and occupancy costs associated with our business growth, our acquisition of
Banco Financiero, and the recent opening of our four new branch offices
(Mayaguez in 2003, Humacao and Ponce (2) in 2002). Our expansion of various
groups, including EuroLease, our construction lending activities and our trust
and wealth management group, also contributed to the increase in our total
noninterest expense. Due to our continuing efforts to minimize noninterest
expense, however, noninterest expenses as a percentage of average assets
declined 2.5% in 2003, from 2.9% in 2002, and from 3.4% in 2001. We believe
that our efforts to expand without comparative increases in our number of
employees, in addition to the effect of the Banco Financiero acquisition, have
improved our operational efficiency. Our efficiency improvement is evidenced
by the decrease in our efficiency ratio to 57.9% in 2003, 62.9% in 2002, and
59.7% in 2001.
We anticipate that the overall volume of our noninterest expense will
continue to increase as we grow. However, we remain committed to controlling
costs and efficiency and expect to moderate these increases relative to our
revenue growth.
Salaries and employee benefits totaled $15.4 million, $11.9 million and
$9.4 million, or 53.5%, 54.5% and 53.3% of total noninterest expenses, in 2003,
2002 and 2001, respectively. Despite the new branch openings and significant
asset growth in the past two years, we have limited full-time employee growth
by making efforts to ensure our operations are efficient. We had 377 full-time
equivalent employees as of December 31, 2003, compared with 355 and 269 in 2002
and 2001, respectively. Our volume of assets per employee increased to $3.5
million for the year ended 2003 from $2.9 million and $2.3 million for the
years ended 2002 and 2001, respectively.
52
Table of Contents
Occupancy and equipment expenses totaled $5.9 million, $4.6 million and
$4.0 million, or 20.5%, 20.9% and 22.6% of total noninterest expenses, in 2003,
2002 and 2001, respectively. These cost increases are attributable primarily
to the expansion of our branch network and franchise.
Professional fees were $1.2 million, $914,000 and $816,000 or 4.3%, 4.2%
and 4.6% of total noninterest expenses, in 2003, 2002 and 2001, respectively.
These increases are attributable primarily to the growth of our business and
other legal, consulting and professional fees related to our capital raising
efforts, acquisitions and our other actions to implement our strategic plan.
Office supplies expenses were $984,000, $747,000 and $663,000, or 3.4%,
3.4% and 3.8% of our total noninterest expenses, in 2003, 2002 and 2001,
respectively. These increases are attributable primarily to the expansion of
our branch network and franchise.
Our expenses related to OREO and repossessed assets were $693,000,
$516,000 and $226,000, or 2.4%, 2.4% and 1.3% of total noninterest expenses in
2003, 2002 and 2001, respectively. This increase is attributable primarily to
the growth of our loan and lease portfolio, and in particular, our lease
financing portfolio. Repossessed assets are initially recorded at fair value
upon repossession and are charged to the allowance for loan and lease losses.
These assets are then periodically evaluated and recorded at fair value. Any
subsequent decline in the fair value is charged to current operations.
Insurance expenses were $628,000, $385,000 and $353,000, or 2.2%, 1.8% and
2.0% of our total noninterest expense in 2003, 2002 and 2001, respectively.
Increases in insurance expenses are attributable primarily to the expansion of
our branch network and our general growth.
Municipal taxes increased to $725,000 in 2003, from $498,000 and $347,000
in 2002 and 2001, respectively. These increases are directly attributable to
our asset growth.
Commissions and service fees on credit and debit cards increased to $1.1
million in 2003, from $765,000 and $824,000 in 2002 and 2001, respectively.
This increase is attributable primarily to the increase in the size of our
commercial loan portfolio, which provide us with merchant point-of-sale
business.
Other noninterest expenses also increased annually during the prior
three-year period, however, these increases were related in large part to our
asset growth over this period. Due in part to management's commitment to
overhead control, these expense increases were significantly outpaced by our
revenue growth rate.
We also expect our noninterest expense to increase as a result of our
becoming a publicly-traded company. Specifically, we expect increases in audit
fees, legal fees associated with public reporting, printing costs, proxy
solicitation costs, additional directors, and officers' insurance cost and
other expenses generally associated with publicly-traded companies.
Provision for Income Taxes
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 federal income tax. As of December 31, 2003, our tax provision
and related accounts are substantially identical to those of Eurobank's.
For the year ended December 31, 2003, we recorded a $3.4 million income
tax expense as compared to $2.7 million in 2002, and $2.1 million in 2001. Our
current income tax provision is lower than a provision based on the statutory
tax rate applicable to Eurobank, which is 39.0%, because we have interest
income from certain investments that is exempt from Puerto Rico income tax.
Exempt interest relates mostly to interest earned on obligations of the United
States and Puerto Rico governments and certain mortgage-backed securities held
by Eurobank International. The main reason for the increase of 2003 tax
expense is the increase in our income before taxes of 55.0%, 8% and 33.8% when
compared to 2002 and 2001, respectively.
53
Table of Contents
Income tax expense is the sum of two components: current tax expense and
deferred tax expense (benefit). Current tax expense is calculated by applying
our current tax rate to taxable income. The deferred tax expense accounts for
the change in deferred tax assets (liabilities) from year to year. 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. As of December 31, 2003,
2002 and 2001, we had net deferred tax assets of $4.0 million, $3.7 million and
$946,000, respectively. Please refer to "
Note 18- Income Taxes
" to our 2003
consolidated financial statements for further details.
Extraordinary Gain on Acquisition of Banco Financiero de Puerto Rico
Effective December 15, 2002, we acquired all of the capital stock of Banco
Financiero de Puerto Rico for a purchase price of $1.5 million. The purchase
price consisted of the issuance of our common stock, valued at $1.2 million at
that time, and $326,000 in cash. The estimated fair value of the assets
acquired less liabilities assumed of $2.8 million exceeded the acquisition
price of $1.8 million, including additional costs associated with the
acquisition of $215,000. This excess resulted in an extraordinary gain on
business acquisition of $1.1 million after reducing the value of certain assets
acquired by $456,000. Please refer to "
Note 2- Acquisition"
to our 2003
consolidated financial statements for further details.
Financial Condition as of and for the Years Ended December 31, 2003, 2002 and 2001
Our total assets increased to $1.3 billion as of December 31, 2003, a
27.6% increase, when compared to $1.0 billion and $607.7 million as of December
31, 2002 and 2001, respectively. The increase during 2003 was primarily the
result of growth in our investment securities and loan and lease portfolio.
The increase during 2002 was primarily the result of growth in loans and leases
from current operations and from those assets acquired in the acquisition of
Banco Financiero de Puerto Rico.
Our total deposits increased by $141.5 million, or 16.8%, to reach $984.5
million as of December 31, 2003 as compared to $843.0 million as of December
31, 2002. Our asset growth during 2003 was also funded with a $143.4 million
increase in securities sold under agreements to repurchase. Total deposits as
of December 31, 2002 increased by $357.4 million, or 73.6%, when compared to
$485.7 million as of December 31, 2001. The increase during 2002 was, in part,
the result of our acquisition of Banco Financiero, in which we acquired $84.2
million of deposits. Growth for the year 2002 was also funded with a $36.8
million increase in securities sold under agreements to repurchase and a $20.0
million issuance of trust preferred capital securities.
As of December 31, 2003, our total stockholders' equity was $65.1 million,
representing an increase of 13.5% from $57.3 million as of December 31, 2002.
Our total stockholders' equity as of December 31, 2002 represented an increase
of 19.9% from $47.8 million as of December 31, 2001. In addition to earnings
from operations and stock options exercised, our stockholders' equity was also
impacted by a $2.4 million decrease, and a $1.2 million increase, in our
unrealized gain (loss) on investment securities available for sale as of
December 31, 2002 and 2001, respectively.
Short-Term Investments and Interest-bearing Deposits in Other Financial
Institutions
We sell federal funds, purchase securities under agreements to resell, and
deposit funds in interest-bearing accounts in other financial institutions to
help meet liquidity requirements and provide temporary holdings until the funds
can be otherwise deployed or invested. As of December 31, 2003, 2002 and 2001,
we had $19.3 million, $29.9 million and $14.7 million, respectively, in
interest-bearing deposits in other financial institutions, and $20.5 million,
$45.0 million and $8.1 million, respectively, in purchased securities under
agreements to resell.
Investment Securities
Our investment portfolio primarily serves as a source of interest income
and, secondarily, as a source of liquidity and a management tool for our
interest rate sensitivity. We manage our investment portfolio according to a
written investment policy implemented by our Asset/Liability Management
Committee. Our investment policy is reviewed at least annually by our Board of
Directors. Investment balances, including cash equivalents and
interest-bearing deposits in other financial institutions, are subject to
change over time based on our asset/liability funding
54
Table of Contents
needs and our interest rate risk management objectives. Our liquidity
levels take into consideration anticipated future cash flows and all available
sources of credits and are maintained at levels management believes are
appropriate to assure future flexibility in meeting our anticipated funding
needs.
Our investment portfolio consists of securities we intend to hold until
maturity, or "held-to-maturity securities," and all other securities are
classified as "available-for-sale." The carrying values of our
available-for-sale securities are adjusted for unrealized gain or loss as a
valuation allowance, and any gain or loss is reported on an after-tax basis as
a component of other comprehensive income.
The following table presents the composition, book value and market value
of our investment portfolio by major category as of the dates indicated:
Available-for-Sale
Held-to-Maturity
Total
Amortized
Estimated
Amortized
Estimated
Amortized
Estimated
Cost
Fair Value
Cost
Fair Value
Cost
Fair Value
(in thousands)
December 31, 2003:
U.S. treasury securities
$
84,748
$
85,116
$
–
$
–
$
84,748
$
85,116
U.S.
government agencies obligations
39,867
39,930
–
–
39,867
39,930
Collateralized mortgage obligations
144,885
143,189
–
–
144,885
143,189
Mortgage-backed securities
49,027
49,134
–
–
49,027
49,134
State and municipal obligations
4,519
4,575
–
–
4,519
4,575
Other debt securities
2,968
2,994
–
–
2,968
2,994
Total
$
326,014
$
324,938
–
–
$
326,014
$
324,938
December 31, 2002:
U.S. treasury securities
$
29,945
$
30,260
–
–
$
29,945
$
30,260
U.S. government agencies obligations
21,547
21,863
–
–
21,547
21,863
Collateralized mortgage obligations
57,687
58,722
–
–
57,687
58,722
Mortgage-backed securities
23,900
24,127
–
–
23,900
24,127
State and municipal obligations
4,659
4,758
–
–
4,659
4,758
Other debt securities
5,919
6,065
–
–
5,919
6,065
Total
$
143,657
$
145,795
–
–
$
143,657
$
145,795
December 31, 2001:
U.S. treasury securities
$
17,498
$
17,737
–
–
$
17,498
$
17,737
U.S. government agencies obligations
10,483
10,556
–
–
10,483
10,556
Collateralized mortgage obligations
49,021
49,028
–
–
49,021
49,028
Mortgage-backed securities
6,222
6,336
–
–
6,222
6,336
State and municipal obligations
2,000
2,000
225
225
2,225
2,225
Other debt securities
3,000
3,052
–
–
3,000
3,052
Total
$
88,224
$
88,709
$
225
$
225
$
88,449
$
88,934
Available-for-sale securities, which are stated at their fair market
value, increased to $324.9 million as of December 31, 2003 from $145.8 million
and $88.7 million as of December 31, 2002 and 2001, respectively. These
increases are representative of our strategy to enhance our liquidity level
through the use of available-for-sale securities in addition to immediately
available funds. The majority of our immediately available funds are
maintained in the form of overnight investments. As of December 31, 2003,
investment securities having a carrying value of approximately $243.0 million
were pledged to secure borrowings and deposits of public funds and to comply
with other pledging requirements.
Investment Portfolio – Maturity and Yields
The following table summarizes the contractual maturity of investment
securities held in our investment portfolio and their weighted average yields:
55
Table of Contents
As of December 31, 2003
Within
After One but Within Five
After Five but Within Ten
After
One Year
Years
Years
Ten Years
Total
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
(dollars in thousands)
Investments
available-for-sale:
(1) (2)
U.S. treasury obligations
$
–
–
%
$
85,116
1.94
%
$
–
–
%
$
–
–
%
$
85,116
1.94
%
U.S. government agencies
obligations
18,571
2.71
15,990
2.42
5,369
3.88
–
–
39,930
2.75
Mortgage backed securities
(3)
9,353
4.23
182,969
3.85
–
–
–
–
192,322
3.87
State & political
subdivisions
1,010
3.76
3,356
4.06
210
5.93
–
–
4,576
4.68
Other debt securities
2,994
3.64
–
–
–
–
–
–
2,994
3.64
Total investments
available for sale
$
31,928
3.09
$
287,431
3.21
$
5,579
3.95
–
–
$
324,938
3.23
Other Investments:
–
FHLB stock
$
1,954
–
–
–
–
–
$
–
–
$
1,954
–
Investment in statutory trust
–
–
–
–
–
–
1,388
4.63
1,388
4.63
Total other investments
$
1,954
–
–
–
–
–
$
1,388
4.63
$
3,342
1.92
Total investments
$
33,882
3.09
%
$
287,431
3.27
%
$
5,579
3.95
%
$
1,388
4.63
%
$
328,280
3.21
%
(1)
Based on estimated fair value.
(2)
All of our income from investments in available-for-sale securities is
tax exempt because these securities are held in our IBE. The yields shown
in the above table are not calculated on a fully taxable equivalent basis.
(3)
Maturities of mortgage-backed securities and collateralized mortgage
obligations, or CMOs, are based on anticipated lives of the underlying
mortgages, not contractual maturities. CMO maturities are based on cash
flow (or payment) windows derived from broker market consensus.
Other Earning Assets
For various business purposes, we make investments in earning assets other
than the interest-earning securities discussed above. As of December 31, 2003,
our investment in other earning assets included $2.0 million in FHLB stock and
$1.4 million equity in our statutory trusts. Prior to 2003, the only other
earning assets we held were insignificant amounts of FHLB stock. Our holdings
of FHLB stock as of December 31, 2002 and 2001 totaled $2.4 million and $1.2
million, respectively.
The following table presents the balances of other earning assets as of
dated indicated:
As of December 31,
Type
2003
2002
2001
(in thousands)
Statutory trusts
$
1,388
$
–
$
–
Federal FHLB stock
1,954
2,405
1,251
Total
$
3,342
$
2,405
$
1,251
Loan and Lease Portfolio
Our primary source of income is interest on loans and leases. The
following table presents the composition of our loan and lease portfolio by
category as of the dates indicated:
56
Table of Contents
As of December 31,
2003
2002
2001
2000
1999
(in thousands)
Real estate – secured
$
321,307
$
268,318
$
161,810
$
123,665
$
87,946
Leases
320,853
259,523
140,712
81,430
17,227
Commercial and industrial
179,737
152,880
107,047
84,009
63,815
Real estate – construction
48,505
54,937
32,524
8,083
–
Consumer
26,619
31,509
18,086
17,634
17,196
Other loans
4,145
3,665
2,521
2,063
1,494
Gross loans and leases
$
901,166
$
770,832
$
462,700
$
316,884
$
187,678
Less: Unearned income
(1,774
)
(3,041
)
(4,020
)
(4,686
)
(1,687
)
Total loans, net of unearned income
$
899,932
$
767,791
$
458,680
$
312,198
$
185,991
Less: Allowance for loan and lease losses
9,394
6,918
4,513
3,051
2,143
Loans, net
$
889,998
$
760,873
$
454,167
$
309,147
$
183,848
As of December 31, 2003, 2002 and 2001, our total loans and leases, net of
unearned income, were $899.4 million, $767.8 million and $458.7 million,
respectively. The increase in our loan and lease volume during 2003 and 2001
resulted primarily from the growth of our operations. The significant increase
in our loan and lease volume in 2002 was largely the result of our acquisition
of Banco Financiero. Our total loans and leases, net of unearned income as a
percentage of total assets, however, declined to 68.1% in 2003 from 74.2% and
75.5% in 2002 and 2001, respectively, as growth in other assets, such as our
investment securities, outpaced the growth of our loan and lease portfolio.
Real estate secured loans, the largest component of our loan and lease
portfolio, consist primarily of commercial real estate loans and/or commercial
lines of credit that are extended to finance the purchase and/or improvement of
commercial real estate and/or businesses thereon or for business working
capital purposes. The properties may be either owner-occupied or for
investment purposes. Our loan policy adheres to the real estate loan
guidelines promulgated by the FDIC in 1993. The policy provides guidelines
including, among other things, review of appraised value, limitation on
loan-to-value ratio, and minimum cash flow requirements to service debt. Loans
secured by real estate equaled $321.3 million, $268.3 million and $161.8
million as of December 31, 2003, 2002 and 2001, respectively. The volume of
our real estate loans has increased significantly as a result of our growth and
as a result of our acquisition of Banco Financiero. In the acquisition, we
acquired real estate loans totaling $11.8 million. The percentage of our real
estate secured loans in relation to our total loan and lease portfolio,
however, has remained relatively constant. Real estate secured loans as a
percentage of total loans and leases were 35.7%, 34.9% and 35.3% for fiscal
years ended 2003, 2002 and 2001, respectively.
Lease financing contracts, the second largest component of our loan
portfolio, consist of automobile and equipment leases made through our leasing
group, EuroLease, to individuals and corporate customers. In the last two
years, we have deemphasized equipment leasing and focused on automobile
leasing. As of December 31, 2003, approximately 75.4% of our lease financing
contracts were for new automobiles, approximately 20.2% were for used
automobiles and the remaining 4.4% consisted primarily of construction and
medical equipment leases. The volume of our lease financing contracts
increased to $320.9 million, $259.5 million and $140.7 million at the end of
2003, 2002 and 2001, respectively. Lease financing contracts, as a percentage
of total loans and leases were 35.7%, 33.8% and 30.7% at the end of 2003, 2002
and 2001, respectively. In December 2001, we sold $9.0 million in lease
contracts to Banco Financiero de Puerto Rico. Upon the acquisition of Banco
Financiero in December 2002, these leases once again became part of our lease
portfolio. During June and December 2003, we sold lease contracts with
carrying values of $30.0 million and $20.0 million, respectively, to another
financial institution, while retaining servicing responsibilities. The lease
contracts sold in 2003 were sold on a limited recourse basis. The recourse is
limited to a maximum of 5.0% of the principle balance on any defaulted lease,
subject to an aggregate limitation of 5.0% on all of the leases sold.
Commercial and industrial loans include revolving lines of credit as well
as term business loans. Commercial and industrial loans increased to $179.7
million, $152.8 million and $107.0 million as of December 31, 2003, 2002 and
2001, respectively. The significant increase in commercial and industrial
loans in 2002 is attributable to our
57
Table of Contents
acquisition of Banco Financiero de Puerto Rico. Commercial and industrial
loans as a percentage of total loans were 20.0%, 19.9% and 23.3% at the end of
2003, 2002 and 2001, respectively.
Construction loans are not a significant part of our total loan portfolio.
Construction loans decreased to $48.5 million as of December 31, 2003 from
$54.9 million as of December 31, 2002. Construction loans were $32.5 million
as of December 31, 2001. Construction loans as a percentage of total loans and
leases were 5.4%, 7.2% and 7.1% as of December 31, 2003, 2002 and 2001,
respectively. Since we introduced our construction lending product in the year
2000, strategic objectives with respect to residential construction lending
have resulted in outstanding balances in the $40.0 million to $50.0 million
range, and at the end of 2003 outstanding balances of our construction loans
were $48.5 million. During 2003, a combination of factors led to a slight
decrease in loans in this category. Due to a slowdown in the economy and a
reduction in permits for private residential construction, acceptable risk
opportunities were not as plentiful in the market. This slowdown coupled with
our conservative underwriting strategy resulted in fewer lending opportunities.
Furthermore, a number of projects were completed and sold during the year
2003, and as a result the corresponding loans were paid down.
Consumer loans have historically represented a small part of our total
loan and lease portfolio. The majority of consumer loans consist of personal
installment loans, credit cards and consumer lines of credit. We make consumer
loans only to complement our commercial business, and these loans are not
emphasized by our branch managers. As a result, repayment on this portfolio
has generally exceeded or equaled origination, except for 2002, when we
acquired consumer loans in connection with our acquisition of Banco Financiero
de Puerto Rico. Consumer loans decreased to $26.6 million as of December 31,
2003, from $31.5 million as of December 31, 2002, as compared to $18.1 million
as of December 31, 2001. Consumer loans as a percentage of total loans and
leases were 3.0%, 4.1% and 3.9% at the end of 2003, 2002 and 2001,
respectively.
Our loan terms vary according to loan type. Commercial term loans
generally have maturities of three to five years, while we generally limit real
estate loan maturities to five to eight years. Lines of credit, in general,
are extended on an annual basis to businesses that need temporary working
capital and/or import/export financing. The following table shows our maturity
distribution of loans and leases as of the dates indicated. The table excludes
the nonaccrual loans in the amount of $17.1 million, and includes unearned
income and deferred fees totaling $2.9 million as of December 31, 2003.
As of December 31, 2003
Over 1 Year
through 5 Years
Over 5 Years
Floating or
Floating or
One Year
Fixed
Adjustable
Fixed
Adjustable
or Less
(1)
Rate
Rate
Rate
Rate
Total
(in thousands)
Real estate – construction
$
37,260
$
13,565
$
–
$
–
$
–
$
50,825
Real estate – secured
269,101
18,614
–
22,185
–
309,900
Commercial and industrial
120,976
46,568
–
9,165
–
176,709
Consumer
8,026
16,493
–
1,516
–
26,035
Leases
1,967
232,522
–
80,497
–
314,986
Other loans
4,145
–
–
–
–
4,145
Total
$
441,475
$
327,762
$
–
$
113,363
$
–
$
882,600
(1)
Maturities are based upon contract dates. Demand loans are included
in the one year or less category and totaled $199.9 million as of
December 31, 2003.
Nonperforming Loans, Leases and Assets
Nonperforming assets consist of loans and leases on nonaccrual status,
loans 90 days or more past due and still accruing interest, loans that have
been restructured resulting in a reduction or deferral of interest or
principal, OREO, and other repossessed assets.
The following table sets forth the amounts of nonperforming assets (net of
the portion guaranteed by the United States government) as of the dates
indicated:
58
Table of Contents
As of December 31,
2003
2002
2001
2000
1999
(dollars in thousands)
Loans contractually past due 90 days or more
but still accruing interest
$
9,700
$
6,171
$
3,668
$
2,688
$
2,834
Nonaccrual loans
17,058
15,889
6,540
4,921
3,256
Total nonperforming loans
26,758
22,060
10,208
7,609
6,090
Other real estate
2,774
1,963
29
535
790
Other repossessed assets
3,643
5,681
3,007
1,122
—
Total nonperforming assets
$
33,175
$
29,704
$
13,244
$
9,266
$
6,880
Nonperforming loans to total loans and leases
3.01
%
2.90
%
2.25
%
2.46
%
3.31
%
Nonperforming assets to total loans and
leases plus repossessed property
3.70
3.87
2.90
2.98
3.73
Nonperforming assets to total assets
2.51
2.87
2.18
2.05
2.25
We continuously review present and estimated future performance of the
loans and leases within our portfolio and risk-rate such loans in accordance
with a risk rating system. Loans are generally placed on nonaccrual status
when they become 90 days past due, unless we believe the loan is adequately
collateralized and we are in the process of collection. The nonrecognition of
interest income on an accrual basis does not constitute forgiveness of the
interest, and collection efforts are continuously pursued. Loans may be
restructured by management when a borrower has experienced some change in
financial status, resulting in an inability to meet the original repayment
terms, and when we believe the borrower will eventually overcome financial
difficulties and repay the loan in full.
Generally, our nonperforming loans and leases have increased in connection
with the growth of our loan and lease portfolio. The recent economic downturn
further increased our nonperforming loans and leases to $26.8 million, $22.1
million and $10.2 million as of December 31, 2003, 2002 and 2001, respectively,
as compared with $7.6 million and $6.1 million as of December 31, 2000 and
1999, respectively. The ratio of nonperforming loans and leases over total
loans and leases increased to 3.0% and 2.9% as of December 31, 2003 and 2002,
respectively, compared to 2.3% as of December 31, 2001.
OREO consists of properties acquired by foreclosure or similar means and
that management intends to offer for sale. Other repossessed assets are
comprised primarily of repossessed automobiles and equipment subject to lease
contracts. OREO and repossessed assets are initially recorded at fair value.
Any resulting loss is charged to the allowance for loan and lease losses. An
appraisal of OREO and repossessed assets is made periodically after a property
is acquired, and a comparison between the appraised value and the carrying
value is performed. Additional declines in value after acquisition, if any,
are charged to current operations. Gains or losses on disposition of OREO and
repossessed assets, and related operating income and maintenance expenses, are
included in current operations.
As of December 31, 2003, our OREO consisted of 13 properties with an
aggregate value of $2.8 million, compared to 10 properties with an aggregate
value of $2.0 million as of December 31, 2002, and one property valued at
$29,000 as of December 31, 2001. The significant increase in OREO in 2002 from
2001 is primarily attributable to eight properties acquired in the Banco
Financiero de Puerto Rico acquisition in December 2002.
Other repossessed assets as of December 31, 2003, 2002 and 2001 were $3.6
million, $5.7 million and $3.0 million, respectively. The increase in volume
of repossessed assets from 1999 to 2002 was attributable to increases in
volumes of our automobile lease originations. As our volume of lease
financings has increased, in order to avoid building our inventory of
repossessed automobiles, we have been more aggressive in our disposition
efforts. The reduction in repossessed assets during 2003 was attributable to
these increased disposition efforts.
Together with OREO, the ratio of nonperforming assets as a percentage of
total loans and leases plus repossessed property improved in 2003 to 3.7%, from
3.9% in 2002, compared to 2.9% as of December 31, 2001.
Allowance for Loan and Lease Losses
We have established an allowance for loan and lease losses to provide for
loans in our portfolio that may not be repaid in their entirety. The allowance
is based on our regular, monthly assessments of the probable estimated
59
Table of Contents
losses inherent in the loan and lease portfolio. Our methodology for
measuring the appropriate level of the allowance relies on several key
elements, which include the formula described below, specific allowances for
identified problem loans and portfolio segments and the unallocated allowance.
The formula portion of our allowance is calculated by applying loss
factors to all categories of loans and leases outstanding in our portfolio. We
use historic loss rates, determined over a period of years, plus migration
analysis techniques. The resulting loss factors are then multiplied against
the current period's balance of loans outstanding to derive an estimated loss.
We adjust the historical loss percentage for each pool of loans to reflect any
current conditions that are expected to result in loss recognition. Factors
that we consider include, but are not limited to:
•
effects of any changes in lending policies and procedures,
including those for underwriting, collection, charge-offs, and
recoveries;
•
changes in the experience, ability and depth of our lending
management and staff;
•
concentrations of credit that might affect loss experience
across one or more components of the portfolio;
•
levels of, and trends in, delinquencies and nonaccruals; and
•
national and local economic business trends and conditions.
Specific allowances are established in cases where management has
identified significant conditions or circumstances related to a credit that
management believes indicate a high probability that a loss will be incurred.
This amount may be determined either by a method prescribed by SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, or by a method that
identifies certain qualitative factors.
The unallocated portion of the allowance contains amounts that are based
on management's evaluation of conditions that are not directly measured in the
determination of the formula and specific allowances. The evaluation of the
inherent loss with respect to these conditions is subject to a higher degree of
uncertainty because they are not identified with specific problem credits or
portfolio segments. The conditions evaluated in connection with the
unallocated portion of the allowance include the following:
•
general economic and business conditions affecting our key
lending areas;
•
then-existing economic and business conditions of areas
outside the lending areas, such as other sections of the United
States and Caribbean;
•
credit quality trends, including trends in nonperforming
loans and leases expected to result from existing conditions;
•
loan and lease concentrations by collateral and by obligor;
•
specific industry conditions within portfolio segments;
•
recent loss experience in particular segments of the portfolio;
•
duration of the current business cycle;
•
bank regulatory examination results and guidance; and
•
findings of our internal and external loan review examiners.
Our loan review officer reviews these conditions on an ongoing basis in
discussion with our executive management, senior lenders and credit officers.
To the extent that any of these conditions is evidenced by a specifically
identifiable problem credit or portfolio segment as of the evaluation date,
management's estimate of the effect of such condition may be reflected as a
specific allowance, applicable to such loan or portfolio segment. When any of
these conditions is not evidenced by a specifically identifiable problem loan
or portfolio segment, management's evaluation of the probable loss related to
such conditions is reflected in the unallocated portion of the allowance.
60
Table of Contents
Although our management believes that the allowance for loan and lease
losses is adequate to absorb probable losses on existing loans that may become
uncollectible, there can be no assurance that our allowance will prove
sufficient to cover actual loan and lease losses in the future. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the adequacy of our allowance for loan and lease losses.
Such agencies may require us to make additional provisions to the allowance
based upon their judgments about information available to them at the time of
their examinations.
The table below summarizes, for the periods indicated, loan balances at
the end of each period, the daily averages during the period, changes in the
allowance for loan and lease losses arising from loans and leases charged-off,
recoveries on loans and leases previously charged-off, and additions to the
allowance, and certain ratios related to the allowance for loan and lease
losses:
Year Ended December 31,
2003
2002
2001
2000
1999
(dollars in thousands)
Average total loans and leases outstanding
during period
$
842,033
$
577,995
$
383,970
$
246,352
$
161,880
Total loans and leases outstanding at end
of period
$
899,392
$
767,791
$
458,680
$
312,198
$
185,991
Allowance for loan and lease losses:
Allowance at beginning of period
6,918
4,513
3,051
2,143
2,033
Charge-offs:
Real estate – construction
–
–
–
–
–
Real estate – secured
–
–
–
–
30
Commercial and industrial
966
887
290
125
512
Consumer
1,347
1,717
710
553
827
Leases
2,715
767
339
55
3
Other loans
37
16
57
33
45
Total charge-offs
$
5,065
$
3,387
$
1,396
$
766
$
1,417
Recoveries:
Real estate – construction
–
–
–
–
–
Real estate – mortgages
–
–
–
–
6
Commercial and industrial
160
97
201
126
204
Consumer
254
180
182
190
208
Leases
675
142
96
15
6
Other loans
1
2
2
–
–
Total recoveries
$
1,090
$
421
$
481
$
331
$
424
Net loan charge-offs
3,975
2,967
915
435
993
Provision for loan and lease losses
6,451
3,354
2,377
1,343
1,103
Allowance acquisition — Banco Financiero
–
2,018
–
–
–
Allowance at end of period
$
9,394
$
6,918
$
4,513
$
3,051
$
2,143
Ratios:
Net loan charge-offs to average total loans
0.47
%
0.51
%
0.24
%
0.18
%
0.61
%
Allowance for loan and lease losses to total loans
at end of period
1.04
0.90
0.98
0.98
1.15
Net loan charge-offs to allowance for loan
losses at end of period
42.31
42.89
20.27
14.26
46.34
Net loan charge-offs to provision for
loan and lease losses
61.62
55.23
38.49
32.39
90.03
The rapid growth of our loan and lease portfolio in the past five years
required an increased allowance for loan and lease losses. The allowance for
loan and lease losses increased by 35.8%, or $2.5 million, to $9.4 million as
of December 31, 2003, from $6.9 million as of December 31, 2002, as compared to
$4.5 million as of December 31, 2001. Despite the increases from provisions in
our allowance for loan and lease loss, the rapid growth of our loan portfolio
lowered the allowance for loan and lease losses as a percentage of total loans
and leases from 1.0% at the end of 2001 to 0.9% at the end of 2002. However,
the allowance for loan and lease losses as a percentage of total loans and
leases increased to 1.0% in 2003 in connection with our decision to amend our
credit policy to charge off
61
Table of Contents
a portion of our lease finance contracts that are over 120 days past due.
We have established a recourse liability reserve for the estimated losses on
this limited reserve.
Net charge-offs to average total loans and leases decreased to 0.47% in
2003 when compared to 0.51% in 2002 and 0.24% in 2001. Increases in these
ratios for 2003 and 2002, when compared to 2001, were primarily due to the
following:
•
in 2003, we amended our credit policy to require the charging
off of a portion of our lease financing contracts that were over 120
days past due; and
•
in 2002, additional charge-offs were taken after our
acquisition of Banco Financiero, primarily of commercial and lease
financing contracts acquired in the acquisition.
The table below presents an allocation for loan and lease losses among the
various loan categories and sets forth the percentage of loans and leases in
each category to gross loans or leases. The allocation of the allowance for
loan and lease losses as shown in the table should neither be interpreted as an
indication of future charge-offs, nor as an indication that charge-offs in
future periods will necessarily occur in these amounts or in the indicated
proportions:
As of December 31,
2003
2002
2001
2000
1999
Loan
Loan
Loan
Loan
Loan
Category
Category
Category
Category
Category
to Gross
to Gross
to Gross
to Gross
to Gross
Amount
Loans(1)
Amount
Loans
(1)
Amount
Loans
(1)
Amount
Loans
(1)
Amount
Loans
(1)
(dollars in thousands)
Allocated:
Real estate – construction
$
464
5.38
%
$
495
7.13
%
$
249
7.03
%
$
41
2.55
%
$
0
0.00
%
Real estate – secured
1,212
35.65
1,037
34.81
753
0.00
490
39.03
115
46.86
Commercial and industrial
4,067
19.94
2,265
19.83
1,589
23.14
1,232
26.51
1,363
34.00
Consumer
750
2.95
992
4.09
535
3.91
489
5.56
504
9.16
Leases
1,950
35.60
1,825
33.67
1,360
30.41
785
25.70
143
9.18
Other loans
21
0.46
18
0.48
13
0.54
10
0.65
7
0.80
Unallocated
930
–
286
–
14
–
4
–
11
–
Total allowance for loan
and lease losses
$
9,394
100.00
%
$
6,918
100.00
%
$
4,513
65.03
%
$
3,051
100.00
%
$
2,143
100.00
%
(1)
Excludes mortgage loans held-for-sale.
Nonearning Assets
Premises, leasehold improvements and equipment, net of accumulated
depreciation and amortization, totaled $10.5 million at December 31, 2003 as
compared to $9.4 million at December 31, 2002 and $8.7 million at December 31,
2001. We have no definitive agreements regarding acquisition or disposition of
owned or leased facilities and, for the near-term future, we do not expect
significant changes in our total occupancy expense. However, the timing and
amount of capital expenditures and recoveries will likely be asynchronous. We
expect total net capital investment to be less than $[   ] million over the
next two years.
Deposits
Deposits are our primary source of funds. The following table sets forth,
for the periods indicated, the distribution of our average deposit account
balances and average cost of funds on each category of deposits:
62
Table of Contents
Year Ended December 31,
2003
2002
2001
Average
Percent
Average
Average
Percent
Average
Average
Percent
Average
Balance
of Deposits
Rate
Balance
of Deposits
Rate
Balance
of Deposits
Rate
(dollars in thousands)
Noninterest-bearing
demand deposits
$
92,643
10.09
%
–
%
$
73,189
12.03
%
–
%
$
60,673
14.43
%
–
%
Money market deposits
47,896
5.21
2.70
26,843
4.41
3.51
7,020
1.67
3.29
NOW deposits
26,579
2.89
2.14
18,939
3.11
3.00
15,867
3.77
3.13
Savings deposits
197,242
21.47
2.95
98,408
16.18
3.53
52,706
12.53
3.70
Time certificates of
deposit in
denominations of
$100,000 or more
176,216
19.18
3.03
131,728
21.65
3.71
113,923
27.10
5.38
Brokered
certificates of
deposits
216,395
23.55
4.19
156,983
25.81
4.78
82,780
19.69
6.06
Other time deposits
161,811
17.61
3.28
102,230
16.81
4.01
87,486
20.81
%
5.31
Total deposits
$
918,782
100.00
%
$
608,320
100.00
%
$
420,455
100.00
%
Total deposits as of December 31, 2003, 2002 and 2001 were $984.5 million,
$843.0 million and $485.7 million, respectively, representing an increase of
$141.5 million, or 16.8%, in 2003 and $357.3 million, or 73.6%, in 2002.
Average deposits for the years ended December 31, 2003, 2002 and 2001 were
$918.8 million, $608.3 million and $420.5 million, respectively. Thus, average
deposits grew by $310.5 million, or 51.0%, in 2003, and by $187.9 million, or
44.7%, in 2002. The dramatic increase in average deposits in 2003 is the
result of our December 2002 acquisition of Banco Financiero. Our methodology
for calculating average deposits and the timing of the acquisition causes the
related increase to show up in our average deposits for 2003, instead of for
2002. We assumed $84.2 million in deposits in connection with our acquisition
of Banco Financiero.
Our core deposits increased by 27.0% in 2003 to $572.3 million, following
an increase of 76.8% in 2002 to $450.5 million from $254.8 million in 2001. As
a result, the percentage of our core deposits to total deposits increased to
58.1% from 53.4% in 2002 and 52.5% in 2001. We attribute growth in our core
deposits both to our organic growth and also to the increasing number of
deposits from our expanding commercial lending customer base. The average rate
paid on time deposits in denominations of $100,000 or more was 3.7%, 4.3% and
5.7% for the years ended December 31, 2003, 2002 and 2001, respectively.
In addition to the deposits we generate locally, we have also accepted
brokered deposits to augment retail deposits and to fund asset growth. In
order to take advantage of historically low funding costs, we increased
brokered deposits to $228.2 million and $214.7 million as of December 31, 2003
and 2002, respectively, from $102.0 million as of December 31, 2001. Most of
our brokered deposits have maturities of one to seven years. Because brokered
deposits are generally more volatile and interest rate sensitive than other
sources of funds, management closely monitors growth in this category.
The following table sets forth the amount and maturities of the time
deposits of $100,000 or more as of December 31, 2003:
December 31, 2003
(in thousands)
Three months or less
$
87,453
Over three months through six months.
32,989
Over six months through 12 months
58,601
Over 12 months
227,170
Total
$
406,213
63
Table of Contents
Other
Sources of Funds
Securities
Sold Under Agreements to Repurchase
To support our asset base, we sell securities subject to obligations to
repurchase to securities dealers and the FHLB. These repurchase transactions
generally have maturities of one month to less than five years. The following
table summarizes certain information with respect to securities under
agreements to repurchase for fiscal years 2003, 2002 and 2001:
Year Ended December 31,
2003
2002
2001
(dollars in thousands)
Balance at year-end
$
207,523
$
64,113
$
27,364
Average monthly aggregate balance
outstanding during the year
92,069
44,472
40,823
Maximum aggregate balance outstanding at
any month-end
207,523
64,113
63,804
Weighted average interest rate for the year
1.71
%
2.60
%
4.54
%
Weighted average interest rate at year-end.
1.25
2.04
2.43
FHLB Advances
Although deposits and repurchase agreements are the primary source of
funds for our lending and investment activities and for general business
purposes, we may obtain advances from the Federal Home Loan Bank of New York as
an alternative source of liquidity. The following table provides a summary of
FHLB advances for fiscal years 2003, 2002 and 2001:
Year Ended December 31,
2003
2002
2001
(dollars in thousands)
Balance at year-end
$
10,700
$
18,850
$
15,250
Average balance during the year
14,954
18,186
15,053
Maximum amount outstanding at any
month-end
18,850
18,850
15,250
Average interest rate during the year
5.30
%
5.73
%
6.11
%
Average interest rate at year-end
5.64
5.66
5.97
Junior Subordinated Debentures; Trust Preferred Securities
On December 19, 2002, Eurobank Statutory Trust II ("Trust II") issued $20
million of floating rate Trust Preferred Capital Securities (the "Trust II
Preferred Securities") due in 2032 with a liquidation amount of $1,000 per
security. Distributions payable on each capital security will be payable at an
annual rate equal to 4.7% beginning on (and including) the date of original
issuance and ending on (but excluding) March 26, 2003, and at an annual rate
for each successive period equal to the three-month London Interbank Offered
Rate (LIBOR), plus 3.3% with a ceiling rate of 11.8%. The Trust II Preferred
Securities are fully and unconditionally guaranteed by EuroBancshares.
Following the issuance of the Trust II Preferred Securities by Trust II,
EuroBancshares issued $20.6 million of floating rate Junior Subordinated
Deferrable Interest Debentures (the "2002 Debentures") due in 2032 to Trust II.
The terms of the 2002 Debentures, which comprise substantially all of the
assets of Trust II, are identical to the terms of the Trust II Preferred
Securities. The 2002 Debentures are conditionally guaranteed by
EuroBancshares. Eurobank subsequently issued an unsecured promissory note to
EuroBancshares for the issued amount and at an annual rate equal to that being
paid on the Trust II Preferred Securities. See
"Recent accounting
pronouncements,"
below.
On December 18, 2001, Eurobank Statutory Trust I ("Trust I") issued $25.0
million of floating rate Trust Preferred Capital Securities Series I ("Trust I
Preferred Securities") due in 2031 with a liquidation amount of $1,000 per
security. Distributions payable on each Trust I Preferred Security will be
payable at an annual rate equal to
64
Table of Contents
5.6% beginning on (and including) the date of original issuance and ending
on (but excluding) March 18, 2002, and at an annual rate for each successive
period equal to the three-month LIBOR, plus 3.6% with a ceiling rate of 12.5%.
The Trust I Preferred Securities are fully and unconditionally guaranteed by
EuroBancshares, which was a wholly owned subsidiary of Eurobank in 2001.
Following the issuance of the Trust I Preferred Securities, EuroBancshares
issued $25.8 million of floating rate Junior Subordinated Deferrable Interest
Debentures (the "2001 Debentures") to Trust I due in 2031. The terms of the
2001 Debentures, which comprise substantially all of the assets of Trust I, are
equal to the terms of the capital securities issued by Trust I. These trust
preferred securities are conditionally guaranteed by EuroBancshares. Eurobank
subsequently issued an unsecured promissory note to us for the issued amount
and at an annual rate equal to that being paid on the Trust Preferred Capital
Securities Series I due in 2031.
Capital Resources and Capital Adequacy Requirements
We are subject to various regulatory capital requirements administered by
federal banking agencies. Failure to meet minimum capital requirements can
trigger regulatory actions that could have a material adverse effect on our
business, financial condition, results of operations, cash flows and/or future
prospects. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, we must meet specific capital guidelines that rely on
quantitative measures of our assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. Our capital amounts
and classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
We monitor compliance with bank regulatory capital requirements, focusing
primarily on the risk-based capital guidelines. Under the risk-based capital
method of capital measurement, the ratio computed is dependent on the amount
and composition of assets recorded on the balance sheet and the amount and
composition of off-balance sheet items, in addition to the level of capital.
Generally, Tier 1 capital includes common stockholders' equity our Series A
Preferred Stock, our junior subordinated debentures (subject to certain
limitations) less goodwill. Total capital represents Tier 1 plus the allowance
for loan and lease loss (subject to certain limits).
In the past three years, our primary sources of capital have been
internally generated operating income through retained earnings and capital
derived from the issuance of the 2001 and 2002 Debentures. Specifically, in
the last year we have raised $20.9 million in regulatory tier 1 capital and
$24.1 supplemental capital (regulatory tier 2 capital) through the issuance of
the Debentures. As of December 31, 2003, 2002 and 2001 total stockholders'
equity was $65.1 million, $57.3 million and $47.8 million, respectively.
Increases in stockholders' equity during this period are attributable primarily
to internally generated operating income and stock option exercises.
As of December 31, 2003, we and Eurobank both qualified as
"well-capitalized" institutions under the regulatory framework for prompt
corrective action. The following table presents the regulatory standards for
well-capitalized institutions, compared to our capital ratios for Eurobank as
of the dates specified:
To Be Well Capitalized Under
For Minimum Capital Adequacy
Prompt Corrective Action
Actual
Purposes
Provision
Amount Is
Ratio Is
Amount Must Be
Ratio Must Be
Amount Must Be
Ratio Must Be
(dollars in thousands)
As of December 31, 2003:
Total Capital (to Risk Weighted Assets)
EuroBancshares, Inc.
$
117,934
11.60
%
>$81,308
>8.00
%
N/A
Eurobank
117,614
11.57
>81,315
>8.00
>$101,643
>10.00
%
Tier 1 Capital (to Risk Weighted Assets)
EuroBancshares, Inc.
84,400
8.30
>40,654
>4.00
N/A
Eurobank
75,638
7.44
>40,657
>4.00
>60,986
>6.00
Leverage (to average assets)
EuroBancshares, Inc.
84,400
6.76
>49,958
>4.00
N/A
Eurobank
75,638
6.06
>49,958
>4.00
>50,822
>5.00
As of December 31, 2002:
Total Capital (to Risk Weighted Assets)
EuroBancshares, Inc.
$
105,461
12.79
%
>65,952
>8.00
%
N/A
65
Table of Contents
To Be Well Capitalized Under
For Minimum Capital Adequacy
Prompt Corrective Action
Actual
Purposes
Provision
Amount Is
Ratio Is
Amount Must Be
Ratio Must Be
Amount Must Be
Ratio Must Be
(dollars in thousands)
Eurobank
104,033
12.78
>65,960
>8.00
>$82,450
>10.00
%
Tier 1 Capital (to Risk Weighted Assets)
EuroBancshares, Inc.
71,110
8.63
>32,976
>4.00
N/A
Eurobank
64,692
7.99
>32,980
>4.00
>49,470
>6.00
Leverage (to average assets)
EuroBancshares, Inc.
71,110
7.93
>35,879
>4.00
N/A
Eurobank
64,692
7.37
>35,879
>4.00
>41,225
>5.00
As of December 31, 2001:
Total Capital (to Risk Weighted Assets)
EuroBancshares, Inc.
N/A
N/A
N/A
N/A
N/A
Eurobank
$
75,677
15.26
%
>$39,668
>8.00
%
>$49,592
>10.00
%
Tier 1 Capital (to Risk Weighted Assets)
EuroBancshares, Inc.
N/A
N/A
N/A
N/A
N/A
Eurobank
47,443
9.57
>19,834
>4.00
>29,755
>6.00
Leverage (to average assets)
EuroBancshares, Inc.
N/A
N/A
N/A
N/A
N/A
Eurobank
47,433
8.27
>22,947
>4.00
>24,796
>5.00
Liquidity Management
Maintenance of adequate liquidity requires that sufficient resources be
available at all times to meet our cash flow requirements. Liquidity in a
banking institution is required primarily to provide for deposit withdrawals
and the credit needs of customers and to take advantage of investment
opportunities as they arise. Liquidity management involves our ability to
convert assets into cash or cash equivalents without incurring significant
loss, and to raise cash or maintain funds without incurring excessive
additional cost. For this purpose, we maintain a portion of our funds in cash
and cash equivalents, deposits in other financial institutions and loans and
securities available for sale. Our liquid assets as of December 31, 2003, 2002
and 2001 totaled approximately $144.0 million, $137.0 million and $65.0
million, respectively. Our liquidity level measured as a percentage of net
cash, short-term and marketable assets to net deposits and short-term
liabilities was 15.2%, 16.9% and 14.3% as of December 31, 2003, 2002 and 2001,
respectively.
As a secondary source of liquidity, we rely on advances from the FHLB to
supplement our supply of lendable funds and to meet deposit withdrawal
requirements. Advances from the FHLB are typically secured by qualified
residential and commercial mortgage loans, and investment securities. Advances
are made pursuant to several different programs. Each credit program has its
own interest rate and range of maturities. Depending on the program,
limitations on the amount of advances are based either on a fixed percentage of
an institution's net worth or on the FHLB's assessment of the institution's
creditworthiness. Other funding alternatives available are local and United
States conventional and brokered time deposits, unsecured lines of credit with
correspondent banks, borrowing lines with brokers and the Federal Reserve Bank
of New York. Our target liquidity ratio established in our Liquidity Policy of
liquid assets as a percentage of net deposits and short-term liabilities is
10.0%.
In addition to the normal influx of liquidity from core deposit growth,
together with repayments and maturities of loans and investments, we utilize
brokered and out-of-market certificates of deposit, FHLB borrowings and
broker-dealer repurchase agreements to meet our liquidity needs. The FHLB
borrowings are collateralized by first mortgage residential loans, selected
investment securities and FHLB stock. Pre-approved repurchase agreement
availability with major brokers and banks totaled $270.0 million at December
31, 2003, subject to acceptable unpledged marketable securities available for
sale. In addition, Eurobank is able to borrow from the Federal Reserve Bank
using securities as collateral. Eurobank also maintains pre-approved overnight
borrowing lines at various correspondent banks, which provided additional
short-term borrowing capacity of $7.0 million at December 31, 2003.
66
Table of Contents
During 2003, asset growth was funded with growth in deposits and
borrowings. The deposit growth was distributed as follows: $19.3 million in
demand deposits; $83.6 million in savings accounts; $29.1 million in time
deposits of which $13.5 million was comprised of brokered deposits. The
increase in the level of borrowings was primarily attributable to securities
sold under agreements to repurchase of $143.4 million. During 2003, cash
inflows from operating activities exceeded cash outflows by $7.2 million.
During 2002, asset growth was funded with growth in deposits and
borrowings. The deposit growth was distributed as follows: $101.4 million in
demand deposits; $80.0 million in savings accounts; $225.9 million in time
deposits of which $112.7 million was comprised of brokered deposits. The
increase in the level of borrowings was primarily attributable to securities
sold under agreements to repurchase of $36.7 million and the issuance of $26.6
million of junior subordinated debentures. During 2002, cash inflows from
operating activities exceeded cash outflows by $9.7 million.
During 2001, asset growth was funded with growth in deposits and
borrowings. The deposit growth was distributed as follows: $17.1 million in
demand deposits; $17.4 million in savings accounts; $100.8 million in time
deposits of which $42.3 million was comprised of brokered deposits. The
increase in the level of borrowings was primarily attributable to notes payable
and the issuance of $29.0 million of junior subordinated debentures. During
2001, cash outflows from operating activities exceeded cash inflows by $4.6
million.
Our net cash outflows from investment activities for the years 2003, 2002
and 2001 were $279.3 million, $349.3 million and $140.9 million, respectively.
The higher net investing cash outflows experienced in 2003 were primarily due
to growth in the investment securities portfolio, which provided additional
collateral in that year to support wholesale funding increases. In 2002 and
2001, the higher net investing outflow was attributable to growth of our loan
and lease portfolio.
Our net cash inflows from financing activities for the years 2003, 2002
and 2001 were $277.0 million, $333.6 million and $147.1 million, respectively.
In 2003 and 2002, the net financing cash inflows were primarily provided by
deposit and repurchase agreements growth. In 2001, the net financing cash
inflows were primarily provided by deposit and trust preferred securities
growth.
Quantitative and Qualitative Disclosure About Market Risks
Interest rate risk is the most significant market risk affecting us.
Other types of market risk, such as foreign currency risk and commodity price
risk, do not arise in the normal course of our business activities. Interest
rate risk can be defined as the exposure to a movement in interest rates that
could have an adverse effect on our net interest income or the market value of
our financial instruments. The ongoing monitoring and management of this risk
is an important component of our asset and liability management process, which
is governed by policies established by Eurobank's Board of Directors and
carried out by Eurobank's Asset/Liability Management Committee. The
Asset/Liability Management Committee's objectives are to manage our exposure to
interest rate risk over both the one year planning cycle and the longer term
strategic horizon and, at the same time, to provide a stable and steadily
increasing flow of net interest income. Interest rate risk management
activities include establishing guidelines for tenor and repricing
characteristics of new business flow, the maturity ladder of wholesale funding,
investment security purchase and sale strategies and mortgage loan sales, as
well as derivative financial instruments.
Our primary measurement of interest rate risk is earnings at risk, which
is determined through computerized simulation modeling. The primary simulation
model assumes a static balance sheet, using the balances, rates, maturities and
repricing characteristics of all of the Bank's existing assets and liabilities,
including off-balance sheet financial instruments. Net interest income is
computed by the model assuming market rates remaining unchanged and compares
those results to other interest rate scenarios with changes in the magnitude,
timing and relationship between various interest rates. As of December 31,
2003, we modeled rising ramp and declining interest rate simulations in 100
basis point increments over a 12-month period. The impact of imbedded options
in such products as callable and mortgage-backed securities, real estate
mortgage loans and callable borrowings were considered. Changes in net
interest income in the rising and declining rate scenarios are then measured
against the net interest income in the rates unchanged scenario. The
Asset/Liability Management Committee utilizes the results of the model to
quantify the estimated exposure of net interest income to sustained interest
rate changes.
67
Table of Contents
In December 31, 2003 simulations, our models indicated an exposure in the
level of net interest income to rising rates for a 12-month period. The
hypothetical rate scenarios consider a change of 100 and 200 basis points
during a 12-month period. The decreasing rate scenarios have a floor of 200
basis points. This floor causes liabilities to have little cost reduction,
while assets do have a decrease in yields, causing a small loss in declining
rate simulations of 200 basis points. The net interest income at risk for year
one in the 100 basis point falling rate scenario was calculated at $518,000, or
4.4%, higher than the net interest income in the rates unchanged scenario, and
$879,000, or 2.2%, lower than the net interest income in the rates unchanged
scenario at the December 31, 2003 simulation with a 200 basis point falling.
This exposure was well within our policy guidelines of 15.0%. The net interest
income for year one in the 100 basis point rising rate scenario was calculated
to be $520,000, or 1.3%, lower than the net interest income in the rates
unchanged scenario, and $1.0 million, or 2.6%, lower than the net interest
income in the rate unchanged scenario at the December 31, 2003 simulation with
a 200 basis point increase. Computation of prospective effects of hypothetical
interest rate changes are based on numerous assumptions, including relative
levels of market interest rates, loan and security prepayments, deposit
run-offs and pricing and reinvestment strategies and should not be relied upon
as indicative of actual results. Further, the computations do not contemplate
any actions we may take in response to changes in interest rates. We cannot
assure you that our actual net interest income would increase or decrease by
the amounts computed by the simulations. The following table indicates the
estimated impact on net interest income under various interest rate scenarios
as of December 31, 2003:
Change in Future Net Interest Income
As of December 31, 2003
Dollar Change
Percentage Change
Change in interest rates
(dollars in thousands)
+200 basis points over one year
$
(1,042
)
(2.62
)%
+100 basis points over one year
(520
)
(1.31
)
-100 basis points over one year
518
4.39
-200 basis points over one year
(879
)
(2.21
)
We also monitor the repricing terms of our assets and liabilities through
gap matrix reports for the rates in unchanged, rising and falling interest rate
scenarios. The reports illustrate, at designated time frames, the dollar
amount of assets and liabilities maturing or repricing.
The following table sets forth, on a stand-alone basis, Eurobank's amounts
of interest-earning assets and interest-bearing liabilities outstanding at
December 31, 2003, which we anticipate, based upon certain assumptions, to
reprice or mature in each of the future time periods shown. The projected
repricing of assets and liabilities anticipates prepayments and scheduled rate
adjustments, as well as contractual maturities under an interest rate unchanged
scenario within the selected time intervals. While we believe such assumptions
are reasonable, we cannot assure you that assumed repricing rates will
approximate our actual future deposit activity.
68
Table of Contents
As of December 31, 2003
Volumes Subject to Repricing Within
0-1
2-180
181-365
1-3
Over 3
Non-interest
Days
Days
Days
Years
Years
Sensitive
Total
(dollars in thousands)
Assets:
Short-term investments and
federal funds sold
$
39,808
$
—
$
—
$
—
$
—
$
—
$
39,808
Investment securities and
FHLB/ Federal Reserve Bank
stock
13,242
29,410
135,704
149,924
—
328,280
Loans
234,412
110,491
52,229
251,753
246,563
—
895,448
Fixed and other assets
—
—
—
—
—
57,397
57,397
Total assets
$
274,220
$
123,733
$
81,639
$
387,457
$
396,487
$
57,397
$
1,320,934
Liabilities and Stockholders'
Equity:
Interest-bearing checking,
savings and money market
accounts
$
—
$
48,865
$
—
$
—
$
258,481
$
104,758
$
412,104
Certificates of deposit
—
174,729
95,105
197,687
104,924
—
572,445
Borrowed funds
—
178,297
7,500
35,119
43,700
—
264,616
Other liabilities
—
—
—
—
—
6,694
6,694
Stockholders' equity
65,075
65,075
Total liabilities and
stockholders' equity
$
—
$
401,891
$
102,605
$
232,806
$
407,105
$
176,527
$
1,320,934
Period gap
$
274,220
$
(278,158
)
$
(20,966
)
$
154,651
$
(10,618
)
$
119,129
Cumulative gap
274,220
(3,938
)
(24,904
)
129,747
119,129
Period gap to total assets
21.72
(21.06
%)
(1.59
%)
11.71
%
(0.80
%)
Cumulative gap to total assets
21.72
(0.30
)
(1.89
)
9.82
9.02
Cumulative interest-earning
assets to cumulative
interest-bearing liabilities
N/A
99.02
%
95.06
%
117.60
%
110.41
%
Certain shortcomings are inherent in the method of analysis presented in
the gap table. For example, although certain assets and liabilities may have
similar maturities or periods of repricing, they may react in different degrees
to changes in market interest rates. Additionally, certain assets, such as
adjustable-rate loans, have features that restrict changes in interest rates,
both on a short-term basis and over the life of the asset. More importantly,
changes in interest rates, prepayments and early withdrawal levels may deviate
significantly from those assumed in the calculations in the table. As a result
of these shortcomings, we focus more on earnings at risk simulation modeling
than on gap analysis. Even though the gap analysis reflects a ratio of
cumulative gap to total assets within acceptable limits, the earnings at risk
simulation modeling is considered by management to be more informative in
forecasting future income at risk.
Finally, we also monitor core funding utilization in each interest rate
scenario as well as market value of equity. These measures are used to
evaluate long-term interest rate risk beyond the two-year planning horizon.
Aggregate Contractual Obligations
The following table represents our on and off-balance sheet aggregate
contractual obligations, other than deposit liabilities, to make future
payments to third parties as of the date specified:
As of December 31,
One Year To Three
Over Three Years To
Less than One Year
Years
Five Years
Over Five Years
(in thousands)
FHLB advances
$
2,500
$
7,000
$
1,200
$
—
Junior subordinated debenture
—
—
—
46,393
Operating leases
1,792
3,332
1,985
7,710
Total
$
4,292
$
10,332
$
3,185
$
54,103
69
Table of Contents
Off-balance Sheet Arrangements
During the ordinary course of business, we provide various forms of credit
lines to meet the financing needs of our customers. These commitments, which
have a term of less than one year, represent a credit risk and are not
represented in any form on our balance sheets.
As of December 31, 2003, 2002, and 2001, we had commitments to extend
credit of $152.7 million, $135.0 million, and $103.0 million, respectively.
These commitments included standby letters of credit of $2.7 million, $2.7
million, and $1.9 million, for 2003, 2002 and 2001, respectively, and
commercial letters of credit of $977,000, $1.3 million, and $744,000 for the
same periods.
The effect on our revenues, expenses, cash flows and liquidity of the
unused portions of these commitments cannot reasonably be predicted because
there is no guarantee that the lines of credit will be used. For more
information regarding our off-balance sheet arrangements, see
"Note 24-
Financial Instruments with Off-Balance-Sheet Risk"
to our consolidated
financial statements.
Recent Accounting Pronouncements
In December 2003, SFAS No. 132 (revised),
Employers' Disclosures about
Pensions and Other Postretirement Benefits
, was issued. SFAS No. 132 (revised)
prescribes employers' disclosures about pension plans and other postretirement
benefit plans; it does not change the measurement or recognition of those
plans. The statement retains and revises the disclosure requirements contained
in the original SFAS No. 132. It also requires additional disclosures about
the assets, obligations, cash flows and net periodic benefit cost of
defined-benefit pension plans and other postretirement benefit plans. The
statement generally is effective for fiscal years ending after December 15,
2003. The adoption of SFAS No. 132 (revised) had no effect on our financial
statements.
In December 2003, the Accounting Standards Executive Committee issued
Statement of Position 03 -3 (SOP 03-3),
Accounting for Certain Loans or Debt
Securities Acquired in a Transfer
. This statement addresses accounting for
differences between contractual cash flows and cash flows expected to be
collected from an investor's initial investment in loans or debt securities
acquired in a transfer if those differences are attributable, at least in part,
to credit quality. SOP 03-3 does not apply to loans originated by the entity.
SOP 03-3 limits the yield that may be accreted (accretable yield) to the excess
of the investor's estimate of undiscounted expected principal, interest, and
other cash flows (cash flows expected at acquisition to be collected) over the
investor's initial investment in the loan. SOP 03-3 requires that the excess of
contractual cash flows over cash flows expected to be collected (nonaccretable
difference) not be recognized as an adjustment of yield, loss accrual, or
valuation allowance. SOP 03-3 prohibits investors from displaying accretable
yield and nonaccretable difference in the balance sheet. Subsequent increases
in cash flows expected to be collected generally should be recognized
prospectively through adjustment of the loan's yield over its remaining life.
Decreases in cash flows expected to be collected should be recognized as
impairment. SOP 03-3 prohibits "carrying over" or creation of valuation
allowances in the initial accounting of all loans acquired in a transfer that
are within the scope of this statement. The prohibition of the valuation
allowance carryover applies to the purchase of an individual loan, a pool of
loans, a group of loans, and loans acquired in a purchase business combination.
SOP 03-3 is effective for loans acquired in fiscal years beginning after
December 15, 2004. Early adoption is encouraged. We elected to defer the
adoption of SOP 03-3 until the year ending December 31, 2005.
During the fourth quarter of 2003, the Company adopted FASB's Emerging
Issues Task Force Issue No. 03-1 "The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments" (EITF 03-1). EITF 03-1
provides new guidance regarding impairment accounting on debt and equity
securities carried at amounts higher than the securities' fair values and
disclosure of additional information about unrealized losses. The initial
adoption of EITF 03-1 resulted in additional disclosures in our financial
statements.
SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
, was issued in May 2003. This
statement establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. The statement also includes required disclosures for financial
instruments within its scope. For us, the statement was effective for
instruments entered into or modified after May 31, 2003 and otherwise will be
effective as of January 1, 2004, except for mandatorily
70
Table of Contents
redeemable financial instruments. For certain mandatorily redeemable
financial instruments, the statement will be effective for us on January 1,
2005. The effective date has been deferred indefinitely for certain other
types of mandatorily redeemable financial instruments. This statement did not
have a material impact on our financial statements.
In April 2003, SFAS No. 149,
Amendment of Statement 133 on Derivative
Instruments and Hedging Activities
, was issued. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133,
Accounting for Derivative Instruments and Hedging Activities
. SFAS No.
149 (1) clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative discussed in paragraph 6(b)
of SFAS No. 133, (2) clarifies when a derivative contains a financing
component, (3) amends the definition of an underlying to conform it to language
used in FIN No. 45,
Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others
, and (4)
amends certain other existing pronouncements. Those changes will result in more
consistent reporting of contracts as either derivatives or hybrid instruments.
SFAS No. 149 is effective for contracts entered into or modified after June 30,
2003, with certain exceptions, and for hedging relationships designated after
June 30, 2003. In addition, except for certain situations, all provisions of
this statement are to be applied prospectively. Also, the provisions related to
forward purchases or sales of when-issued securities or other securities that
do not yet exist, should be applied to both existing contracts and new
contracts entered into after June 30, 2003. The adoption of SFAS No. 149 did
not have an impact on our financial condition or results of operations for the
year ended December 31, 2003.
In January 2003, the FASB issued FIN No. 46,
Consolidation of Variable
Interest Entities
. The FASB's stated intent in issuing FIN No. 46 was to
clarify the application of Accounting Research Bulletin No. 51,
Consolidated
Financial Statements
, to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN No. 46
requires an enterprise to consolidate a variable interest entity (as defined in
FIN No. 46) if that enterprise has a variable interest (or combination of
variable interests) that will absorb a majority of the entity's expected losses
if they occur, receive a majority of the entity's expected returns if they
occur, or both. In December 2003, the FASB issued a revised FIN No. 46 (FIN No.
46R), which attempts to clarify the guidance in the original interpretation.
FIN No. 46 applies to variable interest entities created after January 31,
2003. FIN No. 46 also applies to all variable interest entities created prior
to February 1, 2003 that are considered to be special-purpose entities (as
defined in FIN No. 46R) as of December 31, 2003. FIN No. 46R must be applied to
all variable interest entities no later than the end of the first reporting
period that ends after March 15, 2004. Certain variable interest entities that
are qualifying special purpose entities subject to the reporting requirements
for SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities
, are not required to be consolidated under
the provisions of FIN No. 46. At December 31, 2003, we had two wholly owned
statutory trusts that issued trust preferred securities. Prior to our adoption
of FIN No. 46R, the statutory trusts were consolidated subsidiaries. However,
effective December 31, 2003 we adopted the provisions of FIN No. 46R, requiring
the deconsolidation of these trusts.
In December 2002, SFAS No. 148,
Accounting for Stock-Based Compensation
-
Transition and Disclosure, an amendment of FASB Statement No. 123
, was issued.
This statement amends SFAS No. 123,
Accounting for Stock-Based Compensation
, to
provide alternative methods of transition for a voluntary change to the fair
value method of accounting for stock-based employee compensation. In addition,
SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements. We have
included disclosures required by this standard in the notes to our consolidated
financial statements.
In November 2002, Financial Accounting Standards Board Interpretation No.
45 (FIN 45),
Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness to Others
, an interpretation of
SFAS No. 5, 57, and 107 and a rescission of FIN 34, was issued. This
interpretation enhances the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under guarantees
issued. The interpretation also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of
the Interpretation were applicable to guarantees issued or modified after
December 31, 2002 and the
71
Table of Contents
disclosure requirements were effective for financial statements of interim
or annual periods ending after December 15, 2002. This statement did not have
a material impact on our financial statements.
In June 2002, SFAS No. 146,
Accounting for Costs Associated with Exit or
Disposal Activities
, was issued. SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity
. The provisions of SFAS No. 146 were effective for exit or
disposal activities initiated after December 31, 2002, with early application
encouraged. The adoption of SFAS No. 146 had no effect on our financial
statements.
In April 2002, SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections
, was issued.
SFAS No. 145 amends existing guidance on reporting gains and losses on the
extinguishment of debt to prohibit the classification of the gain or loss as
extraordinary, as the use of such extinguishments have become part of the risk
management strategy of many companies. SFAS No. 145 also amends SFAS No. 13,
Accounting for Leases
, to require sale-leaseback accounting for certain lease
modifications that have economic effects similar to sale-leaseback
transactions. The provisions of SFAS No. 145 related to the rescission of SFAS
No. 4,
Reporting Gains and Losses from Extinguishment of Debt
, were applied in
fiscal years beginning after May 15, 2002. The provisions of SFAS No. 145
related to SFAS No. 13 were effective for transactions occurring after May 15,
2002. The adoption of SFAS No. 145 had no effect on our financial statements.
In June 2001, Financial Accounting Standards Board SFAS No. 143,
Accounting for Asset Retirement Obligations
, was issued. SFAS No. 143 requires
us to record the fair value of an asset retirement obligation as a liability in
the period in which we incur a legal obligation associated with the retirement
of tangible long-lived assets that result from the acquisition, construction,
development and/or normal use of the assets. We also would record a
corresponding asset that is depreciated over the life of the asset. Subsequent
to the initial measurement of the asset retirement obligation, the obligation
would be adjusted at the end of each period to reflect the passage of time and
changes in the estimated future cash flows underlying the obligation. We were
required to adopt SFAS No. 143 on January 1, 2003. The adoption of SFAS No.
143 had no effect on our financial statements.
72
Table of Contents
MANAGEMENT
Executive Officers and Directors
The following table sets forth information concerning our directors and
executive officers as of May 3, 2004.
Position Held with
Name
Age
Position Held with Eurobank
EuroBancshares
Rafael Arrillaga-Torréns, Jr., Esq.
55
Director, Chairman of the
Board, President and Chief
Executive Officer
Class C Director,
Chairman of the
Board, President
and Chief Executive
Officer
Yadira R. Mercado
44
Executive Vice President,
Chief Financial Officer
and Corporate Secretary
Executive Vice
President, Chief
Financial Officer
and Corporate
Secretary
Jorge E. Sepúlveda-Estrada
49
Senior Vice President and
Treasurer
Senior Vice
President and
Treasurer
Pedro Feliciano Benítez
62
Director and Vice Chairman
of the Board
Class C Director
and Vice Chairman
James I. Thomson
59
Executive Vice President,
Risk Management and Chief
Lending Officer
None
Luis S. Suau Hernandez
53
Senior Vice President
San Juan-Metropolitan Area
None
Fausto Peña Villegas
51
Senior Vice President
Northern Region
None
Ricardo X. Pou Vendrell
34
Senior Vice President
Southern Region
None
Roberto Carreras Sosa
49
Senior Vice President
Eastern Region
None
Jaime Noble Fernández
53
Senior Vice President
EuroLease, a division of
Eurobank
None
Juan Ramón Gómez-Cuétara Aguilar
28
Director
(1)
Class B Director
(1)
Antonio R. Pavía Bibiloni
56
Director
Class B Director
Plácido González Córdova
82
Director
Class C Director
Jorge Calderón Drowett
68
Director
Class A Director
Ricardo Levy Echeandía
47
Director
Class A Director
Diana López-Feliciano, Esq.
48
Director
Class A Director
William Torres Torres
50
Director
Class B Director
(1)
Juan Ramón Gómez-Cuétara Aguilar was elected as a director at our
April 26, 2004 annual stockholders meeting. He has agreed to serve
as a director of both EuroBancshares and Eurobank pending approval
by the Commissioner of Financial Institutions of Puerto Rico.
73
Table of Contents
Rafael Arrillaga-Torréns, Jr. Esq.
Mr. Arrillaga has served as Chairman
of Eurobank's Board of Directors and President and Chief Executive Officer of
Eurobank since 1993. He also has served in those same capacities with
EuroBancshares since 2002. Before being named President and Chief Executive
Officer of Eurobank, Mr. Arrillaga practiced law from 1974 until 1993,
specializing in banking, tax and corporate law. Mr. Arrillaga was involved in
the organization of Eurobank, and has served as a director of Eurobank since
1979.
Yadira R. Mercado
. Ms. Mercado currently serves as our Executive Vice
President, Chief Financial Officer and Corporate Secretary, positions she has
held since 1993. She served as Senior Vice President of Finance and Operations
at Eurobank from 1991 to 1993. Prior to joining Eurobank in 1991, Ms. Mercado
held various executive officer positions with several banking institutions in
Puerto Rico.
Jorge E. Sepúlveda-Estrada
. Mr. Sepúlveda-Estrada has served as
Eurobank's Senior Vice President-Treasurer since 1993, overseeing Eurobank's
management and investment strategies, and has served in the same capacity with
EuroBancshares since 2002. He has over thirty years of banking experience,
including previous experience as a financial consultant, bank treasurer and
investment officer.
Pedro Feliciano Benítez.
Mr. Feliciano has been a member of the Board of
Directors of Eurobank since 1999 and has served as a director and Vice Chairman
of the Board of EuroBancshares since 2002. Mr. Feliciano has served as
President of Las Piedras Construction Corp., a civil works construction
company, since he founded the company in 1970.
James I. Thomson
. Mr. Thomson serves as Eurobank's Executive Vice
President, Risk Management and Chief Lending Officer, positions he has held
since 1999. Prior to joining Eurobank, Mr. Thomson worked for the Royal Bank
of Canada beginning in 1968 and last served as Puerto Rico's Regional Manager
from 1996 to 1999.
Luis S. Suau Hernandez
. Mr. Suau currently serves as Eurobank's Senior
Vice President for the San Juan-Metropolitan Region, a position he has held
since 2003. He previously served as Vice President and Manager of our San Juan
branch office from 1997 to 2003. Mr. Suau has over 30 years of experience in
the banking industry.
Fausto Peña Villegas
. Mr. Peña currently serves as Eurobank's Senior Vice
President for the Northern Region, a position he has held since 2001. He
previously served as Assistant Vice President for Banco Santander de Puerto
Rico from 1997 to 2001. Mr. Peña has over 25 years of experience in the
banking industry, including officer positions with Banco Central Hispano Puerto
Rico and Banco Santander de Puerto Rico.
Ricardo X. Pou Vendrell.
Mr. Pou currently serves as Eurobank's Senior
Vice President for the Southern Region, a position he has held since 2003.
Previously, Mr. Pou served as President of Banco Financiero de Puerto Rico from
2001 through 2002. In 2002, Eurobank acquired Banco Financiero. Prior to
working at Banco Financiero, Mr. Pou received his MBA from the University of
Wisconsin-Madison in May of 2001. Mr. Pou is also certified public accountant
and a certified valuation analyst.
Roberto Carreras Sosa
. Mr. Carreras is Eurobank's Senior Vice President
for the Eastern Region, a position he has held since 2002. Mr. Carreras has
over 25 years of banking experience including positions with the Banco Popular
de Puerto Rico from 1997 to 2001 and Roig Commercial Bank from 1988 to 1997.
Jaime Noble Fernández.
Mr. Noble currently serves as Eurobank's Senior
Vice President of EuroLease, a division of Eurobank, a position he has held
since 2000. In 1999, he was a consultant to Eurobank. Prior to joining
Eurobank, Mr. Noble served as Vice President of First Leasing, a division of
Firstbank of Puerto Rico, from 1998 to 2000 and as President of ELBON Leasing
Co., Inc. from 1995 to 1998. Mr. Noble has 29 years of experience in the
leasing business.
Juan Ramón Gómez-Cuétara Aguilar
. Mr. Gómez-Cuétara was appointed to our
Board to fill the vacancy left by the resignation of his father, Juan Ramón
Gómez-Cuétara Fernández in January 2004 and was elected to our Board at our
annual stockholders meeting in April 2004. Mr. Gómez-Cuétara was also
appointed to serve on the Board of Eurobank. He has agreed to serve on our
Board pending regulatory approval from the Commissioner of Financial
Institutions of Puerto Rico. Mr. Gómez-Cuétara is currently the Deputy General
Manager of Risi, S.A., a
74
Table of Contents
Spanish company involved in the manufacture and processing of snack foods,
and he has served in that capacity since 2003. Prior to joining Risi, he was
an auditor with PricewaterhouseCoopers in Madrid, Spain from 2001 to 2003. Mr.
Gómez-Cuétara received his degree in business administration from the
Universidad CEU San Pablo in Madrid, Spain in 2001.
Antonio R. Pavía Bibiloni
. Mr. Pavía has been a member of the Board of
Directors of Eurobank since 1998 and has served as a director of EuroBancshares
since 2002. Mr. Pavía has held a number of senior executive and management
positions in various financial institutions. He currently serves as President
of Bartolo, Inc., a large gasoline station operations company, and has held
this position since 1996.
Plácido González Córdova.
Mr. González has been a member of the Board of
Directors of Eurobank since 1997 and has served as a director of EuroBancshares
since 2002. Prior to joining Eurobank's Board of Directors, Mr. González was
a founder and director of Banco de Comercio, a full service commercial bank in
Puerto Rico that was acquired by Eurobank in 1997.
Jorge Calderón Drowett
. Mr. Calderón has been a member of the Board of
Directors of Eurobank since 1997 and has served as a director of EuroBancshares
since 2002. Mr. Calderón currently serves as President of Calderón &
Asociados, Inc., a property and management developer, and has served in that
position since 1998. Previously, he served as Vice President of Finance for
San Juan Cement Company, Inc. from 1974 until 1996. He is also a certified
public accountant.
Ricardo Levy Echeandía
. Mr. Levy has been a member of our Board of
Directors and a member of the Board of Directors of Eurobank since 2002.
Currently, he is President of Francisco Levy Hijos, Inc., a general contractor
and developer, and has served in that capacity since 2002. From 1999 until
2002, Mr. Echeandía served as Executive Vice President and Treasurer of
Francisco Levy Hijos, Inc.
Diana López-Feliciano, Esq
. Ms. López-Feliciano has been a member of the
Board of Directors of Eurobank since 2001 and has served as a director of
EuroBancshares since 2002. Ms. López-Feliciano is an attorney in private
practice and has been an assistant professor of environmental law at the
Eugenio Maria de Hofstra Law School since 1999. She has also been a professor
of environmental law at the University of Puerto Rico School of Civil
Engineering since 2002.
William Torres Torres
. Mr. Torres has been a member of the Board of
Directors of Eurobank since 1999 and has served as a director of EuroBancshares
since 2002. Mr. Torres, a certified public accountant, is the managing partner
of Torres CPA Group, the accounting firm he founded in 1981.
Composition of the Board
Our amended and restated certificate of incorporation provides that the
terms of office of the members of our Board of Directors be divided into three
classes, Class A, Class B and Class C, each of the members of which will serve
for a staggered three-year term. The terms of the current Class A, B and C
directors are set to expire at the annual meeting of stockholders in 2006,
2007, and 2005, respectively. Our amended and restated bylaws authorize our
Board of Directors to fix the number of directors at not less than seven nor
more than 11. The Board of Directors currently has eight members and one
director-elect, Mr. Gómez-Cuétara.
The directors of Eurobank are elected by EuroBancshares, as the sole
stockholder of Eurobank, each year and they hold office for a term of one year
or until their successors are chosen and qualified. All of our directors are
also currently directors of Eurobank.
Corporate Governance Reforms
After our registration statement, of which this prospectus is a part, is
declared effective by the SEC and our common stock is approved for quotation on
the Nasdaq National Market, we will become subject to a host of new corporate
governance and related requirements under the Sarbanes-Oxley Act of 2002
("Sarbanes-Oxley"), the SEC's rules implementing Sarbanes-Oxley and the enhanced corporate
governance listing standards of The Nasdaq Stock Market, Inc.
75
Table of Contents
Sarbanes-Oxley, which was enacted on July 30, 2002 to address questionable
corporate and accounting practices, imposes on public companies a variety of
new requirements, prohibitions and disclosure obligations, including, but not
limited to:
•
certifications by the chief executive officer and chief
financial officer as to the accuracy and adequacy of periodic
reports filed with the SEC;
•
implementation and evaluation of the company's systems of
disclosure controls and procedures and internal control over
financial reporting;
•
auditing related restrictions, including prohibition on
auditors providing certain non-audit services to public companies,
mandatory audit partner rotation and restrictions on hiring
employees of former auditors;
•
independence requirements and increased responsibilities for
the audit committee, including responsibility for the engagement of
the company's auditor, pre-approval of all services provided by the
auditor, establishment of procedures for addressing
accounting-related complaints and company disclosure of whether any
member of the audit committee qualifies as an "audit committee
financial expert";
•
disclosure of whether the company has a code of ethics
applicable to the chief executive officer and senior financial
officers; and
•
prohibition on the extension of personal loans to executive
officers and directors (subject to certain exemptions).
In addition, The Nasdaq Stock Market, Inc. implemented a number of
additional listing requirements concerning director independence, board
nominations, executive compensation and related corporate governance matters.
Corporate Governance Principles and Board Matters
We are committed to having sound corporate governance principles, both at
the holding company level and at Eurobank. Such principles are essential to
running our business efficiently and to maintaining our integrity in the
marketplace. We have adopted a set of Corporate Governance Guidelines that
embodies these principles. EuroBancshares and Eurobank have also adopted a
Code of Business Conduct and Ethics that applies to all officers, directors,
employees and consultants, in accordance with the applicable Nasdaq rules. In
addition, our Chief Executive Officer and all senior financial officers,
including the Chief Financial Officer, are bound by a separate Code of Ethics
for the Chief Executive Officer and Senior Financial Officers that complies
with Item 406 of Regulation S-K of the Securities Exchange Act of 1934 (the
"Exchange Act") and with the applicable Nasdaq rules. Our Corporate Governance
Guidelines, Code of Business Conduct and Ethics and Code of Ethics for the
Chief Executive Officer and Senior Financial Officers will be posted on our
Internet website under the Investor Relations page as soon as practicable.
Director Compensation
Meetings of our Board of Directors are held regularly each quarter.
Directors are not compensated for attending meetings of the Board of Directors
of EuroBancshares. Meetings of the Board of Directors of Eurobank are held
regularly each month. Directors receive fees of $1,250 per meeting for
attendance at a meeting of the Board of Directors of Eurobank. The Board of
Directors of Eurobank also has several committees, and the directors receive
$400 for attending each committee meeting or special meeting of the Board of
Directors. Directors who are employees or officers of Eurobank do not receive
fees for attending Board of Directors or committee meetings.
76
Table of Contents
Board Independence
Our Board of Directors has determined that each of our current directors,
except Messrs. Arrillaga, Feliciano and Torres, is independent under the
applicable Nasdaq rules. Mr. Arrillaga is an executive officer of both
EuroBancshares and Eurobank. Mr. Torres is the owner of certain real estate of
which portions are leased to Eurobank. During the fiscal year 2003, a
corporation controlled by Mr. Torres received lease payments from us totaling
$142,000. Another corporation controlled equally by Mr. Torres and Mr.
Feliciano received lease payments from the Bank in the amount of $96,000 for
the years 2001, 2002 and 2003. For additional information, see the section of
this prospectus captioned
"Certain Relationships and Related Transactions."
Director Qualifications
We believe that our directors should have the highest professional and
personal ethics and values, consistent with our longstanding values and
standards. They should have broad experience at the policy-making level in
business, government or banking. They should be committed to enhancing
stockholder value and should have sufficient time to carry out their duties and
to provide insight and practical wisdom based on experience. Their service on
other boards of public companies should be limited to a number that permits
them, given their individual circumstances, to perform responsibly all director
duties for us. Each director must represent the interests of all stockholders.
When considering potential director candidates, the Board also considers the
candidate's character, judgment, diversity, age, skills, including financial
literacy and experience in the context of our needs and the needs of the Board
of Directors.
Independent Director Meetings
On March 15, 2004, the independent members of our Board of Directors
resolved that, in the future, they will meet regularly, separately from the
full Board of Directors and outside the presence of our management in executive
session.
Stockholder Communications with our Board of Directors
Our Board of Directors has established a process for stockholders to
communicate with the Board of Directors or with individual directors.
Stockholders who wish to communicate with our Board of Directors or with
individual directors should direct written correspondence to our Corporate
Secretary at our principal executive offices located at 270 Muñoz Rivera
Avenue, San Juan, Puerto Rico 00918. Any such communication must contain:
•
a representation that the stockholder is a holder of record
of our capital stock;
•
the name and address, as they appear on our books, of the
stockholder sending such communication; and
•
the class and number of shares of our capital stock that are
beneficially owned by such stockholder.
The Corporate Secretary will forward such communications to our Board of
Directors or the specified individual director to whom the communication is
directed unless such communication is unduly hostile, threatening, illegal or
similarly inappropriate, in which case the Corporate Secretary has the
authority to discard the communication or to take appropriate legal action
regarding such communication.
Board Structure and Committee Composition
As of the date of this prospectus, our Board has nine directors and the
following committees: Audit; Compensation; Nominating; Compliance and Strategic
Planning. In addition, Eurobank has the following committees: Credit; Trust;
and Asset/Liability Management.
The membership during the last fiscal year and the function of each of the
committees are described below. Our Board of Directors meets at least
quarterly and the Board of Directors of Eurobank meets at least once each
month. During the fiscal year 2003, our Board held nine meetings and the
Eurobank Board held 12 meetings. Each director attended at least 75% of the
total of all Board and applicable committee meetings. Directors are encouraged
to attend annual meetings of our stockholders. All directors attended the last
annual meeting of our stockholders.
77
Table of Contents
Committees of EuroBancshares
Audit Committee
Our Board of Directors has established an Audit Committee to assist the
Board in fulfilling its responsibilities for general oversight of the integrity
of our consolidated financial statements, compliance with legal and regulatory
requirements, the independent auditors' qualifications and independence, the
performance of independent auditors and our internal audit function, and risk
assessment and risk management. The duties of the Audit Committee include:
•
appointing, evaluating and determining the compensation of our independent auditors;
•
reviewing and approving the scope of the annual audit, the audit fee and the financial statements;
•
reviewing disclosure controls and procedures, internal
control over financial reporting, the internal audit function and
corporate policies with respect to financial information;
•
reviewing other risks that may have a significant impact on our financial statements;
•
preparing the Audit Committee report for inclusion in the annual proxy statement;
•
establishing procedures for the receipt, retention and
treatment of complaints regarding accounting and auditing matters;
and
•
evaluating annually the Audit Committee charter and the
committee's performance.
The Audit Committee works closely with management as well as our
independent auditors. The Audit Committee has the authority to obtain advice
and assistance from, and receive appropriate funding from us for, outside
legal, accounting or other advisors as the Audit Committee deems necessary to
carry out its duties.
Our Board of Directors has adopted a written charter for the Audit
Committee meeting applicable standards of the SEC and Nasdaq. The members of
the Audit Committee are Jorge Calderón Drowett, Antonio R. Pavía Bibiloni and
Diana López-Feliciano. Mr. Calderón serves as Chairman of the Audit Committee.
The Audit Committee meets regularly and held 10 meetings during fiscal year
2003. The Board of Directors has determined that the Audit Committee satisfies
the independence and other composition requirements of the SEC and Nasdaq. Our
Board has determined that Mr. Calderón qualifies as an "audit committee
financial expert" under Item 401(h) of Regulation S-K under the Exchange Act,
and has the requisite accounting or related financial expertise required by
applicable Nasdaq rules.
Compensation Committee
Our Compensation Committee discharges the Board's responsibilities
relating to compensation of our Chief Executive Officer, other executive
officers and directors; produces an annual report on executive compensation for
inclusion in our annual proxy statement; and provides general oversight of
compensation structure, including our equity compensation plans and benefit
programs. Other specific duties and responsibilities of the Compensation
Committee include:
•
reviewing and approving objectives relevant to executive
officer compensation;
•
evaluating performance and determining the compensation of
our Chief Executive Officer and other executive officers in
accordance with those objectives (salary revisions for all of our
executive officers and employees are made every 12 months);
•
approving employment agreements for executive officers;
•
approving and amending our stock option plans (subject to stockholder approval, if required);
•
approving any changes to nonequity-based benefit plans
involving a material financial commitment by us or Eurobank,
•
recommending to the Board the compensation for our directors and Eurobank's directors;
78
Table of Contents
•
evaluating human resources and compensation strategies; and
•
evaluating annually the Compensation Committee charter and the Committee's performance.
Our Board of Directors has adopted a written charter for our Compensation
Committee. The Compensation Committee is composed of three directors, Pedro
Feliciano Benítez, Plácido González Córdova and Ricardo Levy Echeandía, each of
whom the Board has determined is independent under applicable rules and
regulations of the SEC, Nasdaq and the Internal Revenue Service. Mr. Feliciano
serves as the Committee's Chairman. The Compensation Committee held two
meetings during the fiscal year 2003.
Nominating and Governance Committee
Our Board has established a Nominating and Governance Committee for the
purpose of reviewing all Board-recommended and stockholder-recommended
nominees, determining each nominee's qualifications and making a recommendation
to the full Board as to which persons should be our Board's nominees. Our
Board has adopted a written charter for the Nominating and Governance
Committee. This Committee is composed of three directors, Pedro Feliciano
Benítez, Plácido González Córdova and Ricardo Levy Echeandía, each of whom the
Board has determined is independent under the Nasdaq rules. The duties and
responsibilities of the Nominating and Governance Committee include:
•
identifying and recommending to our Board individuals
qualified to become members of our Board and to fill vacant Board
positions;
•
recommending to our Board the director nominees for the next annual meeting of stockholders;
•
recommending to our Board director committee assignments;
•
reviewing and evaluating succession planning for our Chief
Executive Officer and other executive officers;
•
monitoring the continuing education program for our
directors;
•
developing and recommending an annual self-evaluation process
for our Board and its committees; and
•
evaluating annually the Nominating and Governance Committee
charter and the Committee's performance.
Our Board of Directors believes that it is necessary that the majority of
our Board of Directors be comprised of independent directors and that it is
desirable to have at least one audit committee financial expert serving on the
Audit Committee. The Nominating and Governance Committee considers these
requirements when recommending Board nominees. Our Nominating and Governance
Committee utilizes a variety of methods for identifying and evaluating nominees
for director. Our Nominating and Governance Committee will regularly assess
the appropriate size of the Board, and whether any vacancies on the Board are
expected due to retirement or other circumstances. When considering potential
director candidates, the Nominating and Governance Committee also considers the
candidate's character, judgment, age, skills, including financial literacy, and
experience in the context of our needs, the needs of Eurobank and the existing
directors. While the Nominating and Governance Committee has the authority to
do so, we have not, as of the date of this prospectus, paid any third party to
assist in identifying and evaluating Board nominees.
Our Board of Directors has established a procedure whereby our
stockholders can nominate potential director candidates. The Nominating and
Governance Committee will consider director candidates recommended by our
stockholders in a similar manner as those recommended by members of management
or other directors, provided the stockholder submitting such nomination has
complied with procedures set forth in our amended and restated bylaws. No
candidate for election to our Board has been recommended within the preceding
year by a beneficial owner of 5% or more of our common stock.
79
Table of Contents
Compliance Committee
The Compliance Committee reviews the compliance of EuroBancshares and
Eurobank with laws and regulations applicable to bank holding companies and
their subsidiary banks. The members of the Compliance Committee throughout
2003 and as of the date of this prospectus were William Torres Torres, Jorge
Calderón Drowett, Antonio Pavía Bibiloni and Rafael Arrillaga-Torréns, Jr. Mr.
Torres serves as the Chairman of the Compliance Committee. The Compliance
Committee generally meets at least quarterly. The Compliance Committee held
three meetings during 2003. For additional information, see the section of
this prospectus captioned
"Supervision and Regulation."
Strategic Planning Committee
Our Board has established a Strategic Planning Committee that is
responsible for delineating our future strategy and business goals. In
addition, it provides general guidance in the development of our strategic
plan. The Strategic Planning Committee also advised our Board of Directors in
its selection of an underwriter for this offering. The members of the
Strategic Planning Committee are William Torres Torres, Antonio Paviá Bibiloni,
Jorge Calderón Drowett, Rafael Arrillaga-Torréns, Jr. and Yadira R. Mercado.
Mr. Torres serves as the Chairman of the Strategic Planning Committee. During
2003, the Strategic Planning Committee held three meetings.
Committees of Eurobank
Credit Committees
The Board of Directors' Credit Committee is responsible for Eurobank's
commercial lending policies and procedures. The Credit Committee also approves
loans from $2.0 million to $3.5 million, and recommends to the full Board of
Directors loans in excess of $3.5 million. Loans in excess of $3.5 million are
approved by the full Board of Directors. The members of the Credit Committee
are Rafael Arrillaga-Torréns, Jr., Ricardo Levy Echeandía, Jorge Calderón
Drowett, Antonio Pavía Bibiloni and William Torres Torres. Mr. Pavía serves as
Chairman of the Credit Committee. The Credit Committee meets as often as
necessary, and usually on a bi-weekly basis. In practice, a significant number
of loans in excess of $2.0 million are reviewed and approved by the full Board
of Directors of Eurobank. In addition, the Board has delegated to the
executive credit committee lending authority to approve loans between $1.0
million and $2.0 million. Messrs. Arrillaga, Thomson, and Suau, together with
Arturo Somohano serve on this committee. This executive credit committee meets
on a daily basis and any three members can review and approve any particular
loan proposal. Further, the President and Chief Lending Officer, jointly, can
approve loans up to $1.0 million. Below these threshold levels executives and
managers have been delegated individual lending authority at various levels.
Trust Committee
The Board of Directors' Trust Committee is responsible for overseeing all
aspects of Eurobank's trust operations. The Trust Committee is comprised of
Rafael Arrillaga-Torréns, Jr., Antonio Pavía Bibiloni, William Torres Torres
and Ricardo Levy Echeandía, with Mr. Torres serving as its Chairman. Our Trust
Committee meets as often as necessary, but generally meets quarterly. In 2003,
the Trust Committee held three meetings.
Asset/Liability Management Committee
Eurobank's Asset/Liability Management Committee is comprised of officers
of Eurobank and includes no members of our Board of Directors. The
Asset/Liability Management Committee meets as necessary, and is primarily
responsible for:
•
development and control over the implementation of liquidity
risk and market risk management policies;
•
review of interest rate and exchange rate movement,
forecasts, and the development of Eurobank's strategy under specific
market conditions; and
•
continued improvement of the overall asset/liability
structure of Eurobank.
80
Table of Contents
In practice, the Asset/Liability Management Committee members meet
informally several times each month and conduct one formal committee meeting
quarterly.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the board of
directors or compensation committee, or other committee serving an equivalent
function, of any other entity that has one or more of its executive officers
serving as a member of our Board of Directors or Compensation Committee. None
of the current members of our Compensation Committee has ever been an employee
of ours or any of our subsidiaries.
Executive Compensation
Summary of Cash and Certain Other Compensation
The following table sets forth all compensation received during the three
years ended December 31, 2003 by our Chief Executive Officer and our three
other most highly compensated executives whose total compensation exceeded
$100,000 in such fiscal year. These four officers are referred to as the named
executive officers in this prospectus.
Long-term
Annual Compensation
Compensation
Securities
Other Annual
Underlying
Name and Principal Position
Year
Salary
(1)
Bonus
Compensation
(2)
Options
Rafael Arrillaga-Torréns, Jr., Esq.
Chairman of the Board,
2003
$
325,000
$
150,200
–
25,000
Chief Executive Officer
2002
300,000
100,200
–
17,625
and President
2001
300,000
80,500
–
15,000
Yadira R. Mercado
Executive Vice President,
2003
$
175,000
$
85,200
–
18,000
Chief Financial Officer and
2002
165,000
55,200
–
11,750
Corporate Secretary
2001
120,000
45,200
–
10,000
James I. Thomson
Executive Vice President,
2003
$
182,000
$
20,000
–
10,000
Risk Management and Chief
2002
175,000
15,000
–
8,225
Lending Officer of Eurobank
2001
175,000
10,000
–
7,000
Jaime Noble Fernández
Senior Vice President,
2003
$
182,400
$
65,000
–
12,500
EuroLease, a division of
2002
176,000
40,000
–
9,400
Eurobank
2001
160,000
25,000
–
8,000
(1)
Amounts shown do not include amounts expended by Eurobank pursuant to plans (including group life and health) that do not
discriminate in scope, terms or operation in favor of the executive officer and that are generally available to all salaried
employees.
(2)
Does not include the value of perquisites or other personal benefits because the amount of such benefits does not exceed the
lesser of $50,000 or 10% of total amount of annual salary and bonus of any named individual.
Stock Option Grants in 2003
The following table provides information concerning individual grants of
stock options during calendar year 2003 to each of the named executive
officers. Unless otherwise indicated, the exercise prices represent the fair
market value of the common stock on the grant date.
81
Table of Contents
The amounts shown as potential realizable value represent hypothetical
gains that could be achieved for the respective options if exercised at the end
of the option term. These amounts represent certain assumed rates of
appreciation in the value of our common stock. The 5% and 10% assumed annual
rates of compounded stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent our estimate or
projection of the future price of our common stock. The potential realizable
value is calculated based on the five year term of the option at its time of
grant. It is calculated based on the assumption that our common stock
appreciates at the indicated annual rate compounded annually for the entire
term of the option and that the option is exercised and sold on the last day of
its term for the appreciated stock price. Actual gains, if any, on stock
option exercises depend on the future performance of the our common stock. The
amounts reflected in the table may not necessarily be achieved.
Potential Realizable
Value of Assumed
Number of
Percent of
Annual Rates of Stock
Securities
Total Options
Exercise
Price Appreciation for
Underlying
Granted to
Price
Option Term
Options
Employees in
Per
Expiration
Name
Granted
Fiscal 2003
Share
Date
5%
10%
Rafael Arrillaga-Torréns, Jr.
25,000
8.71
%
$
10.00
3/15/2008
$
319,070
$
402,628
Yadira R. Mercado
18,000
6.27
10.00
3/15/2008
229,731
289,892
James I. Thomson
10,000
3.48
10.00
3/15/2008
127,628
161,051
Jaime Noble Fernández
12,500
4.36
10.00
3/15/2008
159,535
201,314
Year End 2003 Option Values
The following table provides information about stock options exercised in
2003 and options held as of December 31, 2003 by each of the named executive
officers. Actual gains on exercise, if any, will depend on the value of our
common stock on the date on which the shares are sold.
Number of Securities
Underlying Unexercised
Value of Unexercised
Shares
Options at
In-The-Money Options at
Acquired
December 31, 2003
(1)
December 31, 2003
(1)(2)
on
Value
Name
Exercise
Realized
Exercisable
Unexercisable
Exercisable
Unexercisable
Rafael Arrillaga-Torréns, Jr.
–
–
57,625
–
$
428,031
–
Yadira R. Mercado
–
–
39,750
–
$
293,688
–
James I. Thomson
–
–
25,225
–
$
189,331
–
Jaime Noble Fernández
–
–
29,900
–
$
223,075
–
(1)
"Exercisable" refers to those options which were both exercisable and
vested while "Unexercisable" refers to those options which were
unvested.
(2)
Value is determined by subtracting the exercise price from the fair
market value of our common stock as of December 31, 2003 as determined
by the Board of Directors to be $16.25 and multiplying by the number of
shares underlying the options.
Stock Option Plan
In 1997, Eurobank's Board of Directors adopted a long-term incentive
compensation program in the form of a stock option plan (the "1997 Stock Option
Plan"). Both executive officers and directors were eligible to participate in
the 1997 Stock Option Plan. Under the 1997 Stock Option Plan, a maximum number
of 550,000 shares could be issued upon the exercise of stock options granted
under the plan.
In 2002, our Board of Directors adopted a long-term incentive compensation
plan (the "2002 Stock Option Plan") that became effective when we became a
holding company for Eurobank. At that time, all of the Eurobank options
granted under the 1997 Stock Option Plan were assumed by EuroBancshares under
the 2002 Stock Option Plan and became options to purchase shares of
EuroBancshares common stock. Under the 2002 Stock Option Plan, a maximum of
750,000 shares of common stock may be issued upon the exercise of options
granted under the plan.
82
Table of Contents
As of March 15, 2004, all outstanding options were 100% vested and 578,432
shares of common stock were issuable in connection with the exercise of
outstanding options. Of those shares issuable under outstanding options,
[241,432] shares were subject to options originally granted under the 1997
Stock Option Plan and [337,000] shares were subject to options granted under
the 2002 Stock Option Plan. In addition, [50,000] shares of common stock have
been issued pursuant to the exercise of options granted under the 2002 Stock
Option Plan. Thus, as of March 15, 2004, [363,000] shares of our common stock
remained available for option grants under the 2002 Stock Option Plan.
The 2002 Stock Option Plan is intended to provide our directors, executive
officers and employees the opportunity to acquire a proprietary interest in the
success of EuroBancshares by granting stock options to such directors,
executive officers and employees. Specifically, the plan is intended to
advance the interests of EuroBancshares by (1) enabling us to attract and
retain the best available individuals for positions of substantial
responsibility; (2) providing additional incentive to such persons by affording
them an opportunity for equity participation in our business; and (3) rewarding
directors, executive officers and employees for their contributions to our
business.
The 2002 Stock Option Plan is administered by our Compensation Committee.
The Compensation Committee has authority with respect to the stock option plan
to:
•
adopt, amend and rescind administrative and interpretive rules relating to the plan;
•
accelerate the time of exercisability of any stock option that has been granted;
•
construe the terms of the plan and any related agreement
(including those terms governing eligibility); and
•
make all other determinations and perform all other acts
necessary or advisable for administering the plan, including the
delegation of such ministerial acts and responsibilities as the
Compensation Committee deems appropriate.
Both "Incentive Stock Options" and "Nonstatutory Options" may be granted
under the 2002 Stock Option Plan from time to time. Incentive Stock Options
are stock options intended to satisfy the requirements of Section 1046 of the
Puerto Rico Internal Revenue Code. Nonstatutory Options are stock options that
do not satisfy the requirements of Section 1046 of the Puerto Rico Internal
Revenue Code.
Under our 2002 Stock Option Plan, the aggregate fair market value
(determined as of the date an option is granted) of the shares with respect to
which Incentive Stock Options are exercisable for the first time by any
optionee during any calendar year may not exceed $100,000. Shares acquired
upon the exercise of Nonstatutory Options may not be sold for a period of one
year after such options are exercised.
The option price to be paid upon exercise of an Incentive Stock Option
will not be less than the greater of: (1) the par value per share of our
common stock; or (2) 100% of the fair market value per share of our common
stock on the date of the grant of the Incentive Stock Option. The option price
to be paid upon exercise of a Nonstatutory Option will be determined by the
Compensation Committee at the time of grant.
Each option (including Incentive Stock Options and Nonstatutory Options)
granted under the 2002 Stock Option Plan expires five years after the date the
option is granted, unless a shorter period is determined by the Compensation
Committee. Each option may be exercised upon such terms and conditions as the
Compensation Committee determines. In making any determination as to whom
options shall be granted, and as to the number of shares to be covered by such
options, the Compensation Committee considers the duties of the respective
employees, their present and potential contributions to our success,
profitability and growth, and such other factors as the Compensation Committee
deems relevant in connection with accomplishing the purposes of our 2002 Stock
Option Plan.
As allowed by SFAS No. 123,
Accounting for Stock-Based Compensation
, and
as amended by SFAS No. 148, Accounting for Stock-Based Compensation –
Transition and Disclosure, an amendment of Financial Accounting Standards Board
Statement No. 123, we have elected to continue to measure cost for our stock
compensation plan
83
Table of Contents
using the intrinsic value method prescribed by Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees. Under the
intrinsic value method, compensation cost is the excess, if any, of the quoted
market price of the stock at the grant date or other measurement date over the
amount an employee must pay to acquire the stock. Entities choosing to
continue applying APB Opinion No. 25 on employee stock options granted on or
after January 1996 must provide pro forma disclosures of the consolidated net
income, as if the fair value method of accounting had been applied. Under this
method, compensation cost is measured at the grant date based on the fair value
of the employee stock option and is recognized ratably over the service period
of the option, which is usually the vesting period.
SFAS No. 123 established accounting and disclosure requirements using a
fair value based method of accounting for stock-based employee compensation
plans. The per share fair value of stock options granted during 2003, 2002,
and 2001 was $1.27, $1.60, and $1.68 on the date of grant using the
Black-Scholes option pricing model (excluding a volatility assumption) with the
following weighted average assumptions used for grants in 2003, 2002, and 2001,
respectively: no dividend yield for 2003, 2002, and 2001; risk-free interest
rates of 2.8% for 2003, 4.0% for 2002, and 6.0% for 2001; and expected lives of
five years.
Severance Payment Agreements
In 1999, we entered into a Severance Payment Agreement with Ms. Yadira R.
Mercado our Executive Vice President, Chief Financial Officer and Corporate
Secretary. On each anniversary of the date of commencement of the Severance
Payment Agreement, the term is automatically extended for an additional
one-year period unless we notify Ms. Mercado not less than 90 days prior to an
anniversary date of the agreement, advising her that such agreement will not be
extended. Alternatively, Ms. Mercado's Severance Payment Agreement will
terminate on the second anniversary of an event constituting a "change in
control." The Severance Payment Agreement provides for a severance payment to
Ms. Mercado in connection with either (1) an involuntary termination of her
employment after a "change in control" of EuroBancshares, or (2) following
"constructive termination" of her employment subsequent to a "change in
control" of EuroBancshares.
For purposes of the Severance Payment Agreement, "constructive
termination" generally includes a material change in the status, authority,
duties, responsibilities, compensation, perquisites, conditions of employment,
or location of employment of the employee from those that existed before the
change in control, or in the event of the employee's disability. Any claim or
controversy arising out of or relating to the Severance Payment Agreement will
be resolved by arbitration under the Commercial Arbitration Rules of the
American Arbitration Association.
For purposes of the Severance Payment Agreement, a "change in control" is
deemed to have occurred if:
•
any entity, person or group of persons acting in concert
becomes the beneficial owner (within the meaning of Section 13(d) of
the Exchange Act), directly or indirectly, of securities of
EuroBancshares representing more than 25% of the combined voting
power of EuroBancshares or any successor;
•
the effective date of a merger or consolidation of
EuroBancshares with one or more other corporations or banks as a
result of which the holders of our outstanding voting stock
immediately prior to the merger hold less than 66% of the combined
voting power of the surviving or resulting corporation or bank;
•
the effective date of a transfer of all or substantially all
of the property of EuroBancshares to any individual or entity, other
than to an entity of which we own at least 80% of the combined
voting power; or
•
as a result of, or in connection with, any cash, tender or
exchange offer after a merger, contested election, or other business
combination, or any combination of the foregoing, the services of
the employee are no longer required in his or her present capacity.
To illustrate the potential impact of the Severance Payment Agreement, if
employment during 2004 were terminated under the circumstances set forth in the
Severance Payment Agreement following a change in control, or for "good
reason," the amount payable to Ms. Mercado, based upon compensation earned
during 2003, would be approximately $540,000.
84
Table of Contents
Employment Agreements
Other than the Severance Payments Agreement described above, we do not
have any other employment agreements with any of our named executive officers.
All of our named executive officers serve at the pleasure of our Board of
Directors. We do not maintain any "key-man" life insurance policies on any of
our executive officers. If any of these individuals leaves his or her
respective position, this could have a material adverse effect on our business,
financial condition, results of operations, cash flows and/or future prospects.
Health and Insurance Benefits
Our full-time officers and employees are provided hospitalization and
major medical insurance. We pay a substantial part of the premiums for these
coverages. All insurance coverage under these plans is provided under group
plans on generally the same basis to all full-time employees. In addition, we
maintain term life insurance, which provides benefits to all employees who have
completed three or more months of full-time employment with us. The terms of
our policy provide benefits equal to three times the employee's annual base
earnings (exclusive of overtime pay or bonuses) up to a maximum of $300,000.
Eurobank Master Trust Retirement Plan Program for Employees
Effective January 1, 2000, Eurobank adopted the Eurobank Master Trust
Retirement Plan Program, a defined contribution plan under Section 1165(e) of
the Puerto Rico Internal Revenue Code, covering all full-time employees of
EuroBancshares who have completed three months of service and are 18 years of
age or older. We give each prospective eligible employee written notice of his
or her eligibility to participate in the plan in sufficient time to enable each
of them to participate in the plan. Under the provisions of the plan,
employees may contribute up to 10% of their compensation each year after
deducting social security, up to a specific maximum established by law. We
match each employee's contribution up to 3% of their base compensation that
they contribute to the plan. Participants become vested in our contributions
plus actual earnings on such contributions after three years of service.
Restricted Stock Grants
On April 26, 2004, our Board voted and agreed to issue 1,850 shares of our
common stock (valued at $16.25 per share) to certain of our officers and
employees in consideration for prior service to us. These stock grants were
effected pursuant to the terms of certain Restricted Stock Purchase Agreements
between us and the officers and employees. Under the terms of these Restricted
Stock Purchase Agreements the stock remains unvested until the 5th anniversary
of the date of the grant. In the event the restricted stock grantee leaves
prior to the 5th anniversary, the restricted stock grantee forfeits all right,
title and interest in the restricted stock. The Restricted Stock Purchase
Agreement also provides for the payment of a one-time cash bonus pursuant to
which we will withhold applicable taxes due as a result of the restricted stock
grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under Section 402 of the Sarbanes-Oxley Act of 2002, it is now unlawful
for any issuer to extend, renew or arrange for the extension of credit in the
form of a personal loan to or for any director or executive officer of that
issuer. This prohibition does not apply to loans that were made on or prior to
July 30, 2002, or certain types of loans described in Section 402 that are:
•
made available by the issuer in the ordinary course of the issuer's consumer credit business;
•
of a type generally made available by such issuer to the public; and
•
made by the issuer on market terms, or terms that are no more
favorable than those offered by the issuer to the general public.
Section 402 also does not apply to loans by an insured depository
institution, if the loan is subject to the insider lending restrictions of
Section 22(h) of the Federal Reserve Act or the Federal Reserve's Regulation O.
85
Table of Contents
Certain of our officers, directors and principal stockholders and their
affiliates have had transactions with the Bank, including borrowings and
investments in certificates of deposit. Our management believes that all such
loans and investments have been and will continue to be made in the ordinary
course of business of Eurobank on substantially the same terms, including
interest rates paid and collateral required, as those prevailing at the time
for comparable transactions with unaffiliated persons, and do not involve more
than the normal risk of collectibles or present other unfavorable features.
Therefore, we believe that all of these transactions comply with Section 402 of
the Sarbanes-Oxley Act or have been made pursuant to a valid exception from
Section 402 of the Sarbanes-Oxley Act. As of December 31, 2003, the aggregate
amount of all loans which individually exceed $60,000 to our officers and
directors, members of their immediate families and the firms and corporations
in which they have at least a 100% beneficial interest was approximately $3.5
million.
Two of our directors, William Torres Torres and Pedro Feliciano Benítez
are principals in corporations that own certain real estate of which portions
are leased to Eurobank. During the fiscal year 2003, a corporation controlled
by Mr. Torres received lease payments from Eurobank totaling $142,000. Another
corporation controlled equally by Mr. Torres and Mr. Feliciano received lease
payments in the amount of $96,000 for the years 2001, 2002 and 2003. We
believe that the terms of the leases between Eurobank and the corporations
controlled by Mr. Torres and Mr. Feliciano are on an arm's-length basis. In
addition, we paid $45,000 in 2001 and $49,000 in 2002 to the accounting firm in
which Mr. Torres is a principal for certain accounting services provided to
Eurobank.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of our common stock as of May 12, 2004 by (1) each stockholder known by us to be
the beneficial owner of more than 5% of the outstanding shares of our common
stock, (2) each of our directors, (3) each of our named executive officers and
(4) all of our directors and named executive officers as a group, and (5) each
selling stockholder.
Beneficial ownership is determined according to the rules of the SEC and
generally includes any shares over which a person possesses sole or shared
voting or investment power and options that are currently exercisable or
exercisable within 60 days. Each director, officer or 5% or more stockholder,
as the case may be, has furnished to us information with respect to beneficial
ownership. Except as otherwise indicated in the footnotes to this table, we
believe that the beneficial owners of common stock listed below, based on
information each of them has provided to us, have sole investment and voting
power with respect to their shares.
The table lists applicable percentage ownership based on 7,425,554 shares
of common stock outstanding as of May 12, 2004, and also lists applicable
percentage ownership based on 7,425,554 shares of common stock outstanding
after the completion of this offering. Shares of common stock subject to
options currently exercisable or exercisable within 60 days of
May 12, 2004 are
deemed outstanding for the purpose of calculating the percentage ownership of
the person holding these options, but are not treated as outstanding for the
purpose of calculating the percentage ownership of any other person. Unless
otherwise noted, the address for each stockholder listed below is: c/o
EuroBancshares, Inc., 270 Muñoz Rivera Avenue, San Juan, Puerto Rico 00918.
Shares Beneficially Owned
Shares to be Beneficially
Prior to the Offering
Shares
Being
Owned After the Offering
Name of Beneficial Owners
Number
Percentage
Offered
Number
Percentage
Greater than 5% stockholders and
selling stockholders:
Juan Ramón Gómez-Cuétara Fernández
(1)
554,341
7.46
%
Andrés Llorente 1-3A
Alcalá de Henáres
Madrid, Spain
Dionisio Trigo-Gonzalez
318,742
4.29
%
157,494
161,248
Mimosa Street #14
Sta. Maria
San Juan, Puerto Rico
86
Table of Contents
Shares Beneficially Owned
Shares to be Beneficially
Prior to the Offering
Shares
Being
Owned After the Offering
Name of Beneficial Owners
Number
Percentage
Offered
Number
Percentage
Ruben Jordan
30,000
*
20,000
10,000
PH 2204 Pasas Cond.
San Juan, Puerto Rico
Parques de Atracciones, S.A.
236,700
3.19
%
45,000
191,700
Taquigrafo Garrigia #97 2-9
Barcelona, Spain
Directors and Named Executive Officers:
Rafael Arrillaga-Torréns, Jr.
299,483
3.99
%
Yadira R. Mercado
77,031
(3)
1.03
%
James I. Thomson
38,403
(4)
*
Jaime Noble Fernández
54,900
(5)
*
Pedro Feliciano Benítez
2,606,793
(6)
34.84
%
Jorge Calderón Drowett
80,250
1.08
%
Plácido González Córdova
865,602
11.57
%
Juan Ramón Gómez-Cuétara Aguilar
–
(8)
–
Ricardo Levy Echeandía
458,324
(9)
6.15
%
Antonio R. Pavía Bibiloni
62,403
(10)
*
William Torres Torres
221,300
(11)
2.96
%
Diana López-Feliciano
49,244
(12)
*
All directors and executive officers
as a group (12 persons)
4,813,733
(13)
61.00
%
*
Represents less than 1% of total shares outstanding.
(1)
Juan Ramón Gómez-Cuétara Fernández is the father of director Juan
Ramón Gómez-Cuétara Aguilar.
(2)
Includes 25,000 shares of common stock held by Mr. Arrillaga's wife
and 82,625 stock options that are presently exercisable.
(3)
Includes 62,250 stock options that are presently exercisable.
(4)
Includes 38,403 stock options that are presently exercisable.
(5)
Includes 49,900 stock options that are presently exercisable.
(6)
Includes 57,625 stock options that are presently exercisable.
(7)
Includes 15,524.33 shares of our common stock held by a corporation
controlled by Mr. González and 59,013 stock options that are presently
exercisable. Does not include 5,259 shares owned by Mr. González's
daughter. Mr. González disclaims voting and investment powers over
the shares owned by his daughter.
(8)
A foreign corporation wholly owned by Mr. Gómez-Cuétara Aguilar's
father owns 465,568 shares of our common stock. In addition, his
father personally owns 57,625 shares of our common stock. Mr.
Gómez-Cuétara Aguilar disclaims voting and investment powers with
respect to shares owned by the corporation and his father.
(9)
A corporation, controlled by Mr. Levy's family, which employs Mr.
Levy as an executive officer, owns 216,123 shares of our common stock.
Mr. Levy's brother and the family of his late brother own 127,113
shares. Mr. Levy disclaims voting and investment powers over this
latter 127,113 shares. In addition, the estate of Mr. Levy's late
father owns 146,436 shares. Because of Mr. Levy's voting power over
the shares of his late father and those owned by the corporation,
these have been included as controlled by Mr. Levy for purposes of the
above table. Includes 25,000 stock options that are presently
exercisable.
87
Table of Contents
(10)
Includes 59,013 stock options that are presently exercisable.
(11)
Includes 57,625 stock options that are presently exercisable.
(12)
Includes 35,281 stock options that are presently exercisable.
(13)
Includes 465,932 stock options that are presently exercisable.
SUPERVISION AND REGULATION
This following is a summary description of the relevant laws, rules and
regulations governing banks and bank and financial holding companies. The
descriptions of, and references to, the statutes and regulations below are
brief summaries and do not purport to be complete. The descriptions are
qualified in their entirety by reference to the specific statutes and
regulations discussed.
General
The supervision and regulation of bank holding companies and their
subsidiaries are intended primarily for the protection of depositors, the
deposit insurance funds of the FDIC and the banking system as a whole, and not
for the protection of the bank holding company stockholders or creditors. The
banking agencies have broad enforcement power over bank holding companies and
banks, including the power to impose substantial fines and other penalties for
violations of laws and regulations.
Various legislation is from time to time introduced in Congress and Puerto
Rico's legislature, including proposals to overhaul the bank regulatory system,
expand the powers of depository institutions and limit the investments that
depository institutions may make with insured funds. Such legislation may
change applicable statutes and the operating environment of EuroBancshares and
Eurobank in substantial and unpredictable ways. We cannot determine the
ultimate effect that future legislation or implementing regulations would have
upon the financial condition and results of operations of EuroBancshares or
Eurobank, or any of their subsidiaries.
EuroBancshares
EuroBancshares is a financial holding company registered under the Bank
Holding Company Act, and is subject to supervision, regulation and examination
by the Federal Reserve Board. The Bank Holding Company Act and other federal
laws subject bank holding companies to particular restrictions on the types of
activities in which they may engage, and to a range of supervisory requirements
and activities, including regulatory enforcement actions for violations of laws
and regulations.
Regulatory Restrictions on Dividends; Source of Strength
EuroBancshares is regarded as a legal entity separate and distinct from
its other subsidiaries. The principal source of our revenue is dividends
received from Eurobank. Various federal and state statutory provisions limit
the amount of dividends Eurobank can pay to EuroBancshares without regulatory
approval. It is the policy of the Federal Reserve Board that bank holding
companies should pay cash dividends on common stock only out of income
available over the past year and only if prospective earnings retention is
consistent with the organization's expected future needs and financial
condition. The policy provides that bank holding companies should not maintain
a level of cash dividends that undermines the bank holding company's ability to
serve as a source of strength to its banking subsidiaries.
Under Federal Reserve Board policy, a bank holding company is expected to
act as a source of financial strength to each of its banking subsidiaries and
commit resources to their support. Such support may be required at times when,
absent this Federal Reserve Board policy, a holding company may not be inclined
to provide it. As discussed below, a bank holding company, in certain
circumstances, could be required to guarantee the capital plan of an
undercapitalized banking subsidiary.
In the event of a bank holding company's bankruptcy under Chapter 11 of
the United States Bankruptcy Code, the trustee will be deemed to have assumed,
and is required to cure immediately, any deficit under any commitment
88
Table of Contents
by the debtor holding company to any of the federal banking agencies to
maintain the capital of an insured depository institution, and any claim for
breach of such obligation will generally have priority over most other
unsecured claims.
Activities "Closely Related" to Banking
The Bank Holding Company Act prohibits a bank holding company, with
certain limited exceptions, from acquiring direct or indirect ownership or
control of any voting shares of any company which is not a bank or from
engaging in any activities other than those of banking, managing or controlling
banks and certain other subsidiaries, or furnishing services to or performing
services for its subsidiaries. One principal exception to these prohibitions
allows the acquisition of interests in companies whose activities are found by
the Federal Reserve Board, by order or regulation, to be so closely related to
banking or managing or controlling banks, as to be a proper incident thereto.
These activities include, among other things, numerous services and functions
performed in connection with lending, investing, and financial counseling and
tax planning. In approving acquisitions by bank holding companies of companies
engaged in banking-related activities, the Federal Reserve Board considers a
number of factors, and weighs the expected benefits to the public (such as
greater convenience and increased competition or gains in efficiency) against
the risks of possible adverse effects (such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices). The Federal Reserve Board is also empowered to
differentiate between activities commenced
de novo
and activities commenced
through acquisition of a going concern.
Gramm-Leach Bliley Act; Financial Holding Companies
The Gramm-Leach-Bliley Financial Modernization Act of 1999, revised and
expanded the provisions of the Bank Holding Company Act by including a new
section that permits a bank holding company to elect to become a financial
holding company to engage in a full range of activities that are "financial in
nature." The qualification requirements and the process for a bank holding
company that elects to be treated as a financial holding company require that
all of the subsidiary banks controlled by the bank holding company at the time
of election to become a financial holding company must be and remain at all
times "well-capitalized" and "well managed." EuroBancshares made an election
to become a financial holding company on September 20, 2002.
The Gramm-Leach-Bliley Act further requires that, in the event that the
bank holding company elects to become a financial holding company, the election
must be made by filing a written declaration with the appropriate Federal
Reserve Bank that:
•
states that the bank holding company elects to become a
financial holding company;
•
provides the name and head office address of the bank holding
company and each depository institution controlled by the bank
holding company;
•
certifies that each depository institution controlled by the
bank holding company is "well-capitalized" as of the date the bank
holding company submits its declaration;
•
provides the capital ratios for all relevant capital measures
as of the close of the previous quarter for each depository
institution controlled by the bank holding company; and
•
certifies that each depository institution controlled by the
bank holding company is "well managed" as of the date the bank
holding company submits its declaration.
The bank holding company must have also achieved at least a rating of
"satisfactory record of meeting community credit needs" under the Community
Reinvestment Act during the institution's most recent examination.
Financial holding companies may engage, directly or indirectly, in any activity that is determined to be:
•
financial in nature;
•
incidental to such financial activity; or
89
Table of Contents
•
complementary to a financial activity provided it "does not
pose a substantial risk to the safety and soundness of depository
institutions or the financial system generally."
The Gramm-Leach-Bliley Act specifically provides that the following
activities have been determined to be "financial in nature": lending, trust
and other banking activities; insurance activities; financial or economic
advisory services; securitization of assets; securities underwriting and
dealing; existing bank holding company domestic activities; existing bank
holding company foreign activities and merchant banking activities. In
addition, the Gramm-Leach-Bliley Act specifically gives the Federal Reserve
Board the authority, by regulation or order, to expand the list of "financial"
or "incidental" activities, but requires consultation with the United States
Treasury Department, and gives the Federal Reserve Board authority to allow a
financial holding company to engage in any activity that is "complementary" to
a financial activity and does not "pose a substantial risk to the safety and
soundness of depository institutions or the financial system generally."
Privacy Policies
Under the Gramm-Leach-Bliley Act, all financial institutions are required
to adopt privacy policies, restrict the sharing of nonpublic customer data with
nonaffiliated parties and establish procedures and practices to protect
customer data from unauthorized access. EuroBancshares and its subsidiaries
have established policies and procedures to assure our compliance with all
privacy provisions of the Gramm-Leach-Bliley Act.
Safe and Sound Banking Practices
Bank holding companies are not permitted to engage in unsafe and unsound
banking practices. The Federal Reserve Board's Regulation Y, for example,
generally requires a holding company to give the Federal Reserve Board prior
notice of any redemption or repurchase of its own equity securities, if the
consideration to be paid, together with the consideration paid for any
repurchases or redemptions in the preceding year, is equal to 10% or more of
the company's consolidated net worth. The Federal Reserve Board may oppose the
transaction if it believes that the transaction would constitute an unsafe or
unsound practice or would violate any law or regulation. Depending upon the
circumstances, the Federal Reserve Board could take the position that paying a
dividend would constitute an unsafe or unsound banking practice.
The Federal Reserve Board has broad authority to prohibit activities of
bank holding companies and their nonbanking subsidiaries which represent unsafe
and unsound banking practices or which constitute violations of laws or
regulations, and can assess civil money penalties for certain activities
conducted on a knowing and reckless basis, if those activities caused a
substantial loss to a depository institution. The penalties can be as high as
$1 million for each day the activity continues.
Annual Reporting; Examinations
We are required to file annual reports with the Federal Reserve Board, and
such additional information as the Federal Reserve Board may require pursuant
to the Bank Holding Company Act. The Federal Reserve Board may examine a bank
holding company or any of its subsidiaries, and charge the company for the cost
of such the examination.
Capital Adequacy Requirements
The Federal Reserve Board has adopted a system using risk-based capital
guidelines to evaluate the capital adequacy of bank holding companies having
$150.0 million or more in assets on a consolidated basis. EuroBancshares
currently has consolidated assets in excess of $150.0 million is therefore
subject to the Federal Reserve Board's capital adequacy guidelines.
Under the guidelines, specific categories of assets are assigned different
risk weights, based generally on the perceived credit risk of the asset. These
risk weights are multiplied by corresponding asset balances to determine a
"risk-weighted" asset base. The guidelines require a minimum total risk-based
capital ratio of 8.0% (of which at least 4.0% is required to consist of Tier 1
capital elements). Total capital is the sum of Tier 1 and Tier 2 capital. To
be considered "well-capitalized," a bank holding company must maintain, on a
consolidated basis, (i) a Tier 1 risk-
90
Table of Contents
based capital ratio of at least 6.0%, and (ii) a total risk-based capital
ratio of 10.0% or greater. As of December 31, 2003, our Tier 1 risk-based
capital ratio was 8.30% and its total risk-based capital ratio was 11.6%.
Thus, EuroBancshares is considered "well-capitalized" for regulatory purposes.
In addition to the risk-based capital guidelines, the Federal Reserve
Board uses a leverage ratio as an additional tool to evaluate the capital
adequacy of bank holding companies. The leverage ratio is a company's Tier 1
capital divided by its average total consolidated assets. Certain highly-rated
bank holding companies may maintain a minimum leverage ratio of 3.0%, but other
bank holding companies are required to maintain a leverage ratio of at least
4.0%. As of December 31, 2003, our leverage ratio was 6.8%.
The federal banking agencies' risk-based and leverage ratios are minimum
supervisory ratios generally applicable to banking organizations that meet
certain specified criteria. The federal bank regulatory agencies may set
capital requirements for a particular banking organization that are higher than
the minimum ratios when circumstances warrant. Federal Reserve Board
guidelines also provide that banking organizations experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions,
substantially above the minimum supervisory levels, without significant
reliance on intangible assets.
Imposition of Liability for Undercapitalized Subsidiaries
Bank regulators are required to take "prompt corrective action" to resolve
problems associated with insured depository institutions whose capital declines
below certain levels. In the event an institution becomes "undercapitalized,"
it must submit a capital restoration plan. The capital restoration plan will
not be accepted by the regulators unless each company having control of the
undercapitalized institution guarantees the subsidiary's compliance with the
capital restoration plan up to a certain specified amount. Any such guarantee
from a depository institution's holding company is entitled to a priority of
payment in bankruptcy.
The aggregate liability of the holding company of an undercapitalized bank
is limited to the lesser of 5% of the institution's assets at the time it
became undercapitalized or the amount necessary to cause the institution to be
"adequately capitalized." The bank regulators have greater power in situations
where an institution becomes "significantly" or "critically" undercapitalized
or fails to submit a capital restoration plan. For example, a bank holding
company controlling such an institution can be required to obtain prior Federal
Reserve Board approval of proposed dividends, or might be required to consent
to a consolidation or to divest the troubled institution or other affiliates.
Acquisitions by Bank Holding Companies
The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve Board before it may acquire all, or
substantially all, of the assets of any bank, or ownership or control of any
voting shares of any bank, if after such acquisition it would own or control,
directly or indirectly, more than 5% of the voting shares of such bank. In
approving bank acquisitions by bank holding companies, the Federal Reserve
Board is required to consider the financial and managerial resources and future
prospects of the bank holding company and the banks concerned, the convenience
and needs of the communities to be served, and various competitive factors.
Control Acquisitions
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of 10% or
more of a class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Exchange Act would, under the
circumstances set forth in the presumption, constitute acquisition of control.
In addition, any company is required to obtain the approval of the Federal
Reserve Board under the Bank Holding Company Act before acquiring 25% (5% in
the case of an acquiror that is a bank holding company) or more of the
outstanding common stock of the company, or otherwise obtaining control or a
"controlling influence" over the company.
91
Table of Contents
Cross-guarantees
Under the Federal Deposit Insurance Act, or FDIA, a depository institution
(which definition includes both banks and savings associations), the deposits
of which are insured by the FDIC, can be held liable for any loss incurred by,
or reasonably expected to be incurred by, the FDIC in connection with (1) the
default of a commonly controlled FDIC-insured depository institution or (2) any
assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally
as the appointment of a conservator or a receiver and "in danger of default" is
defined generally as the existence of certain conditions indicating that
default is likely to occur in the absence of regulatory assistance. In some
circumstances (depending upon the amount of the loss or anticipated loss
suffered by the FDIC), cross-guarantee liability may result in the ultimate
failure or insolvency of one or more insured depository institutions in a
holding company structure. Any obligation or liability owed by a subsidiary
bank to its parent company is subordinated to the subsidiary bank's
cross-guarantee liability with respect to commonly controlled insured
depository institutions. Eurobank is currently the only FDIC-insured
depository institution subsidiary of EuroBancshares.
Because EuroBancshares is a legal entity separate and distinct from
Eurobank, its right to participate in the distribution of assets of any
subsidiary upon the subsidiary's liquidation or reorganization will be subject
to the prior claims of the subsidiary's creditors. In the event of a
liquidation or other resolution of Eurobank, the claims of depositors and other
general or subordinated creditors of Eurobank would be entitled to a priority
of payment over the claims of holders of any obligation of Eurobank to its
shareholders, including any depository institution holding company (such as
EuroBancshares) or any shareholder or creditor of such holding company.
USA Patriot Act
On October 26, 2001, President Bush signed into law comprehensive
anti-terrorism legislation known as the USA Patriot Act. Title III of the USA
Patriot Act requires financial institutions to help prevent, detect and deter
international money laundering and the financing of terrorism. The
effectiveness of a financial institution in combating money laundering
activities is a factor to be considered in any application submitted by the
financial institution under the Bank Merger Act or the Bank Holding Company
Act, which acts apply to Eurobank and EuroBancshares, respectively.
EuroBancshares and its subsidiaries, including Eurobank, have adopted systems
and procedures to comply with the USA Patriot Act and regulations adopted
thereunder by the Secretary of the Treasury.
Eurobank
Eurobank is subject to extensive regulation and examination by the
Commissioner of Financial Institutions of Puerto Rico and the FDIC, which
insures its deposits to the maximum extent permitted by law, and is subject to
certain Federal Reserve Board regulations of transactions with its affiliates.
The federal and Puerto Rico laws and regulations which are applicable to
Eurobank, regulate, among other things, the scope of its business, its
investments, its reserves against deposits, the timing of the availability of
deposited funds and the nature and amount of and collateral for certain loans.
In addition to the impact of such regulations, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy.
Transactions with Affiliates
There are various statutory and regulatory limitations, including those
set forth in sections 23A and 23B of the Federal Reserve Act and Regulation W,
governing the extent to which Eurobank will be able to purchase assets from or
securities of or otherwise finance or transfer funds to EuroBancshares or its
nonbanking subsidiaries. Among other restrictions, such transfers by Eurobank
to EuroBancshares or any of its nonbanking subsidiaries generally will be
limited to 10.0% of Eurobank's capital and surplus and, with respect to
EuroBancshares and all such nonbanking subsidiaries, to an aggregate of 20.0%
of Eurobank's subsidiary's capital and surplus. Furthermore, loans and
extensions of credit are required to be secured in specified amounts and are
required to be on terms and conditions consistent with safe and sound banking
practices.
92
Table of Contents
In addition, any transaction by a bank with an affiliate and any sale of
assets or provision of services to an affiliate generally must be on terms that
are substantially the same, or at least as favorable, to the bank as those
prevailing at the time for comparable transactions with nonaffiliated
companies.
Loans to Insiders
Sections 22(g) and (h) of the Federal Reserve Act and its implementing
regulation, Regulation O, place restrictions on loans by a bank to executive
officers, directors, and principal stockholders. Under Section 22(h), loans to
a director, an executive officer and to a greater than 10% stockholder of a
bank and certain of their related interests, or insiders, and insiders of
affiliates, may not exceed, together with all other outstanding loans to such
person and related interests, the bank's loans-to-one-borrower limit (generally
equal to 15% of the institution's unimpaired capital and surplus). Section
22(h) also requires that loans to insiders and to insiders of affiliates be
made on terms substantially the same as offered in comparable transactions to
other persons, unless the loans are made pursuant to a benefit or compensation
program that (i) is widely available to employees of the bank and (ii) does not
give preference to insiders over other employees of the bank. Section 22(h)
also requires prior Board of Directors approval for certain loans, and the
aggregate amount of extensions of credit by a bank to all insiders cannot
exceed the institution's unimpaired capital and surplus. Furthermore, Section
22(g) places additional restrictions on loans to executive officers.
Dividends
The ability of Eurobank to pay dividends on its common stock is restricted
by the Puerto Rico Banking Act of 1933, as amended, the FDIA and FDIC
regulations. In general terms, the Puerto Rico Banking Act provides that when
the expenditures of a bank are greater than receipts, the excess of
expenditures over receipts shall be charged against the undistributed profits
of the bank and the balance, if any, shall be charged against the required
reserve fund of the bank. If there is no sufficient reserve fund to cover such
balance in whole or in part, the outstanding amount shall be charged against
the bank's capital account. The Puerto Rico Banking Act provides that until
said capital has been restored to its original amount and the reserve fund to
20% of the original capital, the bank may not declare any dividends. In
general terms, the FDIA and the FDIC regulations restrict the payment of
dividends when a bank is undercapitalized, when a bank has failed to pay
insurance assessments, or when there are safety and soundness concerns
regarding a bank.
The payment of dividends by Eurobank may also be affected by other
regulatory requirements and policies, such as maintenance of adequate capital.
If, in the opinion of the regulatory authority, a depository institution under
its jurisdiction is engaged in, or is about to engage in, an unsafe or unsound
practice (that, depending on the financial condition of the depository
institution, could include the payment of dividends), such authority may
require, after notice and hearing, that such depository institution cease and
desist from such practice. The Federal Reserve Board has issued a policy
statement that provides that insured banks and bank holding companies should
generally pay dividends only out of operating earnings for the current and
preceding two years. In addition, all insured depository institutions are
subject to the capital-based limitations required by the Federal Deposit
Insurance Corporation Improvement Act of 1991.
FDIC Capital Requirements
Eurobank is also subject to certain restrictions on the payment of
dividends as a result of the requirement that it maintain adequate levels of
capital in accordance with guidelines promulgated from time to time by
applicable regulators.
The FDIC and the Commissioner of Financial Institutions of Puerto Rico
monitor the capital adequacy of Eurobank by using a combination of risk-based
guidelines and leverage ratios. The agencies consider the bank's capital
levels when taking action on various types of applications and when conducting
supervisory activities related to the safety and soundness of individual banks
and the banking system.
Under the risk-based capital guidelines, a risk weight factor of 0% to
100% is assigned to each category of assets based generally on the perceived
credit risk of the asset class. The risk weights are then multiplied by the
93
Table of Contents
corresponding asset balances to determine a "risk-weighted" asset base.
At least half of the risk-based capital must consist of core (Tier 1) capital,
which is comprised of:
•
common stockholders' equity (includes common stock and any
related surplus, undivided profits, disclosed capital reserves that
represent a segregation of undivided profits, and foreign currency
translation adjustments; less net unrealized losses on marketable
equity securities);
•
certain noncumulative perpetual preferred stock and related
surplus; and
•
minority interests in the equity capital accounts of
consolidated subsidiaries, and excludes goodwill and various
intangible assets.
The remainder, supplementary (Tier 2) capital, may consist of
•
allowance for loan and lease losses, up to a maximum of 1.25% of risk-weighted assets;
•
certain perpetual preferred stock and related surplus;
•
hybrid capital instruments;
•
perpetual debt;
•
mandatory convertible debt securities;
•
term subordinated debt;
•
intermediate-term preferred stock; and
•
certain unrealized holding gains on equity securities.
"Total risk-based capital" is determined by combining core capital and
supplementary capital.
Under the regulatory capital guidelines, Eurobank must maintain a total
risk-based capital to risk-weighted assets ratio of at least 8.0%, a Tier 1
capital to risk-weighted assets ratio of at least 4.0%, and a Tier 1 capital to
adjusted total assets ratio of at least 4.0% (3.0% for banks receiving the
highest examination rating) to be considered adequately capitalized. See
discussion in the section below captioned "
The FDIC Improvement Act
."
FIRREA
The Financial Institutions Reform, Recovery and Enforcement Act of 1989,
or FIRREA, includes various provisions that affect or may affect Eurobank.
Among other matters, FIRREA generally permits bank holding companies to acquire
healthy thrifts as well as failed or failing thrifts. FIRREA removed certain
cross-marketing prohibitions previously applicable to thrift and bank
subsidiaries of a common holding company. Furthermore, a multi-bank holding
company may now be required to indemnify the federal deposit insurance fund
against losses it incurs with respect to such company's affiliated banks, which
in effect makes a bank holding company's equity investments in healthy bank
subsidiaries available to the FDIC to assist such company's failing or failed
bank subsidiaries.
In addition, pursuant to FIRREA, any depository institution that has been
chartered less than two years, is not in compliance with the minimum capital
requirements of its primary federal banking regulator, or is otherwise in a
troubled condition must notify its primary federal banking regulator of the
proposed addition of any person to the Board of Directors or the employment of
any person as a senior executive officer of the institution at least 30 days
before such addition or employment becomes effective. During such 30-day
period, the applicable federal banking regulatory agency may disapprove of the
addition of employment of such director or officer. Eurobank is not subject to
any such requirements.
FIRREA also expanded and increased civil and criminal penalties available
for use by the appropriate regulatory agency against certain
"institution-affiliated parties" primarily including (i) management, employees
and agents of a financial institution, as well as (ii) independent contractors
such as attorneys and accountants and others
94
Table of Contents
who participate in the conduct of the financial institution's affairs and
who caused or are likely to cause more than minimum financial loss to or a
significant adverse affect on the institution, who knowingly or recklessly
violate a law or regulation, breach a fiduciary duty or engage in unsafe or
unsound practices. Such practices can include the failure of an institution to
timely file required reports or the submission of inaccurate reports.
Furthermore, FIRREA authorizes the appropriate banking agency to issue cease
and desist orders that may, among other things, require affirmative action to
correct any harm resulting from a violation or practice, including restitution,
reimbursement, indemnifications or guarantees against loss. A financial
institution may also be ordered to restrict its growth, dispose of certain
assets or take other action as determined by the ordering agency to be
appropriate.
The FDIC Improvement Act
The Federal Deposit Insurance Corporation Improvement Act of 1991, or
FDICIA, made a number of reforms addressing the safety and soundness of the
deposit insurance system, supervision of domestic and foreign depository
institutions, and improvement of accounting standards. This statute also
limited deposit insurance coverage, implemented changes in consumer protection
laws and provided for least-cost resolution and prompt regulatory action with
regard to troubled institutions.
FDICIA requires every bank with total assets in excess of $500 million to
have an annual independent audit made of the bank's financial statements by a
certified public accountant to verify that the financial statements of the bank
are presented in accordance with generally accepted accounting principles and
comply with such other disclosure requirements as prescribed by the FDIC.
FDICIA also places certain restrictions on activities of banks depending
on their level of capital. FDICIA divides banks into five different
categories, depending on their level of capital. Under regulations adopted by
the FDIC, a bank is deemed to be "well-capitalized" if it has a total
Risk-Based Capital Ratio of 10.0% or more, a Tier 1 Capital Ratio of 6.0% or
more and a Leverage Ratio of 5.0% or more, and the bank is not subject to an
order or capital directive to meet and maintain a certain capital level. Under
such regulations, a bank is deemed to be "adequately capitalized" if it has a
total Risk-Based Capital Ratio of 8.0% or more, a Tier 1 Capital Ratio of 4.0%
or more and a Leverage Ratio of 4.0% or more (unless it receives the highest
composite rating at its most recent examination and is not experiencing or
anticipating significant growth, in which instance it must maintain a Leverage
Ratio of 3.0% or more). Under such regulations, a bank is deemed to be
"undercapitalized" if it has a total Risk-Based Capital Ratio of less than
8.0%, a Tier 1 Capital Ratio of less than 4.0% or a Leverage Ratio of less than
4.0%. Under such regulations, a bank is deemed to be "significantly
undercapitalized" if it has a Risk-Based Capital Ratio of less than 6.0%, a
Tier 1 Capital Ratio of less than 3.0% and a Leverage Ratio of less than 3.0%.
Under such regulations, a bank is deemed to be "critically undercapitalized" if
it has a Leverage Ratio of less than or equal to 2.0%. In addition, the FDIC
has the ability to downgrade a bank's classification (but not to "critically
undercapitalized") based on other considerations even if the bank meets the
capital guidelines. According to these guidelines, currently and on a pro
forma basis after the offering, Eurobank will be classified as
"well-capitalized" as of December 31, 2003.
In addition, if a state non-member bank is classified as undercapitalized,
the bank is required to submit a capital restoration plan to the FDIC.
Pursuant to FDICIA, an undercapitalized bank is prohibited from increasing its
assets, engaging in a new line of business, acquiring any interest in any
company or insured depository institution, or opening or acquiring a new branch
office, except under certain circumstances, including the acceptance by the
FDIC of a capital restoration plan for the bank.
Furthermore, if a state non-member bank is classified as undercapitalized,
the FDIC may take certain actions to correct the capital position of the bank;
if a bank is classified as significantly undercapitalized or critically
undercapitalized, the FDIC would be required to take one or more prompt
corrective actions. These actions would include, among other things,
requiring: sales of new securities to bolster capital; improvements in
management; limits on interest rates paid; prohibitions on transactions with
affiliates; termination of certain risky activities and restrictions on
compensation paid to executive officers. If a bank is classified as critically
undercapitalized, FDICIA requires the bank to be placed into conservatorship or
receivership within ninety days, unless the FDIC determines that other action
would better achieve the purposes of FDICIA regarding prompt corrective action
with respect to undercapitalized banks.
95
Table of Contents
The capital classification of a bank affects the frequency of examinations
of the bank and impacts the ability of the bank to engage in certain activities
and affects the deposit insurance premiums paid by such bank. Under FDICIA,
the FDIC is required to conduct a full-scope, on-site examination of every bank
at least once every twelve months. An exception to this rule is made, however,
that provides that banks (i) with assets of less than $100 million, (ii) are
categorized as "well-capitalized," (iii) were found to be well managed and its
composite rating was outstanding and (iv) has not been subject to a change in
control during the last twelve months, need only be examined by the FDIC once
every eighteen months.
Brokered Deposits
Under FDICIA, banks may be restricted in their ability to accept brokered
deposits, depending on their capital classification. "Well-capitalized" banks
are permitted to accept brokered deposits, but all banks that are not
well-capitalized are not permitted to accept such deposits. The FDIC may, on a
case-by-case basis, permit banks that are adequately capitalized to accept
brokered deposits if the FDIC determines that acceptance of such deposits would
not constitute an unsafe or unsound banking practice with respect to the bank.
Deposits obtained from financial intermediaries, so-called "brokered deposits,"
represented approximately 23.2% of Eurobank's total deposits as of December 31,
2003. As previously mentioned, Eurobank is currently well-capitalized and
therefore is not subject to any limitations with respect to its brokered
deposits.
Federal Limitations on Activities and Investments
The equity investments and activities as a principal of FDIC-insured
state-chartered banks such as Eurobank are generally limited to those that are
permissible for national banks. Under regulations dealing with equity
investments, an insured state bank generally may not directly or indirectly
acquire or retain any equity investment of a type, or in an amount, that is not
permissible for a national bank.
FDIC Deposit Insurance Assessments
In addition, under FDICIA, the FDIC is authorized to assess insurance
premiums on a bank's deposits at a variable rate depending on the probability
that the deposit insurance fund will incur a loss with respect to the bank.
(Under prior law, the deposit insurance assessment was a flat rate, regardless
of the likelihood of loss.) In this regard, the FDIC has issued regulations
that provide for a transitional risk-based deposit assessment that determines
the deposit insurance assessment rates on the basis of the bank's capital
classification and supervisory evaluations. Each of these categories have
three subcategories, resulting in nine assessment risk classifications. The
three subcategories with respect to capital are "well-capitalized," "adequately
capitalized" and "less than adequately capitalized" (which would include
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized" banks). The three subcategories with respect to supervisory
concerns are "healthy," "supervisory concern" and "substantial supervisory
concern." A bank is deemed "healthy" if it is financially sound with only a
few minor weaknesses. A bank is deemed subject to "supervisory concern" if it
has weaknesses that, if not corrected, could result in significant
deterioration of the bank and increased risk to the Bank Insurance Fund, or
BIF. A bank is deemed subject to "substantial supervisory concern" if it poses
a substantial probability of loss to the BIF.
On June 30, 1996, the Deposit Insurance Funds Act of 1996, or DIFA, was
enacted and signed into law as part of the Economic Growth and Regulatory
Paperwork Reduction Act of 1996. DIFA established the framework for the
eventual merger of the BIF and the Savings Association Insurance Fund, or SAIF,
into a single Deposit Insurance Fund. It repealed the statutory minimum
premium and, under implementing FDIC regulations promulgated in 1997, premiums
assessed by both the BIF and the SAIF are to be assessed using the matrix
described above at a rates between 0 cents and 27 cents per $100 of deposits.
DIFA also separated, effective January 1, 1997, the Financing Corporation,
or FICO, assessment to service the interest on its bond obligations from the
BIF and SAIF assessments. The amount assessed on individual institutions by
the FICO will be in addition to the amount, if any, paid for deposit insurance
according to the FDIC's risk-related assessment rate schedules. The FICO rate
may be adjusted quarterly to reflect changes in assessment bases for the BIF
and the SAIF. Accordingly, Eurobank may be subject to two separate premiums
(for servicing interest on bond obligations and for the BIF/SAIF insurance), if
such premiums are assessed.
96
Table of Contents
The FDIC may terminate the deposit insurance of any insured depository
institution, including Eurobank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution at the time of the termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined
by the FDIC. Management is aware of no existing circumstances which would
result in termination of Eurobank's deposit insurance.
Community Reinvestment Act
Under the Community Reinvestment Act, or CRA, as implemented by the
Congress in 1977, a financial institution has a continuing and affirmative
obligation, consistent with its safe and sound operation, to help meet the
credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires federal examiners, in connection with the examination of a financial
institution, to assess the institution's record of meeting the credit needs of
its community and to take such record into account in its evaluation of certain
applications by such institution. The CRA also requires all institutions to
make public disclosure of their CRA ratings. EuroBancshares has a Compliance
Committee, which oversees the planning of products, and services offered to the
community, especially those aimed to serve low and moderate income communities.
The FDIC rated Eurobank as "satisfactory" in meeting community credit needs
under the CRA at its most recent examination for CRA performance.
Consumer Laws and Regulations
In addition to the laws and regulations discussed herein, Eurobank is also
subject to certain consumer laws and regulations that are designed to protect
consumers in transactions with banks. While the list set forth herein is not
exhaustive, these laws and regulations include the Truth in Lending Act, the
Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds
Availability Act, the Equal Credit Opportunity Act, and the Fair Housing Act,
among others. These laws and regulations mandate certain disclosure
requirements and regulate the manner in which financial institutions must deal
with customers when taking deposits or making loans to such customers.
Eurobank must comply with the applicable provisions of these consumer
protection laws and regulations as part of its ongoing customer relations.
Interstate Branching
Effective June 1, 1997, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 amended the FDIA and certain other statutes to permit
state and national banks with different home states to merge across state
lines, with approval of the appropriate federal banking agency, unless the home
state of a participating bank had passed legislation prior to May 31, 1997
expressly prohibiting interstate mergers. Under the Riegle-Neal Act
amendments, once a state or national bank has established branches in a state,
that bank may establish and acquire additional branches at any location in the
state at which any bank involved in the interstate merger transaction could
have established or acquired branches under applicable federal or state law.
If a state opts out of interstate branching within the specified time period,
no bank in any other state may establish a branch in the state which has opted
out, whether through an acquisition or de novo.
For purposes of the Riegle-Neal Act's amendments to the FDIA, Eurobank is
treated as a state bank and is subject to the same restrictions on interstate
branching as other state banks. However, for purposes of the IBE Act, Eurobank
is considered to be a foreign bank and may branch interstate by merger or de
novo to the same extent as a domestic bank in Eurobank's home state. It is not
yet possible to determine how these statutes will be harmonized, with respect
either to which federal agency will approve interstate transactions or to which
"home state" determination rules will apply.
Eurobank currently does not have any branches outside Puerto Rico, nor
will the acquisition of BankTrust result in any branches outside of Puerto
Rico.
97
Table of Contents
Federal Home Loan Bank System
The FHLB system, of which Eurobank is a member, consists of 12 regional
FHLBs governed and regulated by the Federal Housing Finance Board. The FHLBs
serve as reserve or credit facilities for member institutions within their
assigned regions. They are funded primarily from proceeds derived from the
sale of consolidated obligations of the FHLB system. They make loans (
i.e
.,
advances) to members in accordance with policies and procedures established by
the FHLB and the boards of directors of each regional FHLB.
As a system member, Eurobank is entitled to borrow from the FHLB of New
York, or FHLB-NY, and is required to own capital stock in the FHLB-NY in an
amount equal to the greater of 1% of the aggregate of the unpaid principal of
its home mortgage loans, home purchase contracts, and similar obligations at
the beginning of each fiscal year, which for this purpose is deemed to be not
less than 30% of assets or 5% of the total amount of advances by the FHLB-NY to
Eurobank. Eurobank is in compliance with the stock ownership rules described
above with respect to such advances, commitments and letters of credit and home
mortgage loans and similar obligations. All loans, advances and other
extensions of credit made by the FHLB-NY to Eurobank are secured by a portion
of the its mortgage loan portfolio, certain other investments and the capital
stock of the FHLB-NY held by Eurobank.
Mortgage Banking Operations
Eurobank is subject to the rules and regulations of FHA, VA, FNMA, FHLMC
and GNMA with respect to originating, processing, selling and servicing
mortgage loans and the issuance and sale of mortgage-backed securities. Those
rules and regulations, among other things, prohibit discrimination and
establish underwriting guidelines which include provisions for inspections and
appraisals, require credit reports on prospective borrowers and fix maximum
loan amounts and, with respect to VA loans, fix maximum interest rates.
Mortgage origination activities are subject to, among others, the Equal Credit
Opportunity Act, Federal Truth-in-Lending Act and the Real Estate Settlement
Procedures Act and the regulations promulgated thereunder which, among other
things, prohibit discrimination and require the disclosure of certain basic
information to mortgagors concerning credit terms and settlement costs.
Eurobank is also subject to regulation by the Commissioner of Financial
Institutions of Puerto Rico, with respect to, among other things, the
establishment of maximum origination fees on certain types of mortgage loan
products.
Puerto Rico Regulation
As a commercial bank organized under the laws of Puerto Rico, Eurobank is
subject to the supervision, examination and regulation of the Commissioner of
Financial Institutions of Puerto Rico, pursuant to the Puerto Rico Banking Act
of 1933, as amended. Certain of those activities are described in this
"Regulation and Supervision"
section above.
Puerto Rico Banking Law
Section 12 of the Puerto Rico Banking Law requires the prior approval of
the Commissioner of Financial Institutions of Puerto Rico with respect to a
transfer of capital stock of a bank that results in a change of control of the
bank. Under Section 12, a change of control is presumed to occur if a person
or group of persons acting in concert, directly or indirectly, acquire more
than 5.0% of the outstanding voting capital stock of the bank. The
Commissioner of Financial Institutions of Puerto Rico has interpreted the
restrictions of Section 12 as applying to acquisitions of voting securities of
entities controlling a bank, such as a bank holding company. Under the Puerto
Rico Banking Law, the determination of the Commissioner of Financial
Institutions of Puerto Rico whether to approve a change of control filing is
final and non-appealable.
Section 16 of the Puerto Rico Banking Law requires every bank to maintain
a legal reserve which shall not be less than 20% of its demand liabilities,
except government deposits (federal, state and municipal) which are secured by
actual collateral. The reserve is required to be composed of any of the
following securities or combination thereof: (1) legal tender of the United
States; (2) checks on banks or trust companies located in any part of Puerto
Rico, to be presented for collection during the day following that on which
they are received; (3) money deposited in other banks or depository
institutions, subject to immediate collection; (4) federal funds sold to any
Federal Reserve Bank and securities purchased under agreement to resell
executed by the bank with such funds that are subject to be
98
Table of Contents
repaid to the bank on or before the close of the next business day and (5)
any other asset that the Commissioner of Financial Institutions of Puerto Rico
determines from time to time.
Section 17 of the Puerto Rico Banking Law permits Puerto Rico commercial
banks to make unsecured loans to any one person, firm, partnership or
corporation, up to an aggregate amount of 15.0% the sum of (i) paid-in capital;
(ii) reserve fund of the commercial bank; (iii) 50.0% of the commercial bank's
retained earnings and (iv) any other components that the Commissioner of
Financial Institutions of Puerto Rico may determine from time to time. As of
December 31, 2003, the legal lending limit for Eurobank under this provision
was approximately $10.0 million. If such loans are secured by collateral worth
at least 25.0% more than the amount of the loan, the aggregate maximum amount
may reach one-third of the sum of Eurobank's paid-in capital, reserve fund,
retained earnings and any other components that the Commissioner of Financial
Institutions of Puerto Rico may determine from time to time. As of December
31, 2003, the legal lending limit for Eurobank under this provision was
approximately $22.0 million. There are no restrictions under Section 17 of the
Puerto Rico Banking Law on the amount of loans which are fully secured by
bonds, securities and other evidences of indebtedness of the Government of the
United States, of the Commonwealth of Puerto Rico, or by bonds, not in default,
of authorities, instrumentalities or dependencies of the Commonwealth of Puerto
Rico or its municipalities.
Section 17 of the Puerto Rico Banking Law also prohibits Puerto Rico
commercial banks from making loans secured by their own stock and from
purchasing their own stock, unless such purchase is necessary to prevent losses
because of a debt previously contracted in good faith. The stock so purchased
by the Puerto Rico commercial bank must be sold by the bank in a public or
private sale within one year from the date of purchase.
Section 27 of the Puerto Rico Banking Law also requires that at least
10.0% of the yearly net income of a Puerto Rico commercial bank be credited to
a reserve fund until the amount deposited to the credit of the reserve fund is
equal to 100.0% of total paid-in capital (common and preferred) of the
commercial bank. As of December 31, 2003, Eurobank had $2.3 million in its
reserve fund.
Section 27 of the Puerto Rico Banking Law also provides that when the
expenditures of a Puerto Rico commercial bank are greater than receipts, the
excess of the expenditures over receipts shall be charged against the
undistributed profits of the bank, and the balance, if any, shall be charged
against the reserve fund, as a reduction thereof. If there is no reserve fund
sufficient to cover such balance in whole or in part, the outstanding amount
shall be charged against the capital account and no dividends shall be declared
until said capital has been restored to its original amount and the reserve
fund to 20% of the original capital of the bank.
Section 14 of the Puerto Rico Banking Law authorizes Eurobank to conduct
certain financial and related activities directly or through subsidiaries,
including lease financing of personal property, operating small loans companies
and mortgage loans activities. Eurobank is in the process of organizing an IBE
subsidiary, EBS Overseas.
Puerto Rico Usury Law
The rate of interest that Eurobank may charge on real estate and other
types of loans to individuals in Puerto Rico is subject to Puerto Rico's usury
law. That law is administered by the Finance Board, which consists of the
Secretaries of the Treasury, Commerce and Consumer Affairs Departments, the
Commissioner of Financial Institutions of Puerto Rico, the President of the
Planning Board, the President of the Government Development Bank for Puerto
Rico, the Secretary of Economic Development and Commerce Department and a
representative of the private financial industry. The Finance Board
promulgates regulations which specify maximum rates on various types of loans
to individuals and revises those regulations periodically as general interest
rates change.
Among the most important regulations enforced on interest rates are
Regulations 5722, 5782 and 6070. Pursuant to Regulation 5782, there is no
limitation on interest rates that may be charged on small personal loans. The
same rule applies to retail installment sale contracts and credit card loans as
provided by Regulation 6070. The rates on these loans are established as a
result of the market and competition.
Interest rates that may be charged on personal loans, personal lines of
credit, cash advances on credit cards, commercial loans or commercial lines of
credit and residential and commercial mortgage loans are not restricted by
99
Table of Contents
Regulation 5722. The rates on these loans are established as a result of
the market and competition. Regulation 5722 does establish restrictions on
prepayment penalties and late charges for all loans, except commercial loans.
International Banking Center Regulatory Act
We have an IBE that operates as a division of Eurobank under the name
Eurobank International, and are in the process of organizing a new IBE that
will operate as a subsidiary of Eurobank under the name EBS Overseas. We
intend to transfer substantially all of the assets of Eurobank International to
EBS Overseas. We also have an IBE that operates as a division of Eurobank
under the name BT International. We acquired this IBE in connection with the
acquisition of BankTrust. Due to statutory limitations on the amount of assets
that can be transferred to subsidiary IBEs while still preserving tax benefits,
we will continue to operate the acquired IBE as a division of Eurobank and will
not immediately transfer its assets to our subsidiary IBE, EBS Overseas.
The business and operations of our IBEs are subject to supervision and
regulation by the Commissioner of Financial Institutions of Puerto Rico. Under
the IBE Act, no sale, encumbrance, assignment, merger, exchange or transfer of
shares, interest or participation in the capital of an IBE may be initiated
without the prior approval of the Commissioner of Financial Institutions of
Puerto Rico, if by such transaction a person would acquire, directly or
indirectly, control of 10% or more of any class of stock, interest or
participation in the capital of the IBE. The IBE Act and the regulations
issued thereunder by the Commissioner of Financial Institutions of Puerto Rico
limit the business activities that may be carried out by an IBE. Such
activities are limited in part to persons and assets located outside of Puerto
Rico. The IBE Act provides further that every IBE must have not less than
$300,000 of unencumbered assets or acceptable financial guarantees.
Pursuant to the IBE Act and the IBE regulations, our IBEs must maintain
books and records of all their transactions in the ordinary course of business.
The IBEs are also required to submit to the Commissioner of Financial
Institutions of Puerto Rico quarterly and annual reports of their financial
condition and results of operations, including annual audited financial
statements.
The IBE Act empowers the Commissioner of Financial Institutions of Puerto
Rico to revoke or suspend, after notice and hearing, a license issued
thereunder if, among other things, the IBE fails to comply with the IBE Act,
the IBE regulations or the terms of its license, or if the Commissioner of
Financial Institutions of Puerto Rico finds that the business or affairs of the
IBE are conducted in a manner that is not consistent with the public interest.
IBEs generally are exempt from taxation under United States federal law
and Puerto Rico law. Recently, the Legislature of Puerto Rico and the Governor
of Puerto Rico approved a law amending the IBE Act. This law imposes income
taxes at normal statutory rates on each IBE that operates as a unit of a bank,
if the IBE's net income generated after December 31, 2003 exceeds 40% of the
bank's net income in the taxable year commenced on July 1, 2003, 30% of the
bank's net income in the taxable year commencing on July 1, 2004, and 20% of
the bank's net income in the taxable year commencing on July 1, 2005, and
thereafter. It does not impose income taxation on an IBE that operates as a
subsidiary of a bank. Thus, only BT International, which operates as a
division of Eurobank rather than a subsidiary, is impacted by the new law.
However, we cannot give you any assurance that the IBE Act will not be modified
in the future in a manner to reduce the tax benefits available to EBS Overseas.
A reduction of such tax benefits may reduce our earnings.
EuroSeguros, Inc.
EuroSeguros is a wholly owned subsidiary of EuroBancshares and is
registered as a corporate agent and general agency with the Office of the
Commissioner of Insurance of the Commonwealth of Puerto Rico. EuroSeguros is
subject to regulation by the Commissioner of Insurance relating to, among other
things, licensing of employees, sales practices, charging of commissions and
obligations to customers.
Future legislation and economic policy
Management of EuroBancshares and Eurobank cannot predict what other
legislation or economic and monetary policies of the various regulatory
authorities might be enacted or adopted or what other regulations might be
adopted
100
Table of Contents
or the effects thereof. Future legislation and policies and the effects
thereof might have a significant influence on overall growth and distribution
of loans, investments and deposits and affect interest rates charged on loans
or paid from time and savings deposits. Such legislation and policies have had
a significant effect on the operating results of commercial banks in the past
and are expected to continue to do so in the future.
DESCRIPTION OF EUROBANCSHARES CAPITAL STOCK
General
The following summary describes the material terms of our capital stock
and is subject to, and qualified in its entirety by, applicable law and the
provisions of our amended and restated certificate of incorporation and amended
and restated bylaws. We have filed these organizational documents as exhibits
to the registration statement of which this prospectus is a part.
Our authorized capital stock consists of 170,000,000 shares, of which
150,000,000 shares are common stock, par value $0.01 per share, and 20,000,000
shares are preferred stock, par value $0.01 per share. As of May 3, 2004, we
had [   ] shares of common stock outstanding and 429,507 shares of Series
A Preferred Stock outstanding. After giving effect to this offering, we will
have [   ] shares of common stock outstanding (plus any shares issued upon
the exercise of the underwriters' over-allotment option) and 429,507 shares of
Series A Preferred Stock outstanding.
Common Stock
Our outstanding shares of common stock are, and the shares of common stock
to be issued in this offering will be, validly issued, fully paid and
non-assessable. Subject to the rights of holders of preferred stock that may
be issued, the holders of outstanding shares of our common stock are entitled
to receive dividends out of assets legally available therefor at such times and
in such amounts as our Board of Directors may from time to time determine. Our
shares of common stock are neither redeemable nor convertible, and the holders
of common stock have no preemptive or subscription rights to purchase any of
our securities.
Upon our liquidation, dissolution or winding up, the holders of our common
stock are entitled to receive, pro rata, our assets which are legally available
for distribution, after payment of all debts and other liabilities and subject
to the prior rights of any holders of preferred stock then outstanding
(including holders of Series A Preferred Stock and our junior subordinated
debentures described below). Each outstanding share of common stock is
entitled to one vote on all matters submitted to a vote of stockholders. There
is no cumulative voting in the election of directors.
Our Board of Directors may approve for issuance, without approval of the
holders of common stock, preferred stock that has voting, dividend or
liquidation rights superior to that of our common stock and which may adversely
affect the rights of holders of common stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
power of the holders of common stock and could have the effect of delaying,
deferring or preventing a change in our control.
The holders of our common stock are entitled to receive such dividends as
are declared by our Board of Directors. We have not paid cash dividends
historically, nor do we anticipate paying any cash dividends in the foreseeable
future. Any future determination relating to dividend policy will be made at
the discretion of our Board of Directors and will depend on a number of
factors, including our future earnings, capital requirements, financial
condition, future prospects and such other factors as the Board of Directors
may deem relevant.
Various banking laws applicable to the Bank limit the payment of
dividends, management fees and other distributions by the Bank to us, and may
therefore limit our ability to pay dividends on our common stock. In addition,
we generally are unable to declare and pay dividends on our common stock if
there are any accrued and unpaid dividends on our Series A Preferred Stock for
the preceding 12 months. For further discussion on this matter, see the
section of this prospectus captioned
"Supervision and Regulation."
101
Table of Contents
Preferred Stock
Our amended and restated certificate of incorporation authorizes our Board
of Directors to issue preferred stock in classes or series, and to establish
the designations, preferences, qualifications, limitations or restrictions of
any class or series with respect to the rate and nature of dividends, the price
and terms and conditions on which shares may be redeemed, the terms and
conditions for conversion or exchange into any other class or series of the
stock, voting rights and other terms. Pursuant to this authority, on March 15,
2004, in connection with our acquisition of BankTrust, our Board of Directors
designated a series of 600,000 shares of Series A Preferred Stock to be issued
to certain stockholders of BankTrust in exchange for their shares of BankTrust
preferred stock in the acquisition. On May 3, 2004, we issued 429,507 shares
of our Series A Preferred Stock. The rights, preferences, privileges,
qualifications, restrictions and limitations of the Series A Preferred Stock
are described in the Certificate of Designation.
The shares of outstanding Series A Preferred Stock are validly issued,
fully paid and nonassessable. The rights of holders of Series A Preferred
Stock could be subject to, and may be adversely affected by, the rights of
holders of any additional series of preferred stock that may be issued in the
future and that may rank prior to, or on a parity with, the Series A Preferred
Stock as to dividends or distributions of assets. However, any such issuance
is subject to the approval of the holders of at least two–thirds of the
aggregate liquidation preference of the outstanding shares of the Series A
Preferred Stock.
The shares of Series A Preferred Stock are not convertible into, or
exchangeable for, shares of common stock, any other class or classes of capital
stock or any other security, or any other series of any class or classes of our
capital stock or any other security. The shares of Series A Preferred Stock do
not contain a sinking fund provision, and have no preemptive rights. We treat
the Series A Preferred Stock as Tier 1 Capital for purposes of the risk-based
capital guidelines of the Federal Reserve. The shares of Series A Preferred
stock are subject to redemption under the circumstances described under
"
Redemption at Our Option
" below.
Since we are a holding company, our right, and hence the rights of our
creditors and stockholders, to participate in any distribution of assets of any
subsidiary upon our liquidation or reorganization or otherwise is necessarily
subject to the prior claims of creditors of such subsidiary, including
depositors in the case of the Bank, except to the extent that our claims as a
creditor of the subsidiary may be recognized.
Dividend Rights
Holders of shares of our Series A Preferred Stock are entitled to receive
when, as and if declared by our Board of Directors, out of funds legally
available therefor, monthly noncumulative cash dividends payable on the last
day of each calendar month at a rate per annum equal to 6.825%. The Board of
Directors is not obligated or required to declare or pay dividends on the
Series A Preferred Stock, even if we have funds available for the payment of
such dividends. If our Board of Directors does not declare a dividend with
regard to the Series A Preferred Stock for a given dividend period, we have no
obligation to pay the dividend accrued for such dividend period or to pay any
interest thereon, whether or not dividends are declared in any future dividend
period.
So long as any shares of Series A Preferred Stock remain outstanding, we
are not permitted to
•
declare, set apart or pay any dividend or make any other
distribution of assets (other than dividends paid or other
distributions made on stock ranking junior to the Series A Preferred
Stock) on, shares of common stock or of any other class of our stock
ranking junior to the Series A Preferred Stock; or
•
redeem, purchase, set apart or otherwise acquire (except upon
conversion or exchange for stock ranking junior to the Series A
Preferred Stock) shares of common stock or of any other class of our
stock ranking junior to the Series A Preferred Stock;
unless (1) all accrued and unpaid dividends on the Series A Preferred Stock for
the twelve monthly dividend periods ending on the immediately preceding
dividend payment date shall have been paid or are paid contemporaneously, and
the full monthly dividend on the Series A Preferred Stock for the then-current
month has been or is contemporaneously declared and paid or declared and set
apart for payment; and (2) we have not defaulted in the payment of the
redemption price of any shares of Series A Preferred Stock called for
redemption.
102
Table of Contents
Redemption at Our Option
Shares of Series A Preferred Stock are redeemable at our option (with the
consent of the Board of Governors of the Federal Reserve System), in whole or
in part, at any time or from time to time on not less than 30, nor more than
60, days' written notice, at a redemption price of $25.00 per share, plus
accrued but unpaid dividends from the dividend payment date immediately
preceding the payment date (without any cumulation for unpaid dividends for
prior dividend periods on the Series A Preferred Stock) to the date fixed for
redemption.
Voting Rights
Except as described below and as required by applicable laws, holders of
the Series A Preferred Stock have no special voting rights, and their consent
is not required for taking any corporate action.
Any amendment, alteration or repeal of the rights, preferences and
privileges of the Series A Preferred Stock by way of amendment of the
certificate of incorporation, whether by merger or otherwise (including,
without limitation, the authorization or issuance of any shares ranking, as to
dividend rights or rights on liquidation, winding up and dissolution, senior to
the Series A Preferred Stock) that would materially and adversely affect the
powers, preferences or special rights of the Series A Preferred Stock shall not
be effective (unless otherwise required by applicable law) except with the
consent in writing of the holders of at least two-thirds of the outstanding
aggregate liquidation preference of the outstanding shares of the Series A
Preferred Stock, or with the sanction of a special resolution passed at a
separate general meeting by the holders of at least two-thirds of the aggregate
liquidation preference of the outstanding shares of such preferred stock.
Notwithstanding the foregoing, we may, without the consent or sanction of the
holders of the Series A Preferred Stock, authorize and issue shares of capital
stock ranking, as to dividend rights and rights on liquidation, winding up and
dissolution, on a parity with or junior to the Series A Preferred Stock.
If we do not pay monthly dividends for 18 consecutive months, the holders
of the Series A Preferred Stock will be entitled to appoint two members of our
Board of Directors; any director so appointed shall vacate board membership if,
following the 18-month failure to pay dividends, we shall have resumed the
payment of dividends in full on the Series A Preferred Stock and each such
other series of stock for 12 consecutive monthly dividend periods.
Liquidation Rights
In the event of our voluntary or involuntary liquidation, dissolution or
winding up, the holders of shares of Series A Preferred Stock will be entitled
to receive out of our assets available for distribution to stockholders, before
any distribution of assets is made to the holders of shares of common stock or
any other class or series of our stock ranking junior to the shares of Series A
Preferred Stock as to such a distribution, an amount equal to $25.00 per share,
plus an amount equal to dividends declared and unpaid for the then-current
dividend period up to the date of liquidation (without accumulation of accrued
and unpaid dividends for prior dividend periods) to the date fixed for payment
of such distribution. If, upon our voluntary or involuntary liquidation,
dissolution or winding up, the amounts payable with respect to the Series A
Preferred Stock and any other shares of our capital stock ranking as to such
distribution on a parity with the Series A Preferred Stock are not paid in
full, the holders of all such shares will share ratably in any such
distribution of our assets in proportion to the full liquidation preferences to
which they are entitled. After payment of the full amount of the liquidation
preference to which they would otherwise be entitled, the holders of shares of
Series A Preferred Stock will be entitled to no other payments. A
consolidation or merger of us with or into any other corporation or the sale,
lease or conveyance of any or all of our assets will not be regarded as a
liquidation, dissolution or winding up of our business.
Junior Subordinated Debentures; Trust Preferred Securities
On December 19, 2002 we issued $20.0 million of Trust II Preferred
Securities through a special purpose trust subsidiary, Trust II, which is
wholly owned by us. Dividend payments on Trust II Preferred Securities are
funded by interest payments we make on the 2002 Debentures issued to Trust II.
The Trust II Preferred Securities mature 30 years after the issuance date and
have a five-year call provision, except under limited circumstances where the
security may be called earlier. Trust II pays interest quarterly at a rate
equal to three-month LIBOR plus a margin of
103
Table of Contents
325 basis points. At March 31, 2004, the interest rate being paid on the
2001 and 2002 Trust II Preferred Securities (and related 2002 Debentures) was
4.40% and the annual interest payments amounted to $904,000, based on the
applicable interest rate at that date.
On December 18, 2001 we issued $25.0 million of Trust I Preferred
Securities through a special purpose trust subsidiary, Trust I, which is wholly
owned by us. Dividend payments on the Trust I Preferred Securities are funded
by interest payments we make on the 2001 Debentures issued to Trust I. The
Trust I Preferred Securities mature 30 years after the issuance date and have a
five-year call provision, except under limited circumstances where the security
may be called earlier. Trust I pays interest quarterly at a rate equal to
three-month LIBOR plus a margin of 360 basis points. At March 31, 2004, the
interest rate being paid on the Trust I Preferred Securities (and related 2001
Debentures) was 4.70% and the annual interest payments amounted to $1.2
million, based on the applicable interest rate at that date.
The interest payments on the 2002 and 2001 Trust Preferred Securities and
related 2002 and 2001 Debentures are currently expected to be funded by
dividends paid to us by Eurobank. Our principal and interest payments on the
2002 and 2001 Debentures are in a senior position to the liquidation rights of
holders of our common stock. For additional information regarding the Junior
Subordinated Debentures and the Trust Preferred Securities, see the section of
this prospectus captioned "
Management's Discussion and Analysis – Junior
Subordinated Debentures; Trust Preferred Securities
."
Limitation of Liability and Indemnification Matters
Our amended and restated certificate of incorporation provides that the
personal liability of our directors in cases of monetary claims for damages
resulting from the breach of their fiduciary duties as directors shall be
eliminated, provided that such provision does not eliminate or limit the
liability of the director for: (1) any breach of the duty of loyalty of the
director to us, or our stockholders; (2) acts or omissions not in good faith,
or which involve intentional misconduct or knowing violations of law; (3)
unlawful payments of dividends or purchase and redemption of our stock; or (4)
any transaction where the director derives an improper personal benefit.
Our certificate of incorporation also provides for indemnification of
agents including directors, officers and employees to the maximum extent
allowed by Puerto Rico law. Our certificate of incorporation requires
indemnification of any person who was or is a party, or is threatened to be
made a party, to any imminent, pending or resolved action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent if the Board of
Directors (or other committee or entity empowered to make such a determination)
formally determines that he acted in good faith and in a manner reasonably
deemed consistent with, or not opposed to, our best interests. With respect to
any criminal action or proceeding, the Board of Directors (or other committee
or entity empowered to make such a determination) must formally determine that
he had no reasonable cause to believe his conduct was unlawful. In the case of
any action, suit or proceeding by or in the right of the Company, no
indemnification shall be made if such person is determined to be liable to us,
unless and only to the extent that the court in which such proceeding was
brought determines upon application that such person is fairly and reasonably
entitled to indemnity. To the extent that a director, officer, employee or
agent has prevailed in defense of any such action, suit or proceeding, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him. The indemnification provided by our certificate of
incorporation is not exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, bylaw, agreement, vote of
uninvolved stockholders, directors or otherwise.
Our certificate of incorporation also provides that we may purchase and
maintain insurance covering our directors, officers, employees and agents
against any liability asserted against any of them and incurred by any of them,
whether or not we would have the power to indemnify them against such liability
under the provisions of our certificate of incorporation and applicable law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or controlling persons pursuant
to the provisions described above, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
104
Table of Contents
Certain Anti-takeover Provisions of our Certificate of Incorporation and Bylaws
Our amended and restated certificate of incorporation and bylaws contain
provisions that may prevent, discourage or delay any change in the control of
EuroBancshares and may make it more difficult to remove a member of the Board
of Directors or management. These provisions include:
Blank Check Preferred Stock
Our Board of Directors has the authority to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to effect a change in control or takeover.
Staggered Board of Directors
Our amended and restated certificate of incorporation provides that our
Board of Directors will be divided into three classes of approximately equal
numbers of directors, with the term of office of one class expiring each year
over a three-year period. Classification of directors has the effect of making
it more difficult for stockholders to change the composition of our Board. At
least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in the majority of the Board. Such a delay may
help ensure that our directors, if confronted by a holder attempting to force a
proxy contest, a tender or exchange offer or other extraordinary corporate
transaction, would have sufficient time to review the proposal as well as any
available alternatives to the proposal and to act in what they believe to be
the best interests of the stockholders.
The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of EuroBancshares even though such a transaction
could be beneficial to our stockholders. The classification of our Board also
increases the likelihood the incumbent directors will retain their positions.
Director Removal and Vacancies
Pursuant to our amended and restated bylaws, vacancies in our Board of
Directors may be filled only by the affirmative vote of a majority of the
directors then in office.
Supermajority Vote; Fair Price Requirement
Our amended and restated certificate of incorporation contains a
"supermajority vote; fair price requirement" provision. This provision limits
our ability to enter into certain business combinations with a control person.
With limited exceptions, to approve such a combination, the provision requires
a vote of not less than 80% of the total votes entitled to be cast in an
election of our directors and that are not attributable to shares owned by a
control person.
The term "control person" generally includes any of our stockholders who,
together with their "affiliates" and "associates" (as defined in our amended
and restated certificate of incorporation), beneficially owns in the aggregate
10% or more of our outstanding shares of our common stock.
A "business combination" is defined to include:
•
any merger or consolidation of EuroBancshares with or into a
control person, or any merger or consolidation of a control person
with or into EuroBancshares, or one of our subsidiaries;
•
any sale or other disposition of all or any substantial part
of our assets or the assets of one of our subsidiaries to a control
person, or any sale or other disposition of all, or any substantial
part of, the assets of a control person to us or to one of our
subsidiaries;
•
the issuance of any of our securities or the securities of
one of our subsidiaries to a control person, or our acquisition or
the acquisition by one of our subsidiaries of the securities of a
control person;
105
Table of Contents
•
any reclassification of our common stock, or any
recapitalization involving our common stock within five years after
a control person becomes a control person; or
•
any agreement, contract or other arrangement providing for
any of the transactions listed above.
Notwithstanding the foregoing, there are certain exceptions when a
business combination with a control person would not be subject to the
supermajority vote requirement, including:
•
when our Board of Directors by at least a two-thirds vote has
expressly approved and recommended the business combination to our
stockholders;
•
when the business combination is solely between
EuroBancshares and another corporation, 50% or more of the voting
stock of which is owned by us and none of which is owned by a
control person, and where each holder of our common stock receives
the same type of consideration in proportion to his holdings;
•
when the business combination is solely between
EuroBancshares and another corporation and, following the business
combination, those stockholders owning all of our voting stock
immediately prior to the business combination own greater than 50%
of the voting stock of the entity that survives the business
combination; or
•
a business combination wherein all of the following
conditions are satisfied:
•
the per share consideration to be received in the
business combination is not less than the higher of (1) the
highest per share price paid by the control person in acquiring
any of its holdings of our common stock, or (2) the highest per
share market price for our common stock in the three months
preceding the date of the proxy statement for the business
combination;
•
after becoming a control person and prior to the
consummation of the business combination, the control person has
not (1) acquired any newly issued shares of our common stock
from us (with certain limited exceptions), (2) received any
benefit (except proportionately as a stockholder) of any loans
or any other financial assistance or tax credits from us, or
(iii) made any changes to our business or equity capital
structure; and
•
a proxy statement, responsive to the requirements of
the Exchange Act, as amended, is mailed to all of our public
stockholders of record for the purposes of soliciting
stockholder approval of the business combination.
Evaluation of Business Combinations
Pursuant to our amended and restated certificate of incorporation, our
Board of Directors, when evaluating any offer of another party to
•
purchase or exchange any securities or property for any of
our outstanding equity securities,
•
engage in any business combination (as defined above with
respect to the "supermajority vote; fair price" provision), or
•
purchase or otherwise acquire all or substantially all of our
properties and assets,
may in its sole discretion, in connection with the exercise of its judgment in
determining what is in our best interests and the best interests of our
stockholders, give due consideration not only to the price or other
consideration being offered but also to all other relevant factors, including
(without limitation): the financial and managerial resources and future
prospects of the other party, the possible side effects on our business and our
subsidiaries and on our employees, customers, suppliers and creditors (as well
as those of our subsidiaries), and the effects on the communities in which our
facilities are located. In evaluating any such offer, our Board of Directors
shall be deemed to be performing their duly authorized duties and acting in our
best interests.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock and Series A
Preferred Stock is
.
106
Table of Contents
TAXATION
General
In the opinion of Acosta Ramirez C.S.P., our Puerto Rico tax counsel, the
following discussion summarizes the material Puerto Rico tax considerations
relating to the purchase, ownership and disposition of our common stock offered
under this prospectus. In the opinion of Jenkens & Gilchrist, a Professional
Corporation, our United States tax counsel, the following discussion summarizes
the material United States federal income and estate tax considerations
relating to purchase, ownership and disposition of our common stock offered
under this prospectus. The opinions are based on various assumptions,
including assumptions regarding the accuracy of factual representations made by
us and are subject to limitations. This discussion does not intend to describe
all of the tax considerations that may be relevant to a particular investor in
light of that person's particular circumstances and does not describe any tax
consequences arising under the laws of any state, locality or taxing
jurisdiction other than Puerto Rico and the United States.
This discussion is for general purposes only and is based on the tax laws
of Puerto Rico and the United States as in effect on the date of this
prospectus, as well as regulations, administrative pronouncements and judicial
decisions available on or before such date and now in effect. All of the
foregoing are subject to change, which change could apply retroactively and
could affect the continued validity of this discussion. A prospective investor
should be aware that an opinion of counsel represents only such counsel's best
legal judgment and that it is not binding on the Puerto Rico Treasury
Department, any municipality or agency of Puerto Rico, the United States
Internal Revenue Service or the courts. Accordingly, there can be no assurance
that the opinions set forth herein, if challenged, would be sustained.
You should consult your own tax advisor as to the application to your
particular situation of the tax considerations discussed below, as well as the
application of any state, local, foreign or other tax.
Puerto Rico Taxation
The following discussion does not intend to cover all aspects of Puerto
Rico taxation that may be relevant to a purchaser of our common stock in light
of the purchaser's particular circumstances, or to purchasers subject to
special rules of taxation, such as life insurance companies, "Special
Partnerships," "Subchapter N Corporations," registered investment companies,
and certain pension trusts.
For purposes of the discussion below, and the discussion under
"United
States Taxation,"
a "Puerto Rico corporation" is a corporation organized under
the laws of Puerto Rico. For purposes of the discussion below, a "foreign
corporation" is a corporation organized under the laws of a jurisdiction other
than Puerto Rico. Corporations organized under the laws of the United States
or any of the states of the United States are considered "foreign corporations"
for Puerto Rico income tax purposes.
Ownership and Disposition of Common Stock
Taxation of Dividends
General
. Distributions of cash or other property made by us on our common
stock will be treated as dividends to the extent that we have current or
accumulated earnings and profits. To the extent that a distribution exceeds
our current and accumulated earnings and profits, the distribution will be
applied against and reduce the adjusted tax basis of the common stock in the
hands of the holder. The excess of any distribution of this type over the
adjusted tax basis will be treated as gain on the sale or exchange of the
common stock and will be subject to income tax as described below.
The following discussion regarding the income taxation of dividends on our
common stock received by individuals not residents of Puerto Rico and foreign
corporations not engaged in a trade or business in Puerto Rico assumes that
dividends will constitute income from sources within Puerto Rico. Generally, a
dividend declared by a Puerto Rico corporation will constitute income from
sources within Puerto Rico unless the corporation derived less than 20% of its
gross income from sources within Puerto Rico for the three taxable years
preceding the year of the
107
Table of Contents
declaration. We have represented that we derive more than 20% of our
gross income from Puerto Rico sources on an annual basis since our
incorporation in 1996.
Individual Residents of Puerto Rico and Puerto Rico Corporations
. In
general, stockholders who are individuals and are residents of Puerto Rico will
be subject to a 10% income tax on dividends paid on our common stock. This tax
is generally required to be withheld by us on dividends paid on our common
stock. An individual may elect for this withholding not to apply. In that
case he or she will be required to include the amount of the dividend as
ordinary income and will be subject to income tax thereon at the normal income
tax rates, which may be up to 33%.
Puerto Rico corporations that are stockholders will be subject to income
tax on dividends paid on our common stock at the normal corporate income tax
rates, subject to the dividend received deduction discussed below. No
withholding will be imposed on dividends paid to Puerto Rico corporations on
our common stock. The dividend received deduction will be equal to 85% of the
dividend received, but the deduction may not exceed 85% of the corporation's
net taxable income. Based on the applicable maximum Puerto Rico normal
corporate income tax rate of 39%, the maximum effective income tax rate on
these dividends will be 5.85% after accounting for the dividend received
deduction.
As a practical matter, dividends on our common stock held in "street name"
through foreign financial institutions or other securities intermediaries not
engaged in trade or business in Puerto Rico will generally be subject to a 10%
withholding tax imposed on foreign corporations. See "
Foreign Corporations
."
Accordingly, individuals resident of Puerto Rico who desire to file an election
out of the applicable 10% withholding tax should have their shares of common
stock issued and registered in their own name. Similarly, Puerto Rico
corporations that own any shares of common stock and wish to avoid the
withholding imposed on foreign corporations should have their shares issued and
registered in their own name in order to ensure that no withholding is made on
dividends.
United States Citizens Not Residents of Puerto Rico
. Dividends paid on
our common stock to a United States citizen who is not a resident of Puerto
Rico will be subject to the 10% Puerto Rico income tax, which will be withheld
by us. These individuals may elect for the 10% Puerto Rico income tax and
withholding not to apply, and in that case he or she will be required to
include the amount of the dividend as ordinary income and will be subject to
income tax thereon at the normal income tax rates, which may be up to 33%.
Notwithstanding the making of this election, a separate 10% withholding tax
will be required on the amount of the dividend unless the individual timely
files with us or its agent a withholding exemption certificate to the effect
that the individual's gross income from sources within Puerto Rico during the
taxable year does not exceed $1,300 if single or $3,000 if married.
Withholding exemption certificates will only be accepted by us or its agent
from individuals who have the shares of common stock registered in their names.
Individuals who hold shares of common stock in "street name" will not be
eligible to file with us or its agent withholding exemption certificates.
Individuals Not Citizens of the United States and Not Residents of Puerto
Rico
. Dividends paid on our common stock to any individual who is not a
citizen of the United States and who is not a resident of Puerto Rico will
generally be subject to a 10% Puerto Rico income tax which will be withheld at
source by us.
Foreign Corporations
. The income taxation of dividends paid on our common
stock to a foreign corporation will depend on whether or not the corporation is
engaged in a trade or business in Puerto Rico in the taxable year of the
dividend.
A foreign corporation that is engaged in a trade or business in Puerto
Rico will be subject to the normal corporate income tax rates applicable to
Puerto Rico corporations on their net income that is effectively connected with
the active conduct of a trade or business in Puerto Rico. This income will
include all net income from sources within Puerto Rico and certain items of net
income from sources outside Puerto Rico that are effectively connected with the
active conduct of a trade or business in Puerto Rico. Net income from sources
within Puerto Rico will include dividends on the common stock. A foreign
corporation that is engaged in a trade or business in Puerto Rico will be
entitled to claim the 85% dividend received deduction discussed above in
connection with Puerto Rico corporations.
108
Table of Contents
In general, foreign corporations that are engaged in a trade or business
in Puerto Rico are also subject to a 10% branch profits tax. However,
dividends on our common stock received by these corporations will be excluded
from the computation of the branch profits tax liability of these corporations.
A foreign corporation that is not engaged in a trade or business in Puerto
Rico will be subject to a 10% withholding tax on dividends received on our
common stock.
Partnerships
. Partnerships are generally taxed in the same manner as
corporations. Accordingly, the preceding discussion with respect to Puerto
Rico and foreign corporations is equally applicable in the case of most Puerto
Rico and foreign partnerships, respectively.
Taxation of Gains Upon Sales or Exchanges other than Redemptions
General
. The sale or exchange of our common stock will give rise to gain
or loss equal to the difference between the amount realized on the sale or
exchange and the tax basis of the common stock in the hands of the holder. Any
gain or loss that is required to be recognized will be a capital gain or loss
if the common stock is held as a capital asset by the holder and will be a
long-term capital gain or loss if the stockholders' holding period of the
common stock exceeds six months. The deductibility of capital losses is
subject to limitations.
Individual Residents of Puerto Rico and Puerto Rico Corporations
. Gain on
the sale or exchange of our common stock by an individual resident of Puerto
Rico or a Puerto Rico corporation will generally be required to be recognized
as gross income and will be subject to income tax. If the stockholder is an
individual and the gain is a long-term capital gain, the gain will be taxable
at a maximum rate of 10%. If the stockholder is a Puerto Rico corporation and
the gain is a long-term capital gain, the gain will qualify for an alternative
tax rate of 12.5%.
United States Citizens Not Residents of Puerto Rico
. A United States
citizen who is not a resident of Puerto Rico will not be subject to Puerto Rico
income tax on the sale or exchange of our common stock if the gain resulting
therefrom constitutes income from sources outside Puerto Rico. Generally, gain
on the sale or exchange of common stock will be considered to be income from
sources outside Puerto Rico if all rights, title and interest in or to the
common stock are transferred outside Puerto Rico, and if the delivery or
surrender of the instruments that evidence the common stock is made to an
office of a paying or exchange agent located outside Puerto Rico. If the gain
resulting from the sale or exchange constitutes income from sources within
Puerto Rico, an amount equal to 10% of the payments received will be withheld
at the source; and if the gain constitutes a long-term capital gain, it will be
subject to a tax at a maximum rate of 10%. The amount of tax withheld at
source will be creditable against the stockholder's Puerto Rico income tax
liability.
Individuals Not Citizens of the United States and Not Residents of Puerto
Rico
. An individual who is not a citizen of the United States and who is not a
resident of Puerto Rico will be subject to the rules described above under
"
United States Citizens Not Residents of Puerto Rico
." However, if the gain
resulting from the sale or exchange of common stock constitutes income from
sources within Puerto Rico, an amount equal to 25% of the payments received
will be withheld at the source; provided, that if the gain resulting from the
sale or exchange represents a net capital gain, the individual will generally
be subject to tax on this gain at a fixed rate of 29%. The amount of tax
withheld at source will be creditable against the stockholder's Puerto Rico
income tax liability.
Foreign Corporations
. A foreign corporation that is engaged in a trade or
business in Puerto Rico will generally be subject to Puerto Rico corporate
income tax on any gain realized on the sale or exchange of our common stock if
the gain is (1) from sources within Puerto Rico or (2) from sources outside
Puerto Rico and effectively connected with a trade or business in Puerto Rico.
Any such gain will qualify for an alternative tax of 12.5% if it qualifies as a
long-term capital gain.
In general, foreign corporations that are engaged in a trade or business
in Puerto Rico will also be subject to a 10% branch profits tax. In the
computation of this tax, any gain realized by these corporations on the sale or
exchange of common stock and that is subject to Puerto Rico income tax will be
taken into account. However, a deduction will be allowed in the computation
for any income tax paid on the gain realized on the sale or exchange.
109
Table of Contents
A foreign corporation that is not engaged in a trade or business in Puerto
Rico will generally be subject to a corporate income tax rate of 29% on any
capital gain realized on the sale or exchange of our common stock if the gain
is from sources within Puerto Rico. Gain on the sale or exchange of common
stock will generally not be considered to be from sources within Puerto Rico if
all rights, title and interest in or to the common stock are transferred
outside Puerto Rico, and if the delivery or surrender of the instruments that
evidence the common stock is made to an office of a paying or exchange agent
located outside Puerto Rico. If the payments received resulting from the sale
or exchange constitutes income from sources within Puerto Rico, an amount equal
to 25% of the payments received will be withheld at the source and be
creditable against the stockholder's Puerto Rico income tax liability. In the
case of such foreign corporation, no income tax will be imposed if the gain
constitutes income from sources outside Puerto Rico.
Partnerships
. Partnerships are generally taxed as corporations.
Accordingly, the discussion with respect to Puerto Rico and foreign
corporations is equally applicable to most Puerto Rico and foreign
partnerships, respectively.
Taxation of Redemptions
A redemption of shares of our common stock for cash will be treated as a
distribution taxable as a dividend to the extent of our current or accumulated
earnings and profits if it is "essentially equivalent to a dividend." Under
regulations issued by the Department of the Treasury of Puerto Rico (1) a
redemption of stock that completely terminates a stockholder's interest in a
corporation does not constitute a dividend, and (2) certain pro rata
redemptions among all the stockholders will be treated as a dividend. In
situations not described by these regulations, the Department of the Treasury
of Puerto Rico will generally follow principles applied by the United States
Internal Revenue Service under the United States Internal Revenue Code of 1986,
in determining whether a distribution is essentially equivalent to a dividend.
The Department of the Treasury of Puerto Rico, however, is not bound by
Internal Revenue Service determinations on this issue and is free to adopt a
different rule.
If the redemption of our common stock is not treated as a dividend, it
will generally generate gain or loss that will be measured as provided above
under "
Taxation of Gains upon Sales or Exchanges (Not including Redemptions)
"
for a sale or exchange of common stock. Gain on the redemption of our common
stock will generally be recognized and will be subject to income tax. If the
holder of the common stock is an individual resident of Puerto Rico and the
gain is a long-term capital gain, the gain will be taxable at a maximum rate of
10%. If the stockholder is a Puerto Rico corporation and the gain is a
long-term capital gain, the gain will qualify for the alternative tax rate of
12.5%.
If the stockholder is an individual who is not a resident of Puerto Rico
or a foreign corporation or foreign partnership, any gain realized by the
holder on the redemption of our common stock that is not taxable as a dividend
may be subject to Puerto Rico income tax if the gain constitutes income from
sources within Puerto Rico or is effectively connected with a trade or business
conducted by the holder in Puerto Rico. The Puerto Rico income tax law does
not clearly provide a source of income rule for a gain of this nature. As a
result thereof, these prospective stockholders should be aware that a gain
realized from a redemption of our common stock may be subject to Puerto Rico
income tax.
Estate and Gift Taxation
The transfer of our common stock by inheritance by an individual who is a
resident of Puerto Rico at the time of his or her death will not be subject to
estate tax if the individual is a citizen of the United States who acquired his
or her citizenship solely by reason of birth or residence in Puerto Rico. The
transfer of our common stock by gift by an individual who is a resident of
Puerto Rico at the time of the gift will not be subject to gift tax. Other
individuals should consult their own tax advisors in order to determine the
appropriate treatment for Puerto Rico estate and gift tax purposes of the
transfer of our common stock by death or gift.
110
Table of Contents
Municipal License Taxation
Individuals and corporations that are not engaged in a trade or business
in Puerto Rico will not be subject to municipal license tax on dividends paid
on our common stock or on any gain realized on the sale, exchange or redemption
of such common stock.
A corporation or partnership, Puerto Rico or foreign, that is engaged in a
trade or business in Puerto Rico will generally be subject to municipal license
tax on dividends paid on our common stock and on the gain realized on the sale,
exchange or redemption of such common stock if the dividends or gain are
attributable to that trade or business. The municipal license tax is imposed
on the volume of business of the taxpayer, and the tax rates range from a
maximum of 1.5% for financial businesses to a maximum of 0.5% for other
businesses.
Property Taxation
Our common stock will not be subject to Puerto Rico property tax.
United States Taxation
The following discussion is limited to the United States federal tax
consequences of the ownership and disposition of our common stock by U.S.
Holders, as defined below, and Puerto Rico corporations. This discussion is
based on the existing United States Internal Revenue Code of 1986, as amended
(the "Code") and regulations (temporary, final and proposed) of the United
States Department of the Treasury promulgated thereunder, administrative
pronouncements and judicial decisions, all of which are subject to change, even
with retroactive effect. This discussion deals only with common stock, offered
pursuant to this prospectus, that is held by initial purchasers as capital
assets within the meaning of Section 1221 of the Code. It does not discuss all
of the tax consequences that may be relevant to a purchaser in light of that
person's particular circumstances or to purchasers subject to special rules,
such as entities that are taxed under the Code as partnerships, "Subchapter S
Corporations," life insurance companies, tax exempt entities, dealers in
securities, financial institutions, or to persons that hold our common stock as
part of a straddle, hedge or conversion transaction, are subject to the United
States alternative minimum tax, or whose functional currency is not the United
States dollar.
As used herein, the term "U.S. Holder" means a beneficial owner of common
stock that does not own directly, indirectly, constructively or by attribution,
10% or more of the vote or value of our stock and is for United States federal
income tax purposes:
•
a citizen or resident of the United States;
•
a corporation organized under the laws of the United States,
any state of the United States or the District of Columbia;
•
an estate the income of which is subject to United States
federal income taxation regardless of its source; or
•
a trust if (A) a court within the United States is able to
exercise primary supervision over its administration and one or more
United States Persons (as such term is defined in the Code) have
authority to control all substantial decisions of the trust, or (B)
the trust was in existence on August 20, 1996, and validly elected
to continue to be treated as a United States domestic trust.
The term "U.S. Holder" does not include individual Puerto Rico residents
who are not citizens or residents of the United States nor does it include
Puerto Rico corporations. As used herein, the term "Puerto Rico U.S. Holder"
means an individual U.S. Holder who is a bona fide resident of Puerto Rico
during the entire taxable year (or, in certain cases, a portion thereof),
within the meaning of Section 933 of the Code.
111
Table of Contents
Ownership and Disposition of the Common Stock
Taxation of Dividends
General
. Under the source of income rules of the Code, dividends on our
common stock generally will constitute gross income from sources outside the
United States if less than 25% of our gross income on an ongoing basis is
effectively connected with a trade or business in the United States. Since our
incorporation, we have derived most of our gross income from the banking
business of our wholly owned subsidiary Eurobank in Puerto Rico and have not
derived in any taxable year, nor do we expect to derive in the future, 25% or
more of our gross income as income that is effectively connected with a trade
or business in the United States. Accordingly, dividends on our common stock
distributed will constitute gross income from sources outside the United States
so long as we continue to meet the gross income test described above.
U.S. Holders other than Puerto Rico U.S. Holders
. Subject to the
discussion under "
Passive Foreign Investment Company Rules
" and "
Foreign
Personal Holding Company Rules
" below, distributions made by us with respect to
our common stock, including the amount of any Puerto Rico taxes withheld on the
distribution, will be includable in the gross income of a U.S. Holder, other
than a Puerto Rico U.S. Holder, as foreign source dividend income to the extent
the distributions are paid out of our current or accumulated earnings and
profits as determined under United States federal income tax principles. These
dividends will not be eligible for the dividends received deduction generally
allowed to U.S. Holders that are corporations.
Under recently enacted United States federal income tax legislation,
"qualified dividend income" received by certain non-corporate U.S. Holders
(including individuals) in taxable years beginning after December 31, 2002, and
beginning before January 1, 2009, generally will be subject to United States
federal income tax at a maximum rate of 15%. Dividends in respect of our
common stock may constitute "qualified dividend income" for this purpose
provided that we are not a "foreign personal holding company" or a "passive
foreign investment company" (both, as described below) and certain other
requirements, including the length of your holding period for such stock, are
satisfied. You should consult your own tax advisors regarding the availability
of this preferential rate in your particular circumstances. To the extent, if
any, that the amount of any of our distributions exceeds our current and
accumulated earnings and profits as determined under United States federal
income tax principles, such excess will be treated first as a tax-free return
of the U.S. Holder's tax basis in the common stock and thereafter as capital
gain.
Subject to certain conditions and limitations contained in the Code, any
Puerto Rico income tax imposed on dividends distributed by us in accordance
with Puerto Rico law will be eligible for credit against the U.S. Holder's
United States federal income tax liability. See "
Puerto Rico Taxation –
Ownership and Disposition of Common Stock – Taxation of Dividends
" above. For
purposes of calculating a U.S. Holder's United States foreign tax credit
limitation, dividends distributed by us will generally constitute foreign
source "passive income" or, in the case of certain U.S. Holders (those
predominantly engaged in the active conduct of a banking, insurance, financing
or similar business), foreign source "financial services income."
Puerto Rico U.S. Holders
. In general, and subject to the discussion under
"
Passive Foreign Investment Company Rules
" and "
Foreign Personal Holding
Company Rules
" below, distributions of dividends made by us on our common stock
to a Puerto Rico U.S. Holder will constitute gross income from sources within
Puerto Rico, will not be includable in the stockholder's gross income and will
be exempt from United States federal income taxation. In addition, for United
States federal income tax purposes, no deduction or credit will be allowed that
is allocable to or chargeable against amounts so excluded from the Puerto Rico
U.S. Holder's gross income.
Puerto Rico Corporations
. In general, distributions of dividends made by
us on our common stock to a Puerto Rico corporation will not, in the hands of
the Puerto Rico corporation, be subject to United States income tax if the
dividends are not effectively connected with a United States trade or business
of the Puerto Rico corporation and the Puerto Rico corporation is not treated
as a domestic corporation of the United States for purposes of the Code. The
Code provides special rules that could change the tax consequences discussed
above for Puerto Rico corporations that are "Controlled Foreign Corporations,"
"Personal Holding Companies," "Foreign Personal Holding Companies," or "Passive
Foreign Investment Companies." See additional discussion below under
"Passive
Foreign Investment Company Rules
" and
"Foreign Personal Holding Company Rules
."
112
Table of Contents
Taxation of Sales or Exchanges
U.S. Holders other than Puerto Rico U.S. Holders
. A U.S. Holder, other
than a Puerto Rico U.S. Holder, will recognize gain or loss on the sale or
other disposition of our common stock, including redemptions treated as sales
or exchanges of our common stock under the Code, in an amount equal to the
difference between the amount realized on the sale or other disposition and the
U.S. Holder's adjusted tax basis in the common stock. Subject to the
discussion under "
Passive Foreign Investment Company Rules
" and "
Foreign
Personal Holding Company Rules"
below, the gain or loss will be a capital gain
or loss, and will be long-term capital gain or loss if the U.S. Holder's
holding period for the common stock is more than one year. Certain
noncorporate U.S. Holders (including individuals) may be eligible for
preferential rates of United States federal income tax with respect to their
long-term capital gains. The deductibility of capital losses is subject to
limitations under the Code. U.S. Holders should consult their own tax advisors
concerning the treatment of capital gains and losses. Redemptions of our
common stock that are not treated as sales or exchanges for United States
federal income tax purposes will generally be subject to income tax as
dividends to the extent of our current and accumulated earnings and profits.
Gain recognized by a U.S. Holder on the sale or other disposition of our
common stock generally will be treated as United States source income.
Puerto Rico U.S. Holders
. In general, and subject to the discussion under
"
Passive Foreign Investment Company Rules
" and "
Foreign Personal Holding
Company Rules
" below, gain from the sale or exchange of our common stock,
including redemptions treated as sales or exchanges of the common stock under
the Code, by a Puerto Rico U.S. Holder that is a nonresident of the United
States for purposes of Section 865(g)(1) of the Code will constitute gross
income from sources within Puerto Rico, will not be includable in the
stockholder's gross income and will be exempt from United States federal income
taxation. Also, no deduction or credit will be allowed that is allocable to or
chargeable against amounts so excluded from the Puerto Rico U.S. Holder's gross
income. Redemptions of the common stock that are not treated as sales or
exchanges under the Code will generally be treated as dividends to the extent
of our current and accumulated earnings and profits.
Puerto Rico Corporations
. In general, any gain derived by a Puerto Rico
corporation from the sale or exchange of our common stock will not, in the
hands of the Puerto Rico corporation, be subject to United States income tax if
the gain is not effectively connected with a United States trade or business of
the Puerto Rico corporation and the Puerto Rico corporation is not treated as a
domestic corporation of the United States for purposes of the Code. The Code
provides special rules that could change the tax consequences discussed above
for Puerto Rico corporations that are "Controlled Foreign Corporations,"
"Personal Holding Companies," "Foreign Personal Holding Companies," or "Passive
Foreign Investment Companies." See additional discussion below under
"Passive
Foreign Investment Company Rules
" and
"Foreign Personal Holding Company Rules
.
" Redemptions of the common stock that are not treated as sales or exchanges
under the Code will generally be subject to income tax under the Code as
dividends to the extent of our current and accumulated earnings and profits.
Information Reporting and Backup Withholding
Information reporting requirements will apply to dividends on, and the
proceeds of a sale or exchange of, our common stock that are paid within the
United States (and, in some cases, outside the United States) to U.S. Holders,
other than Puerto Rico U.S. Holders, and certain exempt recipients (such as
corporations). Certain U.S. Holders may be subject to backup withholding at
the rate of 28% on dividends paid or the proceeds of a sale or exchange of our
common stock. Generally, backup withholding applies only when the taxpayer
fails to furnish or certify a proper taxpayer identification number or when the
payor is notified by the Internal Revenue Service that the taxpayer has failed
to report payments of interest and dividends properly. U.S. Holders should
consult their own tax advisors regarding their qualification for exemption from
backup withholding and information reporting and the procedure for obtaining
any applicable exemption.
Passive Foreign Investment Company Rules
The Code provides special rules for distributions received by U.S. Holders
on stock of a passive foreign investment company ("PFIC") as well as amounts
received from the sale or other disposition of PFIC stock. For purposes of the
PFIC rules, pledges generally will be considered dispositions.
113
Table of Contents
A non-United States corporation generally will be classified as a PFIC for
United States federal income tax purposes in any taxable year in which either
(i) at least 75% of its gross income is "passive income" or (ii) at least 50%
of the gross value of its assets, determined on the basis of a quarterly
average, is attributable to assets that produce passive income or are held for
the production of passive income. For this purpose, passive income generally
includes, among other items, dividends, interest, rents, royalties and gains
from the sale or exchange of passive assets. Passive assets generally are
assets which produce passive income or which are held for the production of
passive income. Based upon certain proposed Treasury Regulations under the
PFIC provisions of the Code (the "Proposed Regulations"), banking income earned
by an active bank and assets held by a non-United States bank that are used to
produce income in the active conduct of a banking business are not considered
passive income and assets, respectively.
If a foreign corporation owns directly or indirectly at least 25% by value
of the stock of another corporation, the foreign corporation is treated as
owning its proportionate share of the assets of the corporation, and as if it
had received directly its proportionate share of the income of such other
corporation. Because we wholly-own Euro Seguros, Inc. and Eurobank for
purposes of the PFIC tests, we should be treated as owning all of the assets of
and receiving directly all of the income of Euro Seguros, Inc. and Eurobank.
Based upon the Proposed Regulations, we believe that neither we nor any of
our subsidiaries will be a PFIC in our current taxable year and we expect to
continue to conduct our affairs in a manner so that neither we nor any of our
subsidiaries meet the criteria to be considered a PFIC in the foreseeable
future. If, contrary to our expectations, either we or any of our subsidiaries
are determined to be a PFIC for any taxable year, a U.S. Holder would generally
be subject to taxation under special rules, regardless of whether we or any of
our subsidiaries remains a PFIC, with respect to (1) any "excess distribution"
made by us to the U.S. Holder and (2) any gain realized on the sale, pledge or
other disposition of our common stock or the stock of the subsidiary that was
determined to be a PFIC.
An "excess distribution" is, generally, any distributions received by the
U.S. Holder on the common stock in a taxable year that are greater than 125% of
the average annual distributions received by the U.S. Holder in the three
preceding taxable years, or the U.S. Holder's holding period for the common
stock if shorter. Under these rules, (1) the excess distribution or gain would
be allocated ratably over each day in the U.S. Holder's holding period for the
common stock, (2) the amount allocated to the current taxable year and any
taxable year prior to the first taxable year beginning after December 31, 1986
in which we would be a PFIC would be taxed as ordinary income, and (3) the
amount allocated to each of the other taxable years would be subject to tax at
the highest rate of tax in effect for the applicable class of taxpayer for that
year, and an interest charge for the deemed deferral benefit would be imposed
on the resulting tax attributable to each such year. Proposed Regulations
provide that Puerto Rico U.S. Holders would generally only be subject to the
rule described in (3) above to the extent that any excess distribution or gain
is allocated to a taxable year during which the individual held the common
stock and was not a bona fide resident of Puerto Rico during the entire taxable
year within the meaning of Section 933 of the Code or, in certain cases, a
portion thereof. Gains recognized on a sale, pledge or other disposition are
treated in the same manner as if such gain were an excess distribution.
As an alternative to these rules, if we are a PFIC, U.S. Holders may, in
certain circumstances, elect a mark-to-market treatment with respect to their
common stock, provided that the common stock will constitute "marketable stock"
for purposes of these rules. In general, marketable stock is stock that is
treated under applicable Treasury regulations as being regularly traded on a
"qualified exchange," which includes the NASDAQ.
If a mark-to-market election is available and is validly made, then for
each taxable year of ownership, a U.S. Holder generally would include in gross
income, as an item of ordinary income, the excess, if any, of the fair market
value of common stock at the end of such taxable year over such U.S. Holder's
adjusted tax basis, and would deduct from gross income, as an ordinary loss,
the excess, if any, of the adjusted tax basis of the stock over its fair market
value at the end of the taxable year (but only to the extent of the amount
previously included in such U.S. Holder's gross income as a result of the
mark-to-market election). A U.S. Holder's adjusted tax basis in common stock
will be adjusted to reflect any such income or loss that is included in, or
deducted from, such U.S. Holder's gross income. If the mark-to-market election
is made, it can only be revoked with the consent of the Internal Revenue
Service. Special rules apply if the mark-to-market election is not made for
the first taxable year in which a U.S. Holder owns shares in a PFIC and with
respect to indirect holders.
114
Table of Contents
Alternatively, a U.S. Holder of shares in a PFIC may, if the PFIC
satisfies certain information reporting requirements and grants access to its
books of account, make a "QEF election," pursuant to which the U.S. Holder will
include in taxable income each year the U.S. Holder's pro rata share of the
ordinary earnings and net realized capital gain of the PFIC (whether or not
such earnings or gain is distributed). We do not anticipate, at this time
providing a purchaser with the necessary information or access that would be
required to enable the purchaser to make a QEF election.
If we or any of our subsidiaries are determined to be a PFIC in any year,
a U.S. Holder who beneficially owns common stock during that year must make an
annual return on Internal Revenue Service Form 8621 that describes any
distributions received from us and any gain realized on the disposition of
common stock.
If there is an overlap of income inclusion under the FPHC rules (discussed
below) and the PFIC rules, the FPHC rules will generally take precedence. A
Puerto Rico U.S. Holder will only be required to include in his/her gross
income any PFIC income for United States federal income tax purposes to the
extent required by the Code.
You should consult your own tax advisors regarding the application of the
PFIC rules to our common stock in your particular circumstances, including the
availability of making an election to avoid adverse United States federal
income tax consequences under the PFIC rules in the case that either we or any
of our subsidiaries are a PFIC for any given taxable year.
Foreign Personal Holding Company Rules
A non-United States corporation will be classified as a foreign personal
holding company ("FPHC") for United States federal income tax purposes if (i)
at any time during the taxable year at issue, five or fewer individuals who are
United States citizens or residents, referred to as a "United States group,"
own or are deemed to own (pursuant to certain constructive ownership rules)
more than 50% of all classes of the corporation's stock measured by voting
power or value, and (ii) at least 60% of its gross income for the taxable year
is "FPHC income" or, if the corporation has been classified as a FPHC for any
preceding tax year ending after August 26, 1937, at least 50% of its gross
income for the taxable year is "FPHC income," with certain exceptions. Under
these constructive ownership rules, a person will be treated as owning shares
of our stock owned by certain members of the person's family, shares of stock
that could be acquired upon the exercise of an option held by the person and a
proportionate amount of our stock owned by a corporation, partnership, estate,
or trust in which that person is a shareholder, partner or beneficiary. If a
non-United States corporation meets the stock ownership test and is a
shareholder in a FPHC, then for purposes of determining whether it meets the
gross income test and determining its "undistributed foreign personal holding
company income," discussed below, a dividend is deemed included in its gross
income for the applicable taxable year equal to its proportionate share of the
FPHC's "undistributed foreign personal holding company income" to the extent of
the FPHC's current and accumulated earnings and profits.
If EuroBancshares or any of our subsidiaries were to be treated as a FPHC,
a portion of the applicable "undistributed foreign personal holding company
income" (as defined for United States federal income tax purposes) would be
imputed to U.S. Holders on the last day on which a United States group (as
defined above) existed in the applicable taxable year. In the event a United
States group ceases to exist prior to the end of a taxable year, the proportion
of the FPHCs' undistributed foreign personal holding company income includible
in such U.S. Holder's income would be based on the ratio of the number of days
in the taxable year up to and including the last day on which the "United
States group" existed to the total number of days in that year. If we are a
FPHC, such income would be taxable as a deemed dividend to U.S. Holders to the
extent of our current and accumulated earnings and profits even if no cash
dividend were actually paid and would not be eligible for a reduced rate of tax
under recently enacted legislation. The amount of the deemed dividend
included in the gross income of a U.S. Holder would be treated as then
reinvested by the U.S. Holder as a contribution to the capital of
EuroBancshares, and the U.S. Holder's tax basis in our stock should generally
be increased by that same amount. Distributions by us to our shareholders with
respect to their stock in subsequent taxable years will generally be subject to
income tax as dividends to the extent of our current and accumulated earnings
and profits, reduced to reflect the amount any deemed FPHC dividends. A
distribution paid by us to a U.S. Holder that is characterized as a dividend
would likewise not be eligible for a reduced rate of tax under recently enacted
legislation with respect to dividends paid before 2009. Further, in such case,
upon the death of any United States individual owning shares in a FPHC, such
individual's heirs or estate would not be entitled to a "step-up" in the basis
of the common shares which might
115
Table of Contents
otherwise be available under United States federal income tax laws. If we
are not a FPHC and such income is from one or more of our subsidiaries that are
FPHCs, then the "undistributed personal holding company income" of the
subsidiaries that are FPHCs could be taxable as a deemed dividend to U.S.
Holders in certain circumstances.
Prior to this offering, both we and our subsidiaries satisfied the stock
ownership test for classification as a FPHC in 2004 (
i.e
., 50% or more of the
shares of our stock have been owned or deemed owned by five or fewer
individuals who are U.S. citizens or residents and therefore constitute a
"United States group") and the stock ownership test could continue to be
satisfied after the offering. As discussed below, unless Eurobank and its
subsidiaries that are organized and doing business under the banking and credit
laws of Puerto Rico (which we refer to as "Banking Subsidiaries") receive
certificates from the Commissioner of the Internal Revenue Service that they
are not FPHCs, Eurobank and such subsidiaries would likely meet the gross
income test and be treated as FPHCs in 2004. Furthermore, if Eurobank and its
Banking Subsidiaries do not receive a certificate for 2004, it is likely that
we would also meet the gross income test and be treated as a FPHC in 2004. In
addition, even if Eurobank and its Banking Subsidiaries receive certificates
that they are not FPHCs, EuroBancshares could still be treated as a FPHC for
2004 if its FPHC income (including the "undistributed foreign personal holding
company income" of any subsidiary classified as a FPHC) is sufficient to meet
the gross income test, although we expect to manage our affairs in such a
manner as to make such event unlikely.
Based upon the information available to us regarding our existing
shareholder base and the expected dispersion of ownership of our common shares
following this offering, we expect that immediately following the consummation
of the offering, less than 50% of our stock will be owned or deemed owned by
five or fewer individuals who are U.S. citizens or residents. In other words,
based upon this information and certain assumptions we have made, we expect
that a "United States group" will no longer exist with respect to
EuroBancshares and its subsidiaries immediately following the completion of the
offering. If a "United States group" does not exist immediately following the
completion of the offering, a U.S. Holder that does not otherwise own our
common stock prior to the completion of the offering should not be required to
include any "undistributed foreign personal holding company income" in their
taxable income in 2004 provided a "United States group" does not exist for the
remainder of our taxable year. There can be no assurances, however, that the
information provided to us is accurate and complete and the assumptions that we
have made are true in all respects. We intend therefore, to take the actions
described immediately below in an attempt to prevent EuroBancshares and its
subsidiaries from being treated as FPHCs in 2004.
Generally, a corporation organized and doing business under the banking
and credit laws of a foreign country should not be treated as a FPHC provided
it establishes annually (or at other periodic intervals) to the satisfaction of
the Internal Revenue Service that such corporation is not formed or availed of
for the purpose of evading or avoiding United States income taxes which would
otherwise be imposed upon its shareholders. If this is so established, the
Commissioner of the Internal Revenue Service (or such other official to whom
such authority has been delegated) will issue a certificate to the corporation
that it is not a FPHC. We plan to timely apply for a certificate from the
Internal Revenue Service for Eurobank and each of its Banking Subsidiaries for
each entity's 2004 taxable year. It is not free from doubt that Eurobank and
each of its Banking Subsidiaries would be eligible to receive a certificate.
Consequently, no assurance can be made that the Internal Revenue Service will
issue such certificates. If we obtain the certificates, none of Eurobank or
its Banking Subsidiaries would be treated as a FPHC in that taxable year. In
addition, provided that Eurobank and each of its Banking Subsidiaries receives
a certificate that it is not a FPHC, no "undistributed foreign personal holding
company income" should be imputed to EuroBancshares from Eurobank and its
Banking Subsidiaries, and it is likely that any actual dividends received by
EuroBancshares from Eurobank would not be treated as FPHC income for purposes
of determining whether EuroBancshares is a FPHC in that taxable year. Eurobank
and each of its Banking Subsidiaries will seek a certificate for each of their
taxable years for which we reasonably believe that the ownership test and the
income test are met. If any of Eurobank or its Banking Subsidiaries obtain a
certificate in any given taxable year from the Internal Revenue Service that it
is not a FPHC, each U.S. Holder must attach a copy of the certificate to his or
her individual United States federal income tax return for such taxable year.
If a certificate has been applied for but has not been issued at the time the
U.S. Holder's United States federal income tax return is filed, the U.S. Holder
should compute the tax on his or her United States federal income tax return by
treating EuroBancshares, Eurobank and its Banking Subsidiaries as FPHCs. If,
after the U.S. Holder's return is filed, a certificate is subsequently issued
(or it is shown that the ownership test or income test was not met), the U.S.
Holder may file a claim for refund or an amended return, attaching a copy of
the certificate.
116
Table of Contents
If certificates are issued by the Internal Revenue Service to Eurobank and
to its Banking Subsidiaries that they are not FPHCs in 2004, we expect, based
upon our projected gross revenues for the remainder of the year (including
those of any subsidiary treated as a FPHC in 2004), that we will not meet the
gross income test in 2004. We also expect based on our existing shareholder
base and the expected dispersion of ownership of our common shares following
this offering and our projected income that neither we nor any of our
subsidiaries will be a FPHC in 2005. We cannot be certain, however, that we or
any of our subsidiaries will not be considered a FPHC due to legal and factual
uncertainties regarding the application of the constructive ownership rules,
the makeup of our shareholder base, our gross income and/or the gross income of
our subsidiaries and other circumstances that could change the application of
the FPHC rules to us. In addition, if we or any of our subsidiaries are or
become a FPHC, we cannot be certain that the amount required to be included in
a U.S. Holder's income under the FPHC rules would be immaterial.
If there is an overlap of income inclusion under the FPHC rules and the
PFIC rules (discussed above), the FPHC rules will generally take precedence. A
Puerto Rico U.S. Holder will not be required to include in his/her gross income
any "undistributed foreign personal holding company income" for United States
federal income tax purposes.
You should consult your own tax advisors regarding the application of the
FPHC rules to common stock in your particular circumstances in the case that
we are a FPHC for any given taxable year.
Estate and Gift Taxation
The transfer of our common stock by inheritance or gift by an individual
who is a resident of Puerto Rico at the time of his or her death or at the time
of the gift will not be subject to United States federal estate and gift tax if
the individual is a citizen of the United States who acquired his or her
citizenship solely by reason of birth or residence in Puerto Rico. Other
individuals should consult their own tax advisors in order to determine the
appropriate treatment for United States federal estate and gift tax purposes of
the transfer of our common stock by death or gift.
SHARES ELIGIBLE FOR FUTURE SALE
If our stockholders sell, or there is a perception they may sell,
substantial amounts of our common stock, including shares issued upon the
exercise of outstanding options or warrants, in the public market following the
offering, the market price of our common stock could decline. These sales may
also make it more difficult for us to sell equity or equity-related securities
in the future at a time and price that we deem appropriate.
Upon completion of this offering, we will have outstanding an aggregate of
[         ] shares of our common stock (plus any shares issued upon exercise of
the underwriters' over-allotment option) and [         ] shares of common stock
issuable upon the exercise of outstanding options. Of these shares, all of the
shares sold in the offering (plus any shares issued upon exercise of the
underwriter's over-allotment option) will be freely tradeable without
restriction or further registration under the Securities Act, unless the shares
are purchased by "affiliates," (as that term is defined in Rule 144 under the
Securities Act), which generally include officers, directors or 10%
stockholders, which shares will be subject to the resale limitations of Rule
144, or purchased under the directed share program, which shares will be
subject to a 180-day lock-up period. The remaining outstanding shares of
common stock held by existing stockholders are "restricted securities" within
the meaning of Rule 144 under the Securities Act. These shares may be sold in
the public market only if registered, or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which are summarized below.
Taking into account the lock-up agreements described below, and assuming
Keefe, Bruyette & Woods, Inc. does not release any parties from these
agreements, the following shares will be eligible for sale in the public market
at the following times:
•
beginning on the effective date of this offering, only the
[         ] shares of common stock sold in this offering (but
excluding any shares purchased under the directed share program) and
the [         ]
117
Table of Contents
shares of common stock not subject to lock-up agreements will be
immediately available for sale in the public market;
•
beginning 180 days after the date of this prospectus, the
expiration date for the lock-up agreements, any shares purchased
under the directed share program and approximately [         ] shares of common stock held by affiliates will be eligible for sale
pursuant to Rule 144, including the volume restrictions described
below; and Rule 701.
Beginning 180 days after the date of this prospectus, the expiration date
for the lock-up agreements, approximately [         ] shares of common stock
issued pursuant to Rule 701 prior to this offering and held by non-affiliates
will be eligible for sale in the market, although approximately [         ] of
these shares will remain subject to vesting requirements.
Lock-Up Agreements
We, our directors and officers, the selling stockholders and substantially
all of our existing stockholders owning approximately [ ]% of our
outstanding common stock immediately prior to the offering have entered into
lock-up agreements (and the purchasers of shares of our common stock under the
directed share program will agree to restrictions) generally providing, subject
to limited exceptions, that they will not, without the prior written consent of
Keefe, Bruyette & Woods, Inc., directly or indirectly, during the period ending
180 days after the date of this prospectus:
•
offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale or otherwise dispose of, any shares of
common stock of EuroBancshares, or any securities convertible into,
exchangeable for or that represent the right to receive shares of
common stock of EuroBancshares, whether now owned or hereafter
acquired, owned directly (including holding as a custodian) or with
respect to which such stockholder has beneficial ownership within
the rules and regulations of the SEC, or file or cause to be filed
any registration statement under the Securities Act with respect to
the foregoing; or
•
engage in any hedging or other transaction that is designed
to or that reasonably could be expected to lead to or result in a
sale or disposition of any shares of common stock of EuroBancshares,
such prohibited hedging or other transactions to include any short
sale or grant of any right (including without limitation any put or
call option) with respect to any shares of common stock of
EuroBancshares or with respect to any security that includes,
relates to, or derives any significant part of its value from such
shares.
The 180-day restricted period described above is subject to extension
under limited circumstances. In the event that either (1) during the period
that begins on the date that is 15 calendar days plus 3 business days before
the last day of the 180-day restricted period and ends on the last day of the
180-day restricted period, we issue an earnings release or material news or a
material event relating to us occurs; or (2) prior to the expiration of the
180-day restricted period, we announce that we will release earnings results
during the 16-day period beginning on the last day of the 180-day restricted
period, then the restricted period will continue to apply until the expiration
of the date that is 15 calendar days plus 3 business days after the date on
which the earnings release is issued or the material news or material event
relating to us occurs.
As a result of these contractual restrictions, notwithstanding possible
earlier eligibility for sale under the provisions of Rule 144, 144(k) or 701,
shares subject to lock-up agreements will not be eligible for sale until these
agreements expire or are waived by Keefe, Bruyette & Woods, Inc. on behalf of
the underwriters.
Rule 144
In general, under Rule 144 as currently in effect, and beginning after the
expiration of the lock-up agreements, a person (or persons whose shares are
aggregated) who has beneficially owned restricted securities for at least one
year is entitled to sell within any three-month period a number of shares that
does not exceed the greater of:
118
Table of Contents
•
one percent of the total number of our then outstanding
shares of common stock (approximately [         ] shares immediately
after this offering), as shown by our most recent published report
or statement at that time; or
•
the average weekly trading volume of our common stock on the
Nasdaq National Market during the four calendar weeks preceding the
date on which notice of the sale is filed with the Securities and
Exchange Commission.
Sales under Rule 144 also are subject to manner of sale provisions, notice
requirements and the availability of current public information about us. To
the extent that shares were acquired from one of our affiliates, such acquiring
person's holding period for purposes of effecting a sale under Rule 144
commences on the date of transfer from the affiliate.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation, or notice provisions of Rule 144.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchased shares of our
common stock from us in connection with a compensatory stock or option plan or
other written agreement is eligible to resell those shares (subject to the
terms of any applicable lock-up agreements) 90 days after the effective date of
the offering in reliance on Rule 144, but without compliance with some of the
restrictions, including the holding period, contained in Rule 144.
As soon as practicable after the completion of this offering, we intend to
file a registration statement under the Securities Act to register shares to be
issued under our stock option plan. We expect this registration statement to
become effective immediately upon filing with the SEC. Shares covered by this
registration statement will be freely tradeable, subject to vesting provisions,
terms of the lock-up agreements and, in the case of affiliates only, the
restrictions of Rule 144 other than the holding period requirement.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement among
us, the Bank, the selling stockholders and Keefe, Bruyette & Woods, Inc., UBS
Securities LLC and Brean Murray & Co., Inc., as representatives (the
"Representatives"), on behalf of the underwriters, the underwriters named below
have severally agreed to purchase from us and the selling stockholders, and we
and the selling stockholders have severally agreed to sell to the underwriters
the following respective numbers of shares of common stock at the initial
public offering price less the underwriting discounts and commissions set forth
on the cover page of this prospectus.
Number of
Underwriters
Shares
Keefe, Bruyette & Woods, Inc.
UBS Securities LLC
Brean Murray & Co., Inc.
Total
Under the terms and conditions of the underwriting agreement, the
underwriters are committed to accept and pay for all of the shares offered by
this prospectus, if any are taken. If an underwriter defaults, the
underwriting agreement provides that the purchase commitments of the
non-defaulting underwriters may be increased or, in certain cases, the
underwriting agreement may be terminated. The underwriting agreement provides
that the underwriters' obligations are subject to approval of certain legal
matters by their counsel, including, without
119
Table of Contents
limitation, the authorization and the validity of the shares, and to
various other conditions customary in a firm commitment underwritten public
offering, such as receipt by the underwriters of officers' certificates, legal
opinions and comfort letters.
The underwriters propose to offer our common stock directly to the public
at the public offering price set forth on the cover page of this prospectus and
to selected securities dealers (who may include the underwriters) at that price
less a concession not in excess of $[         ] per share. The underwriters may
allow, and the selected dealers may reallow, a concession not in excess of
$[         ] per share to certain brokers and dealers. After the initial public
offering, the offering price and other selling terms may be changed from time
to time by the Representatives of the underwriters. The underwriters expect to
deliver the shares of common stock on or about [         ], 2004.
At our request, the underwriters have reserved up to [         ] shares of
our common stock for sale, at the initial public offering price, to our
directors, officers, employees and related persons. Any shares purchased under
this directed share program will be subject to a 180-day lock-up period. The
number of shares of our common stock available for sale to the general public
will be reduced to the extent these persons purchase such reserved shares. Any
reserved shares that are not so purchased will be offered by the underwriters
to the general public on the same basis as the other shares offered by this
prospectus.
We and the selling stockholders have granted the underwriters an option,
exercisable within 30 days after the date of this prospectus, to purchase up to
[         ] additional shares solely to cover over-allotments, if any, at the same
price per share to be paid by the underwriters for the other shares in this
offering. If the underwriters purchase any additional shares under this
option, each underwriter will be committed to purchase the additional shares in
approximately the same proportion allocated to them in the table above.
The following table shows the per share and total underwriting discounts
to be paid by us and the selling stockholders to the underwriters in connection
with this offering. These amounts are shown assuming both no exercise and full
exercise of the over-allotment option.
Per Share
Total
Underwriting discount to be paid by:
No Exercise
Full Exercise
No Exercise
Full Exercise
Us
$
$
$
$
Selling Stockholders
$
$
$
$
Prior to this offering, there has been no public market for our common
stock. We have applied for quotation of our common stock on the Nasdaq
National Market under the symbol "   ." The initial public offering price
for the common stock will be determined by negotiations between the
Representatives of the underwriters and us and the offering price of the common
stock may not be indicative of the market price following the offering.
In connection with the offering, the underwriters may engage in
transactions that are intended to stabilize, maintain or otherwise affect the
market price of our common stock during and after the offering, such as the
following:
•
The underwriters may over-allot or otherwise create a short
position in the common stock for their own account by selling more
shares of common stock than have been sold to them;
•
The underwriters may elect to cover any such short position
by purchasing shares of common stock in the open market or by
exercising the over-allotment option;
•
The underwriters may stabilize or maintain the price of the
common stock by bidding; and
120
Table of Contents
•
The underwriters may impose penalty bids, under which selling
concessions allowed to syndicate members or other broker-dealers
participating in the offering are reclaimed if shares of common
stock previously distributed in the offering are repurchased in
connection with stabilization transactions or otherwise.
The effect of these transactions may be to stabilize or maintain the
market price of our common stock at a level above that which might otherwise
prevail in the open market. The imposition of a penalty bid may also affect
the price of our common stock to the extent that it discourages resales of the
common stock. The magnitude or effect of any stabilization or other
transactions is uncertain. These transactions may be effected on the Nasdaq
National Market or otherwise and, if commenced, may be discontinued at any
time.
We, the Bank and the selling stockholders have agreed to indemnify the
underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the underwriters may be required to make in connection with those
liabilities.
We, our directors and officers, the selling stockholders and substantially
all of our existing stockholders owning approximately [ ]% of our
outstanding common stock immediately prior to the offering have entered into
lock-up agreements (and the purchasers of shares of our common stock under the
directed share program will agree to restrictions) generally providing, subject
to limited exceptions, that they will not, without the prior written consent of
Keefe, Bruyette & Woods, Inc., directly or indirectly, during the period ending
180 days after the date of this prospectus:
•
offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale or otherwise dispose of, any shares of
common stock of EuroBancshares, or any securities convertible into,
exchangeable for or that represent the right to receive shares of
common stock of EuroBancshares, whether now owned or hereafter
acquired, owned directly (including holding as a custodian) or with
respect to which such stockholder has beneficial ownership within
the rules and regulations of the SEC, or file or cause to be filed
any registration statement under the Securities Act with respect to
the foregoing; or
•
engage in any hedging or other transaction that is designed
to or that reasonably could be expected to lead to or result in a
sale or disposition of any shares of common stock of EuroBancshares,
such prohibited hedging or other transactions to include any short
sale or grant of any right (including without limitation any put or
call option) with respect to any shares of common stock of
EuroBancshares or with respect to any security that includes,
relates to, or derives any significant part of its value from such
shares.
The 180-day restricted period described above is subject to extension
under limited circumstances. In the event that either (1) during the period
that begins on the date that is 15 calendar days plus 3 business days before
the last day of the 180-day restricted period and ends on the last day of the
180-day restricted period, we issue an earnings release or material news or a
material event relating to us occurs; or (2) prior to the expiration of the
180-day restricted period, we announce that we will release earnings results
during the 16-day period beginning on the last day of the 180-day restricted
period, then the restricted period will continue to apply until the expiration
of the date that is 15 calendar days plus 3 business days after the date on
which the earnings release is issued or the material news or material event
relating to us occurs.
On December 18, 2001, Eurobank issued $25.0 million and on December 19,
2002 EuroBancshares issued $20.0 million in trust preferred securities. These
trust preferred securities were placed by Keefe, Bruyette & Woods, Inc. In
addition, from time to time, in the ordinary course of business, Eurobank
enters into transactions for the purchase or sale of securities and the
placement of brokered deposits with several broker-dealers and commercial banks
in the United States and Puerto Rico markets including, but not limited to, UBS
Securities LLC and Keefe, Bruyette & Woods, Inc.
121
Table of Contents
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Jenkens & Gilchrist, a Professional Corporation, Dallas, Texas,
in reliance upon certain matters passed upon by Fiddler, Gonzalez & Rodriguez,
P.S.C. as to the laws of the Commonwealth of Puerto Rico.
Certain legal matters relating to this offering will be passed upon for
the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, Houston, Texas.
EXPERTS
KPMG LLP, independent auditors, have audited our consolidated financial
statements as of December 31, 2002 and 2003 and for the years then ended, as
set forth in their report. Their report refers to the adoption of the
provisions of Financial Accounting Standards Board's Interpretation No. 46R,
Consolidation of Variable Interest Entities, as of December 31, 2003. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on KPMG LLP's report, given on their
authority as experts in accounting and auditing.
Our financial statements as of December 31, 2001, included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent auditors, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of this
firm as experts in accounting and auditing in giving these reports. We have
been unable to obtain, after reasonable efforts, the written consent of Arthur
Andersen LLP to our naming it as an expert and as having audited the
consolidated financial statements for the year ended December 31, 2001 and
including its audit report in this prospectus. Under these circumstances, Rule
437(a) under the Securities Act permits this registration statement to be filed
without the consent of Arthur Andersen LLP. This lack of consent may limit your
ability to recover damages from Arthur Andersen LLP under Section 11 of the
Securities Act for any untrue statements of material fact contained in the
financial statements audited by Arthur Andersen LLP or any omissions to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-1 we filed
with the SEC. This prospectus does not contain all of the information
contained in the registration statement and all of its exhibits and schedules.
For further information about us and the common stock being offered by this
prospectus, please see the complete registration statement. Summaries of
agreements or other documents in this prospectus are not necessarily complete.
Please refer to the exhibits to the registration statement for complete copies
of these documents.
You may read and copy our registration statement and all of its exhibits
and schedules at the SEC Public Reference Room located at 450 Fifth Street,
N.W., Washington, DC, 20549. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
registration statement is also available from the SEC's Web site at
http://www.sec.gov.
After this offering, we intend to provide annual reports to our
stockholders that include financial information examined and reported on by an
independent registered public accounting firm.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only on
the date of this prospectus regardless of the time of the delivery of this
prospectus or of any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to
permit public offering of the common stock or possession or distribution of
this prospectus in that jurisdiction. Persons who come into possession or
122
Table of Contents
distribution of this prospectus in jurisdictions outside the United States
are required to inform themselves about and to observe any restrictions as to
this offering and the distribution of this prospectus applicable to that
jurisdiction.
Until      , 2004, all dealers that buy, sell or trade in our
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.
123
Table of Contents
INDEX TO FINANCIAL STATEMENTS
Audited Financial Statements of EuroBancshares and
Subsidiaries as of and
for the Fiscal Years Ended December 31, 2003 and
December 31, 2002.
Independent Auditors' Report
F–2
Consolidated
Balance Sheets
F–3
Consolidated
Statemens of Income
F–4
Consolidated
Statements of Changes in Stockholders' Equity and Comprehensive
Income
F–5
Consolidated
Statements of Cash Flows
F–7
Notes to Consolidated Financial Statements
F–8
Audited
Financial Statements of Eurobank as of and
for the Fiscal Year Ended December 31, 2001.
Copy of Independent Auditors' Report
F–55
Consolidated Balance Sheet
F–56
Consolidated Statement of Income
F–57
Consolidated Statement of Changes in Stockholders' Equity
F–58
Consolidated Statement of Cash Flows
F–60
Notes to Consolidated Financial Statements
F–61
F-1
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 2003 and 2002
(With Independent Auditors' Report Thereon)
F-1
Table of Contents
Independent Auditors' Report
The Shareholders and Board of Directors
EuroBancshares, Inc:
We have audited the accompanying consolidated balance sheets of EuroBancshares,
Inc. and subsidiaries (the Company) as of December 31, 2003 and 2002, and the
related consolidated statements of income, changes in stockholders' equity and
comprehensive income, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The financial statements of Eurobank
(included herein as the consolidated financial statements of EuroBancshares,
Inc. and subsidiaries) for the year ended December 31, 2001 were audited by
other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those consolidated financial statements in their report
dated January 11, 2002.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the 2003 and 2002 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
EuroBancshares, Inc. and subsidiaries as of December 31, 2003 and 2002, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States
of America.
As discussed in note 1, the Company has adopted the provision of Financial
Accounting Standards Board's Interpretation No. 46R,
Consolidation of Variable
Interest Entities,
as of December 31, 2003.
San Juan, Puerto Rico
February 25, 2004, except as to note 30,
which is as of May 12, 2004
Stamp No. 1902222 of the Puerto Rico
Society of Certified Public Accountants
was affixed to the record copy of this report.
F-2
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2003 and 2002
2003
2002
Assets
Cash and due from banks
$
22,522,342
17,620,623
Interest-bearing deposits
19,324,216
29,881,975
Securities purchased under agreements to resell
20,483,736
45,014,420
Investment securities available for sale:
Pledged securities with creditors' right to repledge
213,355,417
65,515,000
Other securities available for sale
111,582,625
80,279,865
Other investments
3,342,100
2,405,200
Loans held for sale
6,846,330
5,238,539
Loans, net of allowance for loan losses of $9,393,943 in 2003
and $6,918,141 in 2002
883,151,891
755,634,838
Accrued interest receivable
6,792,687
5,483,643
Customers' liability on acceptances
558,085
280,960
Premises and equipment, net
10,531,353
9,379,933
Other assets
22,443,283
18,570,501
Total assets
$
1,320,934,065
1,035,305,497
Liabilities and Stockholders' Equity
Deposits:
Noninterest bearing
$
104,757,697
85,444,179
Interest bearing
879,791,433
757,600,898
Total deposits
984,549,130
843,045,077
Securities sold under agreements to repurchase
207,523,000
64,112,687
Acceptances outstanding
558,085
280,960
Notes payable to Federal Home Loan Bank
10,700,000
18,850,000
Junior subordinated debentures
46,393,000
—
Trust Preferred Capital Securities
—
45,000,000
Accrued interest payable
2,868,130
3,439,945
Accrued expenses and other liabilities
3,267,464
3,241,347
1,255,858,809
977,970,016
Stockholders' equity:
Preferred stock:
Preferred stock, $0.01 par value. Authorized 20,000,000 shares;
none issued
—
—
Common stock:
Common stock, $0.01 par value. Authorized 12,500,000 shares; issued and
outstanding 6,973,698 and 6,939,685 shares in 2003 and 2002, respectively
69,737
69,397
Capital paid in excess of par value
42,943,014
42,675,749
Retained earnings:
Reserve fund
2,348,598
1,299,469
Undivided profits
20,521,151
11,687,559
Accumulated other comprehensive income (loss)
(807,244
)
1,603,307
Total stockholders' equity
65,075,256
57,335,481
Commitments and contingencies (notes 16, 17, 20, 22, 24, and 25)
Total liabilities and stockholders' equity
$
1,320,934,065
1,035,305,497
See accompanying notes to consolidated financial statements.
F-3
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 2003, 2002, and 2001
2003
2002
2001
Interest income:
Loans, including fees
$
64,952,274
48,958,689
37,719,014
Securities available for sale
6,009,233
5,341,882
6,284,082
Interest-bearing deposits, securities purchased
under agreements to resell, and other
554,344
667,158
586,497
Total interest income
71,515,851
54,967,729
44,589,593
Interest expense:
Deposits
27,384,400
21,467,060
18,471,478
Securities sold under agreements to repurchase,
notes payable, and other
4,537,848
3,656,508
2,907,063
Total interest expense
31,922,248
25,123,568
21,378,541
Net interest income
39,593,603
29,844,161
23,211,052
Provision for loan losses
6,451,000
3,353,686
2,377,000
Net interest income after provision for loan losses
33,142,603
26,490,475
20,834,052
Noninterest income:
Service charges — fees and other
5,456,397
4,331,341
3,640,658
Net gain on sale of securities
707,155
—
194,842
Net loss on sale of other real estate owned, repossessed
assets, and on disposition of other assets
(662,556
)
(310,567
)
(86,143
)
Gain on sale of loans
3,546,634
—
974,669
Total noninterest income
9,047,630
4,020,774
4,724,026
Noninterest expense:
Salaries and employee benefits
15,434,082
11,943,084
9,374,586
Occupancy
5,909,923
4,592,442
3,971,872
Professional services
1,402,283
1,055,126
951,460
Commissions and service fees
1,050,733
764,348
719,880
Office supplies
984,290
746,458
662,444
Insurance
627,540
384,635
352,558
Promotional
510,782
356,823
289,108
Other
2,955,414
2,091,610
1,285,110
Total noninterest expense
28,875,047
21,934,526
17,607,018
Income before income taxes and extraordinary item
13,315,186
8,576,723
7,951,060
Provision for income taxes
3,432,465
2,723,852
2,147,090
Income before extraordinary item
9,882,721
5,852,871
5,803,970
Extraordinary gain on acquisition of Banco Financiero (note 2)
—
1,080,983
—
Net income
$
9,882,721
6,933,854
5,803,970
Earnings per share:
Basic:
Income before extraordinary item
$
1.42
0.86
0.94
Extraordinary item
—
0.16
—
Net income
$
1.42
1.02
0.94
Diluted:
Income before extraordinary item
$
1.39
0.85
0.93
Extraordinary item
—
0.16
—
Net income
$
1.39
1.01
0.93
See accompanying notes to consolidated financial statements.
F-4
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
and Comprehensive Income
Years ended December 31, 2003, 2002, and 2001
2003
2002
2001
Preferred stock:
Balance at beginning of year
$
—
—
—
Issuance of preferred stock
—
—
—
Balance at end of year
—
—
—
Class A common stock:
Balance at beginning of year
—
—
20,000,000
Issuance of common stock
—
—
—
Transfer to common stock and capital paid in excess of
par value (note 19)
—
—
(20,000,000
)
Balance at end of year
—
—
—
Class B common stock:
Balance at beginning of year
—
—
2,026,032
Transfer to common stock (note 19)
—
—
(2,026,032
)
Balance at end of year
—
—
—
Common stock:
Balance at beginning of year
69,397
6,778,497
—
Issuance of EuroBank common stock
—
9,924
752,465
Exchange as a result of the creation of the holding company
—
(6,720,537
)
—
Purchase and retirement of common stock
—
(97
)
—
Issuance of common stock
340
1,610
—
Transfer from Class A common stock (note 19)
—
—
4,000,000
Transfer from Class B common stock (note 19)
—
—
2,026,032
Balance at end of year
69,737
69,397
6,778,497
Capital paid in excess of par value — common stock:
Balance at beginning of year
42,675,749
34,610,787
13,746,145
Issuance of EuroBank common stock
—
56,073
—
Exchange as a result of the creation of the holding company
—
6,720,537
—
Purchase and retirement of common stock
—
(87,319
)
—
Issuance of common stock
267,265
1,375,671
4,864,642
Transfer from Class A common stock (note 19)
—
—
16,000,000
Balance at end of year
42,943,014
42,675,749
34,610,787
Reserve fund:
Balance at beginning of year
1,299,469
602,857
24,920
Transfer from undivided profits
1,049,129
696,612
577,937
Balance at end of year
2,348,598
1,299,469
602,857
Undivided profits:
Balance at beginning of year
11,687,559
5,450,317
224,284
Net income
9,882,721
6,933,854
5,803,970
Transfer to reserve fund
(1,049,129
)
(696,612
)
(577,937
)
Balance at end of year
20,521,151
11,687,559
5,450,317
Accumulated other comprehensive income (loss), net of taxes:
Balance at beginning of year
1,603,307
363,467
41,961
Unrealized net gain (loss) on investment securities available for
sale, net
(2,410,551
)
1,239,840
321,506
Balance at end of year
(807,244
)
1,603,307
363,467
Total stockholders' equity
$
65,075,256
57,335,481
47,805,925
(Continued)
F-5
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
and Comprehensive Income, continued
Years ended December 31, 2003, 2002, and 2001
2003
2002
2001
Comprehensive income:
Net income
$
9,882,721
6,933,854
5,803,970
Other comprehensive income (loss), net of tax:
Unrealized net gains (losses) on investment securities
available for sale
(1,880,185
)
1,239,840
420,135
Reclassification adjustment for realized gains included
in net income
(530,366
)
—
(98,629
)
Unrealized net gains (losses) on investment
securities available for sale, net of tax
(2,410,551
)
1,239,840
321,506
Comprehensive income
$
7,472,170
8,173,694
6,125,476
See accompanying notes to consolidated financial statements.
F-6
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2003, 2002, and 2001
2003
2002
2001
Cash flows from operating activities:
Net income
$
9,882,721
6,933,854
5,803,970
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization
1,442,973
1,243,089
1,058,957
Provision for loan losses
6,451,000
3,353,686
2,377,000
Deferred tax provision (benefit)
473,178
303,568
(145,846
)
Extraordinary item (note 2)
—
(1,080,983
)
—
Net gain on sale of securities
(707,155
)
—
(194,842
)
Gain on sale of loans
(3,546,634
)
—
(974,669
)
Loss on sale of foreclosed and other assets
662,556
310,567
—
Net (discount accretion) premium amortization on securities, net
2,916,668
337,728
(166,237
)
Decrease in deferred loan costs
(1,688,506
)
(1,241,706
)
(1,088,410
)
Proceeds from sale of trading securities
—
—
150,000
Origination of loans held for sale
(49,165,365
)
(32,634,629
)
(30,612,487
)
Proceeds from sale of loans held for sale
48,284,312
32,447,691
26,639,287
(Increase) decrease in accrued interest receivable
(1,309,044
)
(1,602,118
)
(16,564
)
Net (increase) decrease in other assets
(5,930,458
)
9,258,004
(9,690,676
)
(Decrease) increase in accrued interest payable, accrued expenses,
and other liabilities
(545,698
)
(404,516
)
2,185,111
Net cash provided by (used in) operating activities
7,220,548
17,224,235
(4,675,406
)
Cash flows from investing activities:
Net decrease in securities purchased under
agreements to resell and federal funds sold
24,530,684
(35,450,327
)
(3,259,485
)
Net increase (decrease) in interest-bearing deposits
10,557,759
(13,122,683
)
(14,656,543
)
Proceeds from sale of investment securities available for sale
83,219,690
—
16,483,030
Purchases of investment securities available for sale
(400,874,835
)
(105,347,471
)
(69,970,575
)
Proceeds from principal payments and maturities
of investment securities available for sale
133,088,387
52,692,672
69,303,774
Purchases of investment securities held to maturity
(1,673,100
)
(1,188,900
)
—
Proceeds from principal payments, maturities, and calls of
investment securities held to maturity
2,124,700
260,100
992,100
Proceeds from sale of loans
50,000,046
—
—
Net increase in loans
(194,890,697
)
(255,641,865
)
(141,360,471
)
Proceeds from sale of foreclosed and other assets
17,160,959
6,693,814
3,638,020
Capital expenditures
(2,594,393
)
(1,947,741
)
(2,127,612
)
Acquisition of Banco Financiero including direct costs (note 3p)
—
(541,272
)
—
Cash and due from banks of Banco Financiero
—
4,273,349
—
Net cash used in investing activities
(279,350,800
)
(349,320,324
)
(140,957,762
)
Cash flows from financing activities:
Net increase in deposits
141,504,053
273,148,701
135,267,149
Increase in securities sold under agreements to repurchase
143,410,313
36,749,187
(22,699,084
)
Repayment of notes payable
(8,150,000
)
(1,950,000
)
(600,000
)
Issuance of notes payable
—
5,550,000
4,600,000
Proceeds from issuance of Trust Preferred Capital Securities
—
20,000,000
25,000,000
Proceeds from issuance of common stock
267,605
220,998
5,617,107
Purchase and retirement of common stock
—
(87,416
)
—
Net cash provided by financing activities
277,031,971
333,631,470
147,185,172
Net increase in cash and cash equivalents
4,901,719
1,535,381
1,552,004
Cash and cash equivalents, beginning of year
17,620,623
16,085,242
14,533,238
Cash and cash equivalents, end of year
$
22,522,342
17,620,623
16,085,242
See accompanying notes to consolidated financial statements.
F-7
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(1)
Organization
EuroBancshares, Inc. (the Company or EuroBancshares) was incorporated on
November 21, 2001, under the laws of the Commonwealth of Puerto Rico to
engage, for profit, in any lawful acts or businesses and serve as the
holding company for Eurobank (the Bank). The Bank is a full service
commercial bank with a delivery system of 19 branches in Puerto Rico.
During 2002, the Bank became a wholly owned subsidiary of EuroBancshares,
Inc. The reorganization into a holding company was effected on July 1, 2002
pursuant to an agreement and plan of merger by and among the Bank, Euro
Interim Bank (a nonoperating bank organized under the laws of the
Commonwealth of Puerto Rico for purposes of the merger), and the Company
whereby the common stock of the Bank was converted into common stock of the
Company.
In connection with the merger of the Bank and Euro Interim Bank, which was
carried out as part of the reorganization, each stockholder of the Bank who
owned at least 100 shares of the Bank stock was entitled to receive from
the Company, in exchange for each share of the Bank stock owned as of the
effective date of the merger, one share of the voting common stock of the
Company, par value $0.01 per share. All remaining stockholders of the Bank
received cash for their shares of the Bank stock equal to $9.00 per share.
On September 20, 2002, the Company became a financial holding company. As
part of the reorganization, each holder of options to acquire shares of the
Bank stock outstanding received one option to purchase a share of the
Company's stock. The formation of the Company and the reorganization has
been accounted for at historical cost. Financial statements of the Bank as
of December 31, 2001 and for the year then ended have been presented for
comparative purposes, as it is the same accounting entity.
As a financial holding company, the Company is subject to the provisions of
the Bank Holding Company Act, and to the supervision and regulation by the
board of governors of the Federal Reserve System.
The consolidated financial statements of the Company include the accounts
of its wholly owned subsidiaries: the Bank; Euroseguros, Inc. (Euroseguros
or the Agency), a company acting as an agent to sell life, property, and
casualty insurance products in Puerto Rico, principally to customers of the
Bank; Eurobank Statutory Trust I (the Trust); and Eurobank Statutory Trust
II (the Trust II). However, effective December 31, 2003, the Company
adopted Financial Accounting Standards Board's Interpretation No. 46R (FIN
46R),
Consolidation of Variable Interest Entities
. FIN 46R required the
Company to deconsolidate the Trust and Trust II as of December 31, 2003.
Deconsolidation resulted in the recharacterization of the liability
previously presented as Trust Preferred Capital Securities as junior
subordinated debentures payable to the statutory trusts that issued the
capital securities. The Company's equity interest in the Trust and Trust II
has been included in other investments in the 2003 consolidated balance
sheet. The Trust and the Trust II are special purpose vehicles that entered
into financing transactions involving the issuance of Trust Preferred
Capital Securities (note 15).
(2)
Acquisition
Effective December 15, 2002, the Company, through the Bank, acquired all of
the then issued and outstanding shares of common stock of Banco Financiero
de Puerto Rico (Banco Financiero) for a purchase price of $1,548,671,
consisting of the issuance of common stock of the Company valued at
$1,222,280 and $326,391 paid in cash. Banco Financiero was a commercial
bank which operated through three branches in Ponce, Puerto Rico. Also, as
a result of this transaction, Banco Financiero merged with and into the
Bank in a business combination. The estimated fair value of the assets
acquired less liabilities assumed of $2,844,535 exceeded the acquisition
price of $1,763,552, including additional costs associated
(Continued)
F-8
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
to the
acquisition of $214,881. This excess resulted in an extraordinary gain on
business acquisition of $1,080,983 after reducing the value of certain
assets acquired by $456,351.
The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of acquisition.
Cash and due from banks
$
4,273,349
Interest-bearing deposits
2,102,749
Investment securities
3,115,463
Federal funds sold
1,514,480
Loans receivable, net
72,203,612
Other assets, including deferred taxes of
of $3,450,529
4,865,127
Total assets acquired
88,074,780
Deposits
(84,233,389
)
Other liabilities
(996,856
)
Total liabilities assumed
(85,230,245
)
Net assets acquired
$
2,844,535
The Company has received the opinion of its tax counselor, dated December
15, 2002, to the effect that the acquisition will be treated for Puerto
Rico income taxes as a tax-free reorganization.
The results of operations of the Company include the operations of the
acquired bank after the date of acquisition.
The pro forma information below is theoretical in nature and not
necessarily indicative of future consolidated results of operations of the
Company or the consolidated results of operations which would have resulted
had the Company acquired the stock of Banco Financiero as of beginning of
the years presented. The Company's unaudited pro forma condensed
consolidated statements of operations for the years ended December 31, 2002
and 2001, assuming Banco Financiero had been acquired as of January 1,
2001, are as follows:
Years ended December 31,
2002
2001
Interest income
$
61,008,396
52,073,582
Income before extraordinary item
3,588,728
3,299,013
Net income
4,669,711
3,299,013
Earnings per share — diluted
0.67
0.52
(Continued)
F-9
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(3)
Summary of Significant Accounting Policies
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates. Following is a
description of significant accounting policies followed by the Company in
the preparation of the accompanying consolidated financial statements:
(a)
Cash Equivalents
For purposes of the presentation in the statements of cash flows, cash
and cash equivalents are defined as those amounts included in the
balance sheet caption cash and due from banks.
(b)
Securities Purchased under Agreements to Resell
The Company enters into purchases of securities under agreements to
resell. The amounts advanced under these agreements represent
short-term investment transactions.
(c)
Investment Securities Available for Sale
Investment securities available for sale consist of bonds, notes, and
other debt securities not classified as trading or held-to-maturity
securities. Investment securities available for sale are recorded at
fair value and unrealized gains and losses, net of tax, on these
investments are reflected as a separate component of stockholders'
equity in accumulated other comprehensive income until realized.
Realized gains or losses on sales of investment securities available
for sale are recognized when realized and are computed on the
specific-identification basis.
Declines in fair value of securities below their cost that are deemed
to be other than temporary result in a reduction in carrying amount to
fair value. The impairment is charged to earnings and a new cost basis
for the security is established. To determine whether an impairment is
other than temporary, the Company considers whether it has the ability
and intent to hold the investment until a market price recovery and
considers whether evidence indicating the cost of the investment is
recoverable outweighs evidence to the contrary. Evidence considered in
this assessment includes the reasons for the impairment, the severity
and duration of the impairment, changes in value subsequent to
year-end, and forecasted performance of the investee.
Premiums and discounts are amortized over the estimated average life of
the related investment security available for sale as an adjustment to
yield using the effective interest method. Dividend and interest income
are recognized when earned.
(d)
Other Investments
Other investments include Federal Home Loan Bank (FHLB) stock and
equity investment in the Trust and Trust II (unconsolidated statutory
trusts). The FHLB stock is carried at cost, representing the amount for
which the FHLB would redeem the stock. Investment in statutory trusts
is carried on the equity method of accounting.
(Continued)
F-10
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(e)
Loans Held for Sale
Mortgage loans originated and intended for sale in the secondary market
are carried at the lower of cost or estimated fair value in the
aggregate. Net unrealized losses, if any, are recognized through a
valuation allowance by charges to income.
(f)
Loans and Allowance for Loan Losses
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their
outstanding unpaid principal balances adjusted by any charge-offs,
unearned finance charges, allowance for loan losses, and net deferred
nonrefundable fees or costs on origination. The allowance for loan
losses is an estimate to provide for probable collection losses in the
loan portfolio. Losses are charged and recoveries are credited to the
allowance account at the time a loss is incurred or a recovery takes
place.
The Company follows a consistent procedural discipline and accounts for
loan loss contingencies in accordance with Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards
(SFAS) No. 5,
Accounting for Contingencies
, and SFAS No. 114,
Accounting by Creditors for Impairment of a Loan,
as amended by SFAS
No. 118,
Accounting by Creditors for Impairment of a Loan – Income
Recognition and Disclosures.
The following is a description of how each
portion of the allowance for loan losses is determined.
The Company segregates the loan portfolio for loan loss purposes into
segments based upon the type of loan and underlying collateral. The
Company provides for a general allowance for losses inherent in the
portfolio by such collateral categories. General loss percentages are
established based upon historical analyses as well as estimates of the
inherent losses which probably exist as of the evaluation date even
though they might not have been identified by the more objective
processes used. This is due to the risk of error and/or inherent
imprecision in the process. This portion of the allowance is
particularly subjective and requires judgments based on qualitative
factors which do not lend themselves to exact mathematical calculations
such as: trends in delinquencies and nonaccruals; migration trends in
the portfolio; trends in volume, terms, and portfolio mix; new credit
products and/or changes in the geographic distribution of those
products; changes in lending policies and procedures; loan review
reports on the efficacy of the risk identification process; changes in
the outlook for local, regional, and national economic conditions;
concentrations of credit; and peer group comparisons.
Specific allowances are provided in the event that the specific
analysis on each classified loan indicates that it is probable that the
Company will be unable to collect all amounts due, both principal and
interest, according to the contractual terms of the loan agreement.
When a loan is impaired, the Company measures impairment based on
either (a) the present value of the expected future cash flows of the
impaired loan discounted at the loan's original effective rate, (b) the
observable market price of the impaired loans, or (c) the fair value of
the collateral of a collateral-dependent loan. The Company selects the
measurement method on a loan-by-loan basis, except for
collateral-dependent loans for which foreclosure is probable must be
measured at the fair value of the collateral. When the measure of the
impaired loan is less than the recorded amount, the impairment is
recorded through a valuation allowance. In a troubled debt
restructuring involving a restructured loan, the Company measures
impairment by discounting the total expected future cash
(Continued)
F-11
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
flows at the loan's original effective rate of interest. The provision
for loan loss is adjusted in order to state the allowance for loan
losses to the required level as determined above.
Management believes that the allowance for loan losses is adequate;
however, regulatory agencies, including the Federal Reserve and the
Federal Deposit Insurance Corporation (the FDIC), as an integral part
of their examination process, periodically review the Company's
allowance for loan losses.
The Company classifies loans as nonperforming when they become 90 days
past due.
(g)
Lease Financing
The Company leases vehicles and equipment to individual and corporate
customers. The finance method of accounting is used to recognize
revenue on lease contracts that meet the criteria specified by SFAS No.
13,
Accounting for Leases
, as amended. Aggregate rentals due over the
term of the leases less unearned income are included in net loans.
Unearned income is amortized using a method that results in approximate
level rates of return on the principal amounts outstanding. Finance
lease origination fees and costs are deferred and amortized over the
average life of the portfolio as an adjustment of yield.
(h)
Transfer of Financial Assets and Servicing Rights Retained
Transfers of financial assets are accounted for as sales when control
over the assets has been surrendered. Control over transferred assets
is deemed to be surrendered when (a) the assets have been isolated from
the Company, (b) the transferee obtains the right (free of conditions
that constrain it from taking advantage of that right) to pledge or
exchange the transferred assets, and (c) the Company does not maintain
effective control over the transferred assets through an agreement to
repurchase them before their maturity.
Upon completion of a transfer of assets that satisfies the conditions
described above to be accounted for as a sale, the Company:
•
Derecognizes all assets sold;
•
Recognizes all assets obtained and liabilities incurred
in consideration as proceeds of the sale;
•
Initially measures, at fair value, assets obtained and liabilities incurred in a sale; and
•
Recognizes in earnings any gain or loss on the sale.
The Company receives fees for servicing activities on loans it has
sold. These activities include, but are not limited to, collecting
principal, interest, and escrow payments from borrowers; paying taxes
and insurance from escrowed funds; monitoring delinquencies; and
accounting for and remitting principal and interest payments. To the
extent that the servicing fees exceed or do not provide adequate
compensation for the services provided, the Company records a servicing
asset or liability for the fair value of the servicing retained.
(Continued)
F-12
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(i)
Servicing Assets
The Company has no contracts to service loans for others, except for
servicing retained on the sale of leases. The total cost of leases to
be sold with servicing assets retained is allocated to the servicing
assets and the leases (without the servicing assets), based on their
relative fair values. Servicing assets are amortized in proportion to
and over the period of estimated net servicing income. In addition, the
Company assesses capitalized servicing assets for impairment based on
the fair value of those assets.
To estimate the fair value of servicing assets the Company considers
prices for similar assets and the present value of expected future cash
flows associated with the servicing assets calculated using assumptions
that market participants would use in estimating future servicing
income and expense, including discount rates, anticipated prepayment,
and credit loss rates. For purposes of evaluating and measuring
impairment of capitalized servicing assets, the Company evaluates
separately servicing retained for each loan portfolio sold. The amount
of impairment recognized, if any, is the amount by which the
capitalized servicing assets exceed its estimated fair value.
Impairment is recognized through a valuation allowance with changes
included in net income for the period in which the change occurs.
Servicing assets are included as part of other assets in the balance
sheets.
(j)
Premises and Equipment
Premises and equipment are stated at cost, less accumulated
depreciation and amortization, which are computed utilizing the
straight-line method over the estimated useful lives of the depreciable
assets. Leasehold improvements are stated at cost and are amortized
using the straight-line method over the estimated useful lives of the
assets or the term of the lease, whichever is shorter. Expenditures for
major improvements and remodeling are capitalized while maintenance and
repairs are charged to expense. Gains or losses on disposition of
premises and equipment and related operating income and maintenance
expenses are included in current operations.
(k)
Other Real Estate and Repossessed Assets
Other real estate and repossessed assets, normally obtained through
foreclosure or other workout situations, are initially recorded at fair
value at the date of foreclosure, establishing a new cost basis. Any
resulting loss is charged to the allowance for loan losses. An
appraisal of other real estate properties and repossessed assets is
made periodically after its acquisition and comparison between the
appraised value and the carrying value is performed. Additional
declines in value after acquisition, if any, are charged to current
operations. Gains or losses on disposition of other real estate and
repossessed assets and related operating income and maintenance
expenses are included in current operations.
(l)
Trust Services
In connection with its trust activities, the Company administers and is
custodian of assets which amounted to approximately $10,227,000 and
$4,176,000 at December 31, 2003 and 2002, respectively.
(Continued)
F-13
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(m)
Securities Sold under Agreements to Repurchase
The Company sells securities under agreements to repurchase the same or
similar securities. Amounts received under these agreements represent
short-term financing transactions.
(n)
Income Taxes
The Company uses the asset and liability method for the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns. Deferred income tax assets and
liabilities are determined for differences between financial statement
and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future as well as net operating losses
carryforwards. The computation is based on enacted tax laws and rates
applicable to periods in which the temporary differences are expected
to be recovered or settled.
(o)
Reserve Fund
The Banking Law of Puerto Rico requires that a reserve fund be created
and that annual transfers of at least 10% of annual net income of the
Bank be made, until such fund equals total paid-in capital. Such
transfers restrict the retained earnings, which would otherwise be
available for dividends. If net losses are experienced, such losses
will be initially charged to retained earnings before reducing the
reserve fund.
(p)
Interest Income
Interest income on loans and investment securities is recognized on a
basis which produces a constant yield over the term of the loan or
security. Accrual of interest income is discontinued when
collectibility of the related loan appears doubtful or after 90 days of
delinquency, unless the credit is well secured and in process of
collection. All interest accrued but not collected for loans that are
placed on nonaccrual or charged off is reversed against interest
income. The interest on these loans is accounted on the cash basis or
cost recovery method, until qualifying for return to accrual. Loans are
returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are
reasonably assured.
(q)
Loan Origination and Commitment Fees
Loan fees and certain direct loan origination costs are deferred, and
the net amount is recognized in interest income using the interest
method over the contractual life of the loans. Commitment fees and
costs relating to commitments whose likelihood of exercise is remote
are recognized over the commitment period on a straight-line basis. If
the commitment is subsequently exercised during the commitment period,
the remaining unamortized commitment fee at the time of exercise is
recognized over the life of the loan as an adjustment of yield.
(r)
Earnings Per Share
Basic earnings per share represent income available to common
stockholders divided by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflect
additional common shares that would have been outstanding if dilutive
potential common shares had been issued, as well as any adjustment to
income that would result from the
(Continued)
F-14
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
assumed issuance. Potential common shares that may be issued by the
Company relate solely to outstanding stock options and are determined
using the treasury stock method.
(s)
Supplementary Cash Flow Information
Supplemental disclosures of cash flow information are as follows:
2003
2002
2001
Cash paid during the years for:
Interest
$
32,494,000
23,939,000
21,085,000
Income taxes
3,116,000
2,037,000
924,000
Noncash transactions:
Repossessed assets acquired
through foreclosure of loans
$
15,431,000
7,463,000
6,225,000
Change in fair value of available-
for-sale securities
(3,214,069
)
1,653,120
428,675
Tax effect of change in fair
value of available-for-sale
securities
(803,518
)
413,280
107,169
Capital contribution through
issuance of EuroBancshares
common stock on acquisition
of Banco Financiero (note 2)
—
1,222,280
—
(t)
Stock Option Plan
As allowed by SFAS No. 123,
Accounting for Stock-Based Compensation
,
and as amended by SFAS No. 148,
Accounting for Stock-Based Compensation
– Transition and Disclosure, an amendment of FASB Statement No. 123
,
the Company has elected to continue to measure cost for its stock
compensation plan using the intrinsic value method prescribed by
Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock
Issued to Employees
. Under the intrinsic value method, compensation
cost is the excess, if any, of the quoted market price of the stock at
the grant date or other measurement date over the amount an employee
must pay to acquire the stock. Entities choosing to continue applying
APB Opinion No. 25 must provide pro forma disclosures of the
consolidated net income, as if the fair value method of accounting had
been applied. Under this method, compensation cost is measured at the
grant date based on the fair value of the employee stock option and is
recognized ratably over the service period of the option, which is
usually the vesting period.
SFAS No. 123 established accounting and disclosure requirements using a
fair value based method of accounting for stock-based employee
compensation plans. The per share fair value of stock options granted
during 2003, 2002, and 2001 was $1.27, $1.60, and $1.68 on the date of
grant using the Black-Scholes option pricing model (excluding a
volatility assumption) with the following weighted average assumptions
used for grants in 2003, 2002, and 2001, respectively: no dividend
yield for 2003, 2002, and 2001; risk-free interest rates of 2.75% for
2003, 4% for 2002, and 6% for 2001; and expected lives of five years.
(Continued)
F-15
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
The following table illustrates the effect on net income if the fair
value based method had been applied to all outstanding stock-based
compensation in each period.
(Unaudited)
2003
2002
2001
Net income, as reported
$
9,882,721
6,933,854
5,803,970
Deduct total stock-based employee
compensation expense determined
under fair value based method for
all awards
(364,421
)
(270,832
)
(277,452
)
Pro forma net income
$
9,518,300
6,663,022
5,526,518
Earnings per share:
Basic — as reported
$
1.42
1.02
0.94
Basic — pro forma
1.37
0.98
0.90
Diluted — as reported
1.39
1.01
0.93
Diluted — pro forma
1.34
0.97
0.89
As part of the reorganization described in note 1, each holder of
options to acquire shares of the Bank stock outstanding at the merger
effective date received one option to purchase a share of the Company
stock in exchange for each option to purchase a share of the Bank stock
that such person held as of the merger effective date.
(u)
Comprehensive Income
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. In addition to net income, the
Company recognizes unrealized holding gains and losses arising during
the year in comprehensive income.
(v)
Impairment of Long-Lived Assets
The Company adopted SFAS No. 144 on January 1, 2002. The adoption of
SFAS No. 144 did not affect the Company's financial statements. In
accordance with SFAS No. 144, long-lived assets, such as property,
plant, and equipment, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of the
asset. Assets to be disposed of would be separately presented in the
balance sheet and reported at the lower of the carrying amount or fair
value less costs to sell, and are no longer depreciated. The assets and
liabilities of a disposed group classified as held for sale would be
presented separately in the appropriate asset and liability sections of
the consolidated balance sheet.
(Continued)
F-16
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
Prior to the adoption of SFAS No. 144, the Company accounted for
long-lived assets in accordance with SFAS No. 121,
Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of
.
(w)
Derivative Instruments
The Company does not purchase, sell, or enter into derivative financial
instruments or derivative commodity instruments as defined by SFAS No.
133,
Accounting for Derivative Instruments and Hedging Activities
.
(x)
Reclassifications
Certain amounts in the 2002 financial statements have been reclassified
to conform with 2003 presentation.
(y)
Business Segments
An operating segment is a component of a business for which separate
financial information is available that is evaluated regularly by the
chief operating decision-maker in deciding how to allocate resources
and evaluate performance. Presently, the Company's decisions are
generally based on specific market areas and/or product offerings.
Accordingly, based on the financial information now regularly evaluated
by the Company's chief operating decision-maker, the Company operates
in a single business segment.
(z)
Recently Issued Accounting Standards
In June 2001, SFAS No. 143,
Accounting for Asset Retirement
Obligations
, was issued. SFAS No. 143 requires the Company to record
the fair value of an asset retirement obligation as a liability in the
period in which it incurs a legal obligation associated with the
retirement of tangible long-lived assets that result from the
acquisition, construction, development, and/or normal use of the
assets. The Company also would record a corresponding asset that is
depreciated over the life of the asset. Subsequent to the initial
measurement of the asset retirement obligation, the obligation would be
adjusted at the end of each period to reflect the passage of time and
changes in the estimated future cash flows underlying the obligation.
The Company was required to adopt SFAS No. 143 on January 1, 2003. The
adoption of SFAS No. 143 had no effect on the Company's financial
statements.
In April 2002, SFAS No. 145,
Rescission of FASB Statements No. 4, 44,
and 64, Amendment of FASB Statement No. 13, and Technical Corrections
,
was issued. SFAS No. 145 amends existing guidance on reporting gains
and losses on the extinguishment of debt to prohibit the classification
of the gain or loss as extraordinary, as the use of such
extinguishments have become part of the risk management strategy of
many companies. SFAS No. 145 also amends SFAS No. 13,
Accounting for
Leases
, to require sale-leaseback accounting for certain lease
modifications that have economic effects similar to sale-leaseback
transactions. The provisions of SFAS No. 145 related to the rescission
of SFAS No. 4,
Reporting Gains and Losses from Extinguishment of Debt
,
were applied in fiscal years beginning after May 15, 2002. The
provisions of SFAS No. 145 related to SFAS No. 13 were effective for
transactions occurring after May 15, 2002. The adoption of SFAS No. 145
had no effect on the Company's financial statements.
(Continued)
F-17
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
In June 2002, SFAS No. 146,
Accounting for Costs Associated with Exit
or Disposal Activities
, was issued. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3,
Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity
. The provisions of SFAS No. 146
were effective for exit or disposal activities initiated after December
31, 2002, with early application encouraged. The adoption of SFAS No.
146 had no effect on the Company's financial statements.
In November 2002, FASB Interpretation No. 45 (FIN 45),
Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness to Others
, an interpretation of
SFAS No. 5, 57, and 107 and a rescission of FIN 34, was issued. This
interpretation enhances the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations under
guarantees issued. The interpretation also clarifies that a guarantor
is required to recognize, at inception of a guarantee, a liability for
the fair value of the obligation undertaken. The initial recognition
and measurement provisions of the Interpretation were applicable to
guarantees issued or modified after December 31, 2002 and the
disclosure requirements were effective for financial statements of
interim or annual periods ending after December 15, 2002. This
statement did not have a material impact on the Company's financial
statements.
In December 2002, SFAS No. 148,
Accounting for Stock-Based Compensation
–
Transition and Disclosure, an amendment of FASB Statement No. 123
,
was issued. This statement amends SFAS No. 123,
Accounting for
Stock-Based Compensation
, to provide alternative methods of transition
for a voluntary change to the fair value method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements.
Disclosures required by this standard are included in the notes to
these consolidated financial statements.
In January 2003, the FASB issued FIN No. 46,
Consolidation of Variable
Interest Entities
. The FASB's stated intent in issuing FIN No. 46 was
to clarify the application of Accounting Research Bulletin No. 51,
Consolidated Financial Statements
, to certain entities in which equity
investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial
support from other parties. FIN No. 46 requires an enterprise to
consolidate a variable interest entity (as defined in FIN No. 46) if
that enterprise has a variable interest (or combination of variable
interests) that will absorb a majority of the entity's expected losses
if they occur, receive a majority of the entity's expected returns if
they occur, or both. In December 2003, the FASB issued a revised FIN
No. 46 (FIN No. 46R), which attempts to clarify the guidance in the
original interpretation. FIN No. 46 applies to variable interest
entities created after January 31, 2003. FIN No. 46 also applies to all
variable interest entities created prior to February 1, 2003 that are
considered to be special-purpose entities (as defined in FIN No. 46R)
as of December 31, 2003. FIN No. 46R must be applied to all variable
interest entities no later than the end of the first reporting period
that ends after March 15, 2004. Certain variable interest entities that
are qualifying special purpose entities subject to the reporting
requirements for SFAS No. 140,
Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities
, are not required
to be consolidated under the provisions of FIN No. 46. At December 31,
2003, the Company had two wholly owned statutory trust that issued
trust preferred securities (also referred to as Capital Securities).
Prior to FIN No. 46R, the statutory
(Continued)
F-18
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
trusts were consolidated subsidiaries of the Company. The Company
adopted the provisions of FIN No. 46R, requiring the deconsolidation of
these trusts effective December 31, 2003. Refer to note 15 to the
consolidated financial statements for further information of the
statutory trusts.
In April 2003, SFAS No. 149,
Amendment of Statement 133 on Derivative
Instruments and Hedging Activities
, was issued. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities under SFAS No. 133,
Accounting for Derivative Instruments
and Hedging Activities
. SFAS No. 149 (a) clarifies under what
circumstances a contract with an initial net investment meets the
characteristic of a derivative discussed in paragraph 6(b) of SFAS No.
133, (b) clarifies when a derivative contains a financing component,
(c) amends the definition of an underlying to conform it to language
used in FIN No. 45,
Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others
, and (d) amends certain other existing pronouncements. Those
changes will result in more consistent reporting of contracts as either
derivatives or hybrid instruments. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, with certain
exceptions, and for hedging relationships designated after June 30,
2003. In addition, except for certain situations, all provisions of
this statement are to be applied prospectively. Also, the provisions
related to forward purchases or sales of when-issued securities or
other securities that do not yet exist, should be applied to both
existing contracts and new contracts entered into after June 30, 2003.
The adoption of SFAS No. 149 did not have an impact on the Company's
financial condition or results of operations for the year ended
December 31, 2003.
In December 2003, SFAS No. 132 (revised),
Employers' Disclosures about
Pensions and Other Postretirement Benefits
, was issued. SFAS No. 132
(revised) prescribes employers' disclosures about pension plans and
other postretirement benefit plans; it does not change the measurement
or recognition of those plans. The statement retains and revises the
disclosure requirements contained in the original SFAS No. 132. It also
requires additional disclosures about the assets, obligations, cash
flows, and net periodic benefit cost of defined-benefit pension plans
and other postretirement benefit plans. The statement generally is
effective for fiscal years ending after December 15, 2003. The adoption
of SFAS No. 132 (revised) had no effect on the Company's financial
statements because the Company has no plans subject to the agreements
of such statement.
SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity
, was issued in May 2003.
This statement establishes standards for the classification and
measurement of certain financial instruments with characteristics of
both liabilities and equity. The statement also includes required
disclosures for financial instruments within its scope. For the
Company, the statement was effective for instruments entered into or
modified after May 31, 2003 and otherwise will be effective as of
January 1, 2004, except for mandatorily redeemable financial
instruments. For certain mandatorily redeemable financial instruments,
the statement will be effective for the Company on January 1, 2005. The
effective date has been deferred indefinitely for certain other types
of mandatorily redeemable financial instruments. This statement did not
have a material impact on the Company's financial statements.
During the fourth quarter of 2003, the Company adopted EITF No. 03-1
(EITF 03-1),
The Meaning of Other-Than-Temporary Impairment and its
Application of Certain Investments
. EITF 03-1
(Continued)
F-19
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
provides new guidance regarding impairment accounting on debt and
equity securities carried at amounts higher than the securities' fair
values and disclosure of additional information about unrealized
losses. The initial adoption of EITF 03-1 resulted in additional
disclosures.
In December 2003, the Accounting Standards Executive Committee issued
Statement of Position 03-3 (SOP 03-3),
Accounting for Certain Loans or
Debt Securities Acquired in a Transfer
. This statement addresses
accounting for differences between contractual cash flows and cash
flows expected to be collected from an investor's initial investment in
loans or debt securities acquired in a transfer if those differences
are attributable, at least in part, to credit quality. SOP 03-3 does
not apply to loans originated by the entity. SOP 03-3 limits the yield
that may be accreted (accretable yield) to the excess of the investor's
estimate of undiscounted expected principal, interest, and other cash
flows (cash flows expected at acquisition to be collected) over the
investor's initial investment in the loan. SOP 03-3 requires that the
excess of contractual cash flows over cash flows expected to be
collected (nonaccretable difference) not be recognized as an adjustment
of yield, loss accrual, or valuation allowance. SOP 03-3 prohibits
investors from displaying accretable yield and nonaccretable difference
in the balance sheet. Subsequent increases in cash flows expected to be
collected generally should be recognized prospectively through
adjustment of the loan's yield over its remaining life. Decreases in
cash flows expected to be collected should be recognized as impairment.
SOP 03-3 prohibits "carrying over" or creation of valuation allowances
in the initial accounting of all loans acquired in a transfer that are
within the scope of this statement. The prohibition of the valuation
allowance carryover applies to the purchase of an individual loan, a
pool of loans, a group of loans, and loans acquired in a purchase
business combination. SOP 03-3 is effective for loans acquired in
fiscal years beginning after December 15, 2004. Early adoption is
encouraged. The Company elected to adopt SOP 03-3 for the year ending
December 31, 2005.
(4)
Securities Purchased Under Agreements to Resell
Securities purchased under agreements to resell at December 31, 2003 and
2002 consist of short-term investments. The following table summarizes
certain information on securities purchased under agreements to resell:
2003
2002
2001
Amount outstanding at year-end
$
20,483,736
45,014,420
8,049,613
Maximum aggregate balance
outstanding at any month-end
49,314,518
45,014,420
16,132,455
Average monthly aggregate balance
outstanding during the year
21,017,618
20,232,036
7,667,805
Weighted average interest rate for
the year ended December 31
1.19
%
1.68
%
4.20
%
Weighted average interest rate at
year-end
1.00
%
1.25
%
1.75
%
The amounts advanced under those agreements are reflected as assets in the
balance sheet. It is the Company's policy to take possession of securities
purchased under agreements to resell. Agreements with third parties specify
the Company's rights to request additional collateral, based on its
monitoring of the fair value of the underlying securities on a daily basis.
The securities are segregated by the broker or dealer
(Continued)
F-20
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
custodian bank account designated under a written custodial agreement that
explicitly recognizes the Company's interest in the securities.
The fair value of the collateral securities held by the Bank on these
transactions as of December 31, 2003 and 2002 was approximately $20,504,000
and $45,608,000, respectively.
(5)
Investment Securities Available for Sale
Investment securities available for sale and related contractual maturities
as of December 31 are as follows:
2003
Amortized
Unrealized
Unrealized
Fair
cost
gains
losses
value
Commonwealth of Puerto
Rico obligations:
One through five years
$
4,317,444
48,556
—
4,366,000
More than five years
201,685
7,815
—
209,500
U.S. corporate notes:
Less than one year
2,967,893
26,442
—
2,994,335
U.S. Treasury obligations:
One through five years
84,748,443
367,808
—
85,116,251
Federal Home Loan Bank
notes:
Less than one year
1,000,000
6,347
—
1,006,347
One through five years
23,052,150
24,598
—
23,076,748
Five through ten years
5,356,640
12,474
—
5,369,114
Federal National Mortgage
Association notes:
One through five years
7,449,036
21,951
—
7,470,987
Federal Home Loan Mortgage
corporation notes:
One through five years
3,009,060
—
(2,324
)
3,006,736
Mortgage-backed securities:
More than one year
193,912,017
400,923
(1,990,916
)
192,322,024
Total
$
326,014,368
916,914
(1,993,240
)
324,938,042
(Continued)
F-21
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
2002
Amortized
Unrealized
Unrealized
Fair
cost
gains
losses
value
Commonwealth of Puerto
Rico obligations:
One through five years
$
2,000,000
72,360
—
2,072,360
More than five years
2,659,266
28,853
(1,989
)
2,686,130
U.S. corporate notes:
Less than one year
968,647
—
(3,287
)
965,360
One through five years
4,950,822
150,000
(1,402
)
5,099,420
U.S. Treasury obligations:
Less than one year
24,974,854
183,496
—
25,158,350
One through five years
4,969,674
132,226
—
5,101,900
Federal Home Loan Bank
notes:
Less than one year
7,992,109
147,721
—
8,139,830
One through five years
8,550,855
62,597
(167
)
8,613,285
Federal National Mortgage
Association notes:
One through five years
5,003,227
106,773
—
5,110,000
Mortgage-backed securities:
Less than one year
173,949
921
—
174,870
More than five years
81,413,719
1,366,596
(106,955
)
82,673,360
Total
$
143,657,122
2,251,543
(113,800
)
145,794,865
Contractual maturities on certain investment securities available for sale
could differ from actual maturities since certain issuers have the right to
call or prepay these securities.
During the year ended December 31, 2003 proceeds from sales of investment
securities available for sale were approximately $83,220,000 and gross
gains of approximately $707,000 were realized. During 2002, there were no
sales of investment securities available for sale. Proceeds from sales of
investment securities available for sale during the year ended December 31,
2001, were approximately $16,483,000 and gross gains of approximately
$195,000 were realized.
Gross unrealized losses on investment securities available for sale and the
fair value of the related securities, aggregated by investment category and
length of time that individual securities have been in a continuous
unrealized loss position, at December 31, 2003, were as follows:
Less than 12 months
12 months or more
Total
Unrealized
Fair
Unrealized
Fair
Unrealized
Fair
losses
value
losses
value
losses
value
U.S. agency debt securities
$
2,324
3,006,736
—
—
2,324
3,006,736
Mortgage-backed securities
1,990,916
135,098,409
—
—
1,990,916
135,098,409
$
1,993,240
138,105,145
—
—
1,993,240
138,105,145
(Continued)
F-22
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
•
U.S. Agency Debt Securities –
The unrealized losses on
investments in U.S. agency debt securities were caused by interest
rate increases. The contractual terms of these investments do not
permit the issuer to settle the securities at a price less than the
amortized cost of the investment. Because the Company has the ability
and intent to hold these investments until a market price recovery or
maturity, these investments are not considered other-than-temporarily
impaired.
•
Mortgage-Backed Securities –
The unrealized losses on investments
in mortgage-backed securities were caused by interest rate increases.
The contractual cash flows of these securities are guaranteed by
Federal National Mortgage Association (FNMA) and Federal Home Loan
Mortgage Corporation (FHLMC). It is expected that the securities would
not be settled at a price less than the amortized cost of the
investment. Because the decline in fair value is attributable to
changes in interest rates and not credit quality, and because the
Company has the ability and intent to hold these investments until a
market price recovery or maturity, these investments are not
considered other-than-temporarily impaired.
Interest income on investment securities is summarized as follows:
2003
2002
2001
Taxable
$
76,753
324,306
490,705
Tax-exempt
5,836,773
4,928,345
5,663,350
Dividends
95,707
89,231
130,027
$
6,009,233
5,341,882
6,284,082
(6)
Other Investments
Other investments at December 31, 2003 and 2002 consist of the following:
2003
2002
FHLB stock, at cost
$
1,953,600
2,405,200
Investment in statutory trusts (notes 1 and 15)
1,388,500
—
Other investments
$
3,342,100
2,405,200
(Continued)
F-23
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(7)
Pledged Assets
At December 31, 2003, various securities and loans were pledged to secure
the following:
Carrying
Asset pledged
value
Items secured/collateralized
Securities
$
10,593,237
Deposits of public funds
Commercial loans
guaranteed by the Small
Business Administration
1,570,969
Deposits of public funds
Securities
16,040,904
Notes payable to Federal Home Loan Bank
Residential mortgage loans
2,186,641
Notes payable to Federal Home Loan Bank
Securities
125,000
Assets pledged with the Commissioner of
Financial Institutions of the Commonwealth of
Puerto Rico for IRA Trust
Securities
220,766
Assets for Eurobank IRA Trust
Securities
438,300
Assets pledged with the Commissioner of
Financial Institutions of the Commonwealth of
Puerto Rico for the IRA Trust and the
International Banking Entity operations
Securities
297,155
Assets pledged with the Federal Reserve Bank
for Treasury, tax, and loan account
Securities
2,179,136
Assets pledged with the Federal Reserve Bank
for Discount Window
Securities
213,355,417
Securities sold under agreements to repurchase
(8) Loans, Net
A summary of the Company's loan portfolio at December 31, is as follows:
2003
2002
Commercial and industrial
$
476,745,889
380,384,767
Construction
48,505,160
54,936,789
Mortgage
15,941,467
34,198,273
Consumer
28,249,806
33,303,160
Lease financing contracts
315,935,299
256,087,396
Overdrafts
4,235,486
3,665,207
889,613,107
762,575,592
Deferred loan costs, net
4,706,774
3,018,268
Unearned finance charges
(1,774,047
)
(3,040,881
)
Allowance for loan losses
(9,393,943
)
(6,918,141
)
Loans, net
$
883,151,891
755,634,838
(Continued)
F-24
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
The components of the net financing leases receivable at December 31, were
as follows:
2003
2002
Minimum lease payments
$
285,444,407
236,128,785
Guaranteed residual payments
30,490,892
19,958,611
Deferred origination costs, net
4,932,656
3,408,211
Less unearned income (equipment leases)
(1,734,141
)
(2,837,458
)
Less allowance for lease losses
(1,950,090
)
(1,824,616
)
$
317,183,724
254,833,533
Guaranteed residual payments on automobile leases apply to leases where
there is a more than nominal final payment for transfer of vehicles to
lessee. Such amounts are obligations of the lessee, which are generally
established at amounts not to exceed the vehicles' estimated values at the
end of the lease term.
At December 31, 2003, future minimum lease payments are expected to be
received as follows:
2004
$
82,105,444
2005
65,082,932
2006
57,733,651
2007
46,809,422
2008
26,930,784
Thereafter
6,782,174
$
285,444,407
The following is a summary of information pertaining to impaired loans:
2003
2002
Impaired loans with related allowance
$
7,187,000
7,261,000
Impaired loans that did not require allowance
6,242,000
6,084,000
Total impaired loans
$
13,429,000
13,345,000
Allowance for impaired loans
$
451,000
491,000
2003
2002
2001
Average investment in impaired loans
$
13,246,000
10,210,000
5,769,000
Interest income recognized on impaired
loans
547,000
574,000
220,000
Interest income recognized on a cash
basis on impaired loans
547,000
574,000
220,000
No additional funds are committed to be advanced in connection with
impaired loans.
(Continued)
F-25
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
As of December 31, 2003, 2002, and 2001, loans in which the accrual of
interest has been discontinued amounted to $17,058,295, $15,889,045, and
$6,539,665, respectively. If these loans had been accruing interest, the
additional interest income realized would have been $822,355, $833,228, and
$571,111 for 2003, 2002, and 2001, respectively.
Commercial and industrial loans with principal outstanding balances
amounting to approximately $3,650,000 and $3,600,000 in 2003 and 2002,
respectively, are guaranteed by the U.S. government through the Small
Business Administration at percentages varying from 75% to 90% in 2003 and
2002. As of December 31, 2003 and 2002, industrial loans with a principal
outstanding balance of approximately $1,556,000 and $2,650,000,
respectively, were guaranteed by the U.S. government through the U.S.
Department of Agriculture.
(9)
Allowance for Loan Losses
The following analysis summarizes the changes in the allowance for loan
losses for the years ended December 31:
2003
2002
2001
Balance at beginning of year
$
6,918,141
4,512,932
3,050,556
Provision for loan losses
6,451,000
3,353,686
2,377,000
Loans charged-off
(5,065,207
)
(3,387,240
)
(1,396,326
)
Recoveries
1,090,009
420,764
481,702
Allowance from the acquisition of
Banco Financiero
—
2,017,999
—
Balance at end of year
$
9,393,943
6,918,141
4,512,932
(10)
Premises and Equipment, Net
Premises and equipment at December 31, are as follows:
Estimated
useful lives
2003
2002
Building
40 years
$
5,748,836
5,748,836
Leasehold improvements
5 to 20 years
5,315,561
3,550,728
Furniture, fixtures, and equipment
2 to 5 years
8,734,216
7,737,752
Construction in progress
122,362
925,217
19,920,975
17,962,533
Accumulated depreciation and
amortization
(9,389,622
)
(8,582,600
)
$
10,531,353
9,379,933
(Continued)
F-26
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(11)
Other Assets
Other assets at December 31, consist of the following:
2003
2002
Deferred tax assets, net (note 18)
$
4,010,050
3,679,710
Accounts receivable
3,939,526
1,998,713
Other real estate, net of valuation allowance of $27,525 in
2003 and 2002
2,774,124
1,962,571
Other repossessed assets, net of valuation allowance of
$671,058 and $610,396 in 2003 and 2002, respectively
3,642,886
5,680,630
Servicing assets, net of amortization
of $629,483 in 2003 (note 17)
3,031,297
—
Prepaid expenses and deposits
3,982,463
3,911,766
Other
1,062,937
1,337,111
$
22,443,283
18,570,501
Other repossessed assets are presented net of an allowance for losses. The
following analysis summarizes the changes in the allowance for losses for
the years ended December 31:
2003
2002
2002
Balance,
beginning of year
$
610,396
188,037
—
Provision
for losses
522,660
428,530
188,037
Net
charge-offs
(461,998
)
(6,171
)
—
Balance, end
of year
$
671,058
610,396
188,037
(12)
Deposits
Total interest bearing deposits as of December 31 consisted of the
following:
2003
2002
Savings deposits:
Savings accounts
$
230,326,464
146,763,099
NOW and money market accounts
77,019,283
67,446,555
307,345,747
214,209,654
Time deposits:
Under $100,000
166,232,067
156,930,112
$100,000 and over
406,213,619
386,461,132
572,445,686
543,391,244
$
879,791,433
757,600,898
(Continued)
F-27
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
Interest expense on time deposits over $100,000 or more amounted to
approximately $14,396,000, $12,383,000, and $11,146,000 for the years ended
December 31, 2003, 2002, and 2001, respectively.
At December 31, 2003, the scheduled maturities of time deposits are as
follows:
2004
$
268,267,442
2005
90,857,109
2006
106,627,488
2007
57,021,068
2008
34,357,471
Thereafter
15,315,108
$
572,445,686
At December 31, 2003 and 2002, the Bank had brokered certificates of
deposit amounting to approximately $228,212,000 and $214,679,000,
respectively.
(13)
Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase represent short-term
financing transactions with securities dealers and the FHLB. The following
table summarizes certain information on securities sold under agreements to
repurchase:
2003
2002
2001
Amount outstanding at year-end
$
207,523,000
64,112,687
27,363,500
Maximum aggregate balance outstanding
at any month-end
207,523,000
64,112,687
63,803,500
Average monthly aggregate balance
outstanding during the year
92,068,813
44,472,450
40,822,996
Weighted average interest rate for the year
1.71
%
2.60
%
4.54
%
Weighted average interest rate at year-end
1.25
%
2.04
%
2.43
%
The investment securities underlying such agreements were delivered to the
dealers with whom the agreements were transacted. The dealers may have
sold, loaned, or otherwise disposed of such securities in the normal course
of business operations, but have agreed to resell to the Company
substantially the same securities on the maturity dates of the agreements.
(Continued)
F-28
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
The following table presents the liability associated with the repurchased
transactions (including accrued interest), their maturities and weighted
average interest rates. Also, it includes the amortized cost and
approximate market value of the collateral (including accrued interest) as
of December 31, 2003 and 2002:
2003
Amortized
Weighted
Repurchase
cost of
Market value
average
liability
collateral
of collateral
interest rate
U.S. Treasury securities –
within 30 days
$
84,975,000
84,748,443
85,116,251
0.89
%
Obligations of U.S. Government agencies and
corporations – within 30 days
4,450,000
4,550,000
4,551,283
1.18
%
Mortgage-backed securities –
after 90 days
19,979,554
21,436,974
21,440,930
1.41
%
Collateralized mortgage
obligations:
Within 30 days
35,445,000
36,860,804
36,620,424
1.47
%
After 30 to 90 days
7,034,000
7,115,127
7,052,649
1.16
%
After 90 days
55,639,446
59,239,196
58,573,880
1.65
%
98,118,446
103,215,127
102,246,953
1.55
%
$
207,523,000
213,950,544
213,355,417
1.26
%
(Continued)
F-29
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
2002
Amortized
Weighted
Repurchase
cost of
Market value
average
liability
collateral
of collateral
interest rate
U.S. Treasury securities –
within 30 days
$
29,996,687
29,944,528
30,260,250
1.27
%
Obligations of U.S. Government agencies and corporations:
Within 30 days
—
—
—
—
After 30 to 90 days
4,938,000
5,003,227
5,110,000
1.33
%
After 90 days
2,756,805
3,000,000
3,028,800
2.66
%
7,694,805
8,003,227
8,138,800
1.81
%
Mortgage-backed securities –
After 90 days
2,221,933
2,794,644
2,817,746
4.79
%
Collateralized mortgage
obligations:
Within 30 days
4,616,000
4,725,466
4,812,998
1.35
%
After 90 days
19,583,262
21,738,693
22,205,929
3.48
%
24,199,262
26,464,159
27,018,927
3.07
%
$
64,112,687
67,206,558
68,235,723
2.14
%
(14)
Notes Payable to FHLB
At December 31, the Company owes several advances to the FHLB as follows:
Maturity
Interest rate range
2003
2002
2003
2.89% to 7.28%
$
—
8,150,000
2004
6.50% to 6.81%
2,500,000
2,500,000
2006
4.81% to 5.72%
7,000,000
7,000,000
2007
5.20
%
1,200,000
1,200,000
$
10,700,000
18,850,000
Interest rates are fixed for the term of each advance and are payable on
the first business day of the following month when the original maturity of
the note exceeds six months. In notes with original terms of
six months or less, interest is paid at maturity. Interest payments during
2003, 2002, and 2001 amounted to approximately $831,000, $998,000, and
$902,000, respectively. These notes are guaranteed by approximately
$16,041,000 in securities and $2,187,000 in mortgage loans as of December
31, 2003 (note 7).
(Continued)
F-30
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(15)
Junior Subordinated Debentures
On December 18, 2001, the Trust issued $25,000,000 of floating rate Trust
Preferred Capital Securities Series 1 due in 2031 with a liquidation amount
of $1,000 per security. Distributions payable on each capital security is
payable at an annual rate equal to 5.60% beginning on (and including) the
date of original issuance and ending on (but excluding) March 18, 2002, and
at an annual rate for each successive period equal to the three-month
London Interbank Offered Rate (LIBOR), plus 3.60% with a ceiling rate of
12.50%. The capital securities of the Trust are fully and unconditionally
guaranteed by EuroBancshares (a wholly owned subsidiary of the Bank in
2001), now the Company (note 1). EuroBancshares then issued $25,774,000 of
floating rate junior subordinated deferrable interest debentures to the
Trust due in 2031. The terms of the debentures, which comprise
substantially all of the assets of the Trust, are equal to the terms of the
capital securities issued by the Trust. These debentures are fully and
unconditionally guaranteed by the Bank. The Bank subsequently issued an
unsecured promissory note to EuroBancshares for the issued amount and at an
annual rate equal to that being paid on the Trust Preferred Capital
Securities Series 1 due in 2031.
On December 19, 2002, the Trust II issued $20,000,000 of floating rate
Trust Preferred Capital Securities due in 2032 with a liquidation amount of
$1,000 per security. Distributions payable on each capital security will be
payable at an annual rate equal to 4.66% beginning on (and including) the
date of original issuance and ending on (but excluding) March 26, 2003, and
at an annual rate for each successive period equal to the three-month LIBOR
plus 3.25% with a ceiling rate of 11.75%. The capital securities of the
Trust II are fully and unconditionally guaranteed by EuroBancshares.
EuroBancshares then issued $20,619,000 of floating rate junior subordinated
deferrable interest debentures to the Trust II due in 2032. The terms of
the debentures, which comprise substantially all of the assets of the Trust
II, are equal to the terms of the capital securities issued by the Trust
II. These debentures are fully and unconditionally guaranteed by the Bank.
The Bank subsequently issued an unsecured promissory note to the
EuroBancshares for the issued amount and at an annual rate equal to that
being paid on the Trust Preferred Capital Securities due in 2032.
Interest expense on Trust Preferred Capital Securities amounted to
approximately $2,124,000, $1,472,000, and $54,000 for the years ended
December 31, 2003, 2002, and 2001, respectively.
Prior to FIN No. 46R, the statutory trusts described above, were considered
subsidiaries of the Company. The capital securities were included in the
consolidated balance sheet as of December 31, 2002 under the caption Trust
Preferred Capital Securities, and the retained common capital securities of
the statutory trusts were eliminated against the Company's investment in
the statutory trusts. Distributions on the trust preferred capital
securities were recorded as interest expense on the consolidated statement
of income for the year ended December 31, 2002.
As a result of the adoption of FIN No. 46R, the Company deconsolidated
these statutory trusts effective December 31, 2003. The junior subordinated
debentures issued by the Company to the statutory trusts, totaling
$46,393,000 were reflected in the Company's consolidated balance sheet at
December 31, 2003 under the caption of "Junior Subordinated Debentures". In
the future, the Company will record interest expense on the corresponding
junior subordinated debentures in the consolidated statement of income. At
December 31, 2003, the Company also recorded in the caption of other
investments in the consolidated balance sheet, the common securities issued
by statutory trusts.
(Continued)
F-31
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
The Federal Reserve has indicated in supervisory letter SR 03-13 (the
Supervisory Letter), dated July 2, 2003 that trust preferred securities
will be treated as Tier 1 capital until notice is given of the contrary.
The Supervisory Letter also indicates that the Federal Reserve will review
the regulatory implications of any accounting treatment changes and will
provide further guidance if necessary or warranted.
(16)
Commitments and Contingencies
The Company leases certain premises used in its operations under operating
lease agreements expiring at various dates through 2032. The total
approximated minimum rental payments and the related approximated minimum
future rental income, respectively, under the agreements, including rentals
based upon increases in taxes and other costs, are approximately as
follows:
Minimum
Estimated
rental
rental
payments
income
Net
Year:
2004
$
1,792,000
237,000
1,555,000
2005
1,775,000
237,000
1,538,000
2006
1,557,000
237,000
1,320,000
2007
1,134,000
237,000
897,000
2008
851,000
—
851,000
Thereafter
7,710,000
—
7,710,000
$
14,819,000
948,000
13,871,000
Rent expense for the years ended December 31, 2003, 2002, and 2001 was
approximately $1,780,000, $1,322,000, and $1,127,000, respectively.
The Company is involved as plaintiff or defendant in a variety of routine
litigation incidental to the normal course of business. Management
believes, based on the opinion of legal counsel, that it has adequate
defense or insurance protection with respect to such litigations and that
any losses therefrom, whether or not insured, would not have a material
adverse effect on the results of operations or financial position of the
Company.
(17)
Sale of Receivables and Servicing Assets
During June and December 2003, the Company sold to a third party lease
financing contracts with carrying values of $30,000,011 and $20,000,035,
respectively. In these sales the Company retained servicing
responsibilities and servicing assets of $2,316,450 and $1,344,330 were
recognized on each transaction. The Company surrendered control of the
lease financing receivables, as defined by SFAS No. 140,
Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities
, and accounted for these transactions as sales. The net
proceeds from these sales amounted to approximately $50 million and
recognized net gains of approximately $1,797,000 and $1,023,000 during the
year ended December 31, 2003. Under the terms of the transactions, the
Company has limited recourse obligations to repurchase up to $1.5 million
and $1.0 million of defaulted leases. No loan repurchases were made during
2003.
(Continued)
F-32
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
Additionally, in September 2003, the Company sold to Citibank, N.A.
approximately $42.8 million of mortgage loans. The Company surrendered
control of the mortgage loans receivables, including servicing rights, as
defined by SFAS No. 140, and accounted for this transaction as sale. The
net proceeds from the sale of such loans amounted to approximately $43.5
million, resulting in a gain of approximately $700,000 during the year
ended December 31, 2003.
Total loans serviced for others were $45,300,506 at December 31, 2003.
Quantitative information about delinquencies of servicing assets for
principal amount over 60 days past due is $90,771.
The movement in servicing assets for the year ended December 31, 2003 was
as follows:
Allocated cost of servicing retained
$
3,660,780
Amortization
(629,483
)
Balance, end of year
3,031,297
Less valuation allowance
—
Balance, end of year, net
$
3,031,297
Key assumptions used in measuring the servicing assets at the dates of the
sales completed during the year ended December 31, 2003, were as follows:
Prepayment rate
5.5
%
Weighted average life (in years)
3.9 to 4.03
Discount rate
9.35 to 9.95%
The estimated fair value of servicing assets at December 31, 2003 was
$3,086,408. Such fair value was estimated by an independent financial
advisor using the present value of expected cash flows associated with the
servicing assets using a prepayment assumption of 12%. For purposes of
impairment, the Company considers each of its sold lease portfolios
individually. Risk characteristics of leases within each sold lease
portfolio are considered similar.
The estimated aggregate amortization expense related to servicing assets
for the next five years is as follows:
2004
$
1,556,089
2005
936,125
2006
455,236
2007
83,847
2008
—
$
3,031,297
During December 2001, the Company sold to Banco Financiero, in a
transaction unrelated to the acquisition described in note 2, a portion of
its lease financing contracts portfolio with a carrying value of $9,015,447
as of December 28, 2001 (the Agreement). In this sale, the Company retained
only servicing
(Continued)
F-33
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
responsibilities; however, no servicing asset was recognized
as the servicing arrangement provides for adequate compensation. The
Company surrendered control of the lease financing receivables, as defined
by SFAS No. 140, and accounted for this transaction as sale and recognized
a gain of approximately $975,000 during the year ended December 31, 2001.
The Company had a limited recourse obligation as per the Agreement that
required the Company to repurchase defaulted lease up to certain limits.
Nevertheless, as a result of the acquisition of Banco Financiero, this
portfolio is now part of the Company's lease finance contracts portfolio.
No receivables were sold during 2002.
(18)
Income Taxes
Puerto Rico income tax law does not provide for filing a consolidated
income tax return; therefore, the income tax expense reflected in the
accompanying consolidated statements of income represents the sum
of the income tax expense of the individual companies. At December 31,
2003, the Company's tax provision and related accounts are substantially
those of its subsidiary Bank.
The Bank is subject to Puerto Rico income tax at statutory rates. Under the
provisions of the Puerto Rico Internal Revenue Code of 1994, as amended,
the Bank is subject to regular tax or the alternative minimum tax,
whichever is higher. Customarily, the effective tax rate is lower than the
statutory rate primarily because interest income on certain U.S. and Puerto
Rico securities is exempt from Puerto Rico income taxes.
The Bank is also subject to federal income tax on its U.S. source income.
However, the Bank had no taxable U.S. income for the years ended December
31, 2003, 2002, and 2001. The Bank is not subject to federal income tax on
U.S. Treasury securities that qualify as portfolio interest, nor to the
branch profit tax and the branch-level interest tax on such income.
During 2000, the Bank established an international bank unit engaged in
investment securities, deposits, and other funding transactions outside
Puerto Rico. The revenue generated by these transactions, net of related
interest costs and operating expenses, is exempt from Puerto Rico taxes.
Total income taxes for the years ended December 31 are as follows:
2003
2002
2001
Income from operations
$
3,432,465
2,723,852
2,147,090
Stockholder's equity for unrealized gains
and losses on investment securities
(803,518
)
413,280
107,170
$
2,628,947
3,137,132
2,254,260
(Continued)
F-34
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
The components of the income tax provision from operations for the years
ended December 31, are as follows:
2003
2002
2001
Current tax provision
$
2,959,287
2,420,284
2,292,936
Deferred tax provision (benefit)
473,178
303,568
(145,846
)
Total income tax provision
$
3,432,465
2,723,852
2,147,090
The difference between the income tax provision and the amount computed
using the statutory rate at December 31, is due to the following:
2003
2002
2001
Amount
Rate
Amount
Rate
Amount
Rate
Income tax at statutory rate
$
5,192,923
39.00
%
$
3,344,922
39.00
%
$
3,100,913
39.00
%
Change in the beginning-of-the-year
balance of valuation allowance
(584,712
)
(4.40
)
—
—
—
—
Benefits of tax-exempt interest
income, net
(175,070
)
(1.31
)
(146,381
)
(1.71
)
(339,094
)
(4.26
)
International banking unit
(1,054,468
)
(7.92
)
(524,366
)
(6.11
)
(435,460
)
(5.48
)
(Allowance) disallowance of
certain expenses for tax
purposes and other items
53,792
0.41
49,677
0.58
(179,269
)
(2.26
)
$
3,432,465
25.78
%
$
2,723,852
31.76
%
$
2,147,090
27.00
%
(Continued)
F-35
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
Deferred income taxes reflect 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.
Significant components of the Bank's deferred tax assets and liabilities at
December 31, were as follows:
2003
2002
Deferred tax assets:
Allowance for loan losses
$
3,663,638
2,698,075
Net operating loss carryforward
2,297,665
2,850,472
Unrealized loss on securities available for sale
269,082
—
Other temporary differences
469,568
427,384
Gross deferred tax assets
6,699,953
5,975,931
Less valuation allowance
—
(584,712
)
Deferred tax assets
6,699,953
5,391,219
Deferred tax liabilities:
Deferred loan costs, net
(1,835,642
)
(1,177,073
)
Servicing assets
(854,261
)
—
Unrealized gain on securities available for sale
—
(534,436
)
Deferred tax liabilities
(2,689,903
)
(1,711,509
)
Net deferred tax assets
$
4,010,050
3,679,710
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 not 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, and tax planning strategies in making this
assessment. In order to fully realize the deferred tax asset, the Bank will
need to generate future taxable income of approximately $5.9 million
related to its operations of the former Banco Financiero (note 2) prior to
the expiration of the net operating loss carryforwards through the year
2009. Such operations yielded approximately $1.4 million of taxable income
during 2003 and considering economies of scale to be achieved from the
merger and projected future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely
than not that the Bank will realize the benefits of these deductible
differences at December 31, 2003. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are
reduced.
At December 31, 2003, the Bank has net operating loss carryforwards for
income tax purposes of approximately $5,891,000, which are available to
offset future taxable income of the former Banco Financiero operations
(note 2), if any, through 2009.
(19)
Stock Transactions
During 2003, EuroBancshares issued 34,013 of the common stock shares at
$7.87 per share through stock options exercised.
(Continued)
F-36
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
As a result of the reorganization into a holding company (note 1), on July
1, 2002, EuroBancshares became the sole owner of the Bank's common stock.
As part of such reorganization, the outstanding 6,788,421 shares of the
Bank common stock, $1 par value, were exchanged to 6,788,421 shares of
EuroBancshares common stock, $0.01 par value per share. Also as part of the
reorganization, during 2002 EuroBancshares
purchased and retired approximately 9,707 shares of its outstanding common
stock, $0.01 par value, held by the remaining minority stockholders at a
price of $9.00 per share.
During 2002, EuroBancshares issued 38,750 of its common stock shares at
$4.00 per share through stock options exercised. In addition, as a result
of the acquisition of Banco Financiero (note 2), EuroBancshares also issued
122,228 shares of its common stock, $0.01 par value, at a price of $10 per
share, amounting to $1,222,280.
During 2002, the Bank issued 9,924 of the common stock shares at $6.65 per
share through stock options exercised.
During 2001, the Bank converted its 4,000,000 Class A shares and 2,026,032
Class B shares outstanding with a par value of $5 and $1, respectively,
into 6,026,032 shares of common stock with a par value of $1 and capital
paid in excess of par value of $34,610,787.
During 2001, the Bank issued 699,739 of the new common stock shares at
$7.65 per share through a private placement on September 24, 2001, and
52,726 through stock options exercised.
During 2001, the Bank amended its articles of incorporation and authorized
the issuance of 1,000,000 shares of preferred stock at $10 par value, of
which none had been issued.
(20)
Stock Option Plan
During 2002, the board of directors approved the stock option plan (the
Plan), which was ratified at a special meeting of stockholders. Under the
Plan, an aggregate of 677,850 shares of authorized common stock of the
Company, representing 10% of the shares of common stock outstanding on
February 25, 2002, were reserved for issuance under the Plan. The
outstanding options as of December 31, 2003 include options granted under a
stock option plan held by the Bank until the reorganization.
All officers and directors of EuroBancshares are eligible under the Plan,
provided, however, that stock options shall not be exercisable by an
optionee who is the owner of 5% or more of the issued and outstanding shares of the Company or in exercising the stock options would become the
owner of 5% or more of the issued and outstanding shares of the Company,
unless the optionee obtains the approvals required from the appropriate
regulatory agencies to hold shares in excess of such percent. Any eligible
person may hold more than one option at a time.
The compensation committee, appointed by the board of directors, has
absolute discretion to select which of the eligible persons will be granted
stock options, the number of shares of the Company's common stock subject
to such options, whether stock appreciation rights will be granted for such
options and generally, to determine the terms and conditions of such
options in accordance with the provisions of the Plan. Options are
exercisable within five years after the grant date at the discretion of the
optionee. The options are granted at the approximate fair value of the
Company's common stock at the date of issuance.
(Continued)
F-37
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
A summary of the status of stock options under the Plan at December 31,
2003, 2002, and 2001 and changes during the years then ended is presented
in the table below:
2003
2002
2001
Weighted
Weighted
Weighted
average
average
average
exercise
exercise
exercise
Shares
price
Shares
price
Shares
price
Options outstanding January 1
308,070
$
7.94
187,838
$
6.10
75,564
$
4.15
Granted
287,000
10.00
168,906
9.00
165,000
6.65
Exercised
(34,013
)
7.87
(48,674
)
4.54
(52,726
)
5.01
Options outstanding and
exercisable December 31
561,057
$
9.00
308,070
$
7.94
187,838
$
6.10
The following is a summary of outstanding and exercisable options under the
Plan at December 31, 2003:
Options
outstanding
Exercise
Exercisable
Expiration
Date granted
and exercisable
price
date
date
1999
2,776
$
6.65
December 30, 1999
December 30, 2004
2001
120,000
6.65
February 28, 2001
February 28, 2006
2002
151,281
9.00
February 26, 2002
February 26, 2007
2003
287,000
10.00
March 24, 2003
March 24, 2008
561,057
(Continued)
F-38
Table of Contents
EUROBANCSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(21)
Earnings Per Share
The following is a reconciliation of the income and share data in the basic
and diluted earnings per share computations for the year ended December 31:
2003
2002
2001
Income before extraordinary item
$
9,882,721
5,852,871
5,803,970
Extraordinary gain on the acquisition of
Banco Financiero
—
1,080,983
—
Income available to common
shareholders
$
9,882,721
6,933,854
5,803,970
Weighted average number of common
shares outstanding applicable to basic
EPS
6,940,636
6,811,485
6,175,843
Effect of dilutive securities
176,448
50,639
37,977
Adjusted weighted average
number of common shares
outstanding applicable to
diluted earnings per share
7,117,084
6,862,124
6,213,820
Basic earnings per share:
Income before extraordinary item
$
1.42
0.86
0.94
Extraordinary item
—
0.16
—
Net income
$
1.42
1.02
0.94
Diluted earnings per share:
Income before extraordinary item
$
1.39
0.85
0.93
Extraordinary item
—
0.16
—
Net income
$
1.39
1.01
0.93
For periods prior to the formation of the holding company (note 1), the
share information above is that of the Bank, since the exchange of shares
of that transaction was one to one (note 19).
After December 31, 2003, the Company issued additional common shares as
part of a private placement offering and the acquisition of The Bank &
Trust Company of Puerto Rico (note 30).
(22)
Employees' Benefit Plan
The Company maintains a defined contribution plan covering substantially
all its employees after three months of service. Under the provisions of
the plan, employees elect to contribute to the plan from up to 10% of their
compensation and the Company matches 100% of the amount contributed by the
employees up to maximum of 3% of the employees' annual compensation. The
amount of contribution expense recognized by the Company for the years
ended December 31, 2003, 2002, and 2001 amounted to $185,000, $140,000, and
$135,000, respectively.
(Continued)
F-39
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(23)
Related-Party Transactions
The Company makes loans to its directors, principal stockholders, officers,
employees, organizations, and individuals associated with them in the
normal course of business. At December 31, 2003 and 2002, loans outstanding
with these parties amounted to $4,108,945 and $4,159,779, respectively.
The summary of change in the related-party loans follows (in thousands):
Executive
Principal
officers
shareholders
and related
Directors and
and related
parties
related parties
Employees
parties
Total
Balance, December 31, 2001
$
583,275
4,023,038
365,609
344
4,972,266
Additions
759,864
2,248,715
73,218
707
3,082,504
Reductions
(623,492
)
(3,239,471
)
(32,028
)
—
(3,894,991
)
Balance, December 31, 2002
719,647
3,032,282
406,799
1,051
4,159,779
Additions
99,124
678,485
208,574
573
986,756
Reductions
(408,942
)
(408,360
)
(220,288
)
—
(1,037,590
)
Balance, December 31, 2003
$
409,829
3,302,407
395,085
1,624
4,108,945
Deposits of $7,836,751 and $6,369,869 from these parties were outstanding
as of December 31, 2003 and 2002, respectively.
(24)
Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financial needs of its
customers, such as commitments to extend credit, approved loans not yet
disbursed, unused lines of credit, and standby letters of credit. Such
instruments involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the consolidated balance
sheets. The contract or notional amount reflects the extent of involvement
the Company has in this particular class of financial instrument.
The Company's exposure to credit loss in the event of nonperformance by the
other party to these financial instruments is represented by the
contractual notional amount of those instruments. The Company uses some
credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments.
Unless noted otherwise, the Company requires collateral or other security
to support financial instruments with credit risk. The Company performs its
normal credit granting due diligence procedures, to the extent necessary,
in evaluating its involvement in financial instruments with credit risk.
(Continued)
F-40
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
At December 31, the approximate contract or notional amount of the
Company's financial instruments with off-balance-sheet risk follows:
2003
2002
Financial instruments whose contract amounts represent
credit risk – stand-by and commercial letters of credit
$
3,674,000
4,043,000
Commitments to extend credit, approved loans not yet
disbursed, and unused lines of credit:
Variable rate
131,815,000
107,830,000
Fixed rate
20,910,000
27,141,000
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. The commitments may expire
without being drawn upon. Therefore, the total commitment amounts do not
necessarily represent future cash requirements. The amount of collateral
obtained, if it is deemed necessary by the Company, is based on
management's credit evaluation of the customer.
Unused lines of credit are commitments for possible future extensions of
credit to existing customers. These lines of credit are uncollateralized
and usually do not contain a specified maturity date and may not be drawn
upon to the total extent to which the Company is committed.
Commercial and stand-by letters of credit are conditional commitments
issued by the Company to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing, and
similar transactions. All guarantees expire within a year. The credit risk
involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The Company holds
certificates of deposit as collateral supporting those commitments for
which collateral is deemed necessary.
(25)
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments in accordance with SFAS No. 107, as
amended by SFAS No. 119,
Disclosure about Derivative Financial Instruments
and Fair Value of Financial Instruments
.
(a)
Cash and Due from Banks, Securities Purchased under Agreements to
Resell, and Interest-Bearing Deposits
The carrying amount of cash and cash equivalents, securities purchased
under agreements to resell, and interest-bearing deposits is a
reasonable estimate of fair value, due to the short-term nature of
these instruments.
(b)
Investment Securities Available for Sale
The fair value of investment securities available for sale is estimated
based on bid prices published in financial newspapers or bid quotations
received from securities dealers. If a quoted market price is not
available, fair value is estimated using quoted market prices for
similar securities.
(Continued)
F-41
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(c)
Other Investments
The carrying value of FHLB stock approximates fair value based on the
redemption provisions of the FHLB. The carrying value of equity
interest in unconsolidated statutory trusts approximates the fair value
of the residual equity in the trusts.
(d)
Loans and Loans Held for Sale
Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as
commercial, consumer, mortgage, and other loans. Each loan category is
further segmented into fixed and adjustable interest rate terms.
The fair value of loans is calculated by discounting scheduled cash
flows through the estimated maturity using estimated market discount
rates that reflect the credit and interest rate risk inherent in the
loan.
The estimate of fair value of loans considers the credit risk inherent
in the portfolio through the allowance for loan losses. Assumptions
regarding credit risk, cash flows, and discount rates are judgmentally
determined using available market information and specific-borrower
information.
(e)
Accrued Interest Receivable
The carrying amount of accrued interest receivable is a reasonable
estimate of its fair value, due to the short-term nature of the
instruments.
(f)
Deposits
The fair value of deposits with no stated maturity, such as demand
deposits, savings accounts, money market, and checking accounts is
equal to the amount payable on demand as of December 31, 2003 and 2002.
The fair value of time deposits is based on the discounted value of
contractual cash flows. The discount rate is estimated using the rate
currently offered for deposits of similar remaining maturities.
(g)
Security Sold Under Agreements to Repurchase
The fair value of securities sold under agreements to repurchase are
estimated using discounted cash flow analysis using rates for similar
types of borrowing arrangements.
(h)
Notes Payable to Federal Home Loan Bank
The fair value of notes payable is calculated by discounted scheduled
cash flows through the estimated maturity using market discount rates.
(i)
Accrued Interest Payable, Accrued Expenses, and Other Liabilities
The carrying amount of accrued interest payable, accrued expenses, and
other liabilities is a reasonable estimate of fair value, due to the
short-term nature of the instruments.
(Continued)
F-42
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(j)
Junior Subordinated Debentures
The fair value of junior subordinated debentures payable to statutory
trust outstanding is calculated by discounting scheduled cash flows
through the estimated maturity using the annual rate for each
successive period equal to the three-month LIBOR, plus 3.60%, and the
three-month LIBOR, plus 3.25%.
(k)
Trust Preferred Capital Securities
The fair value of Trust Preferred Capital Securities outstanding is
calculated by discounting scheduled cash flows through the estimated
maturity using the annual rate for each successive period equal to the
three-month LIBOR, plus 3.60%, and the three-month LIBOR, plus 3.25%.
(l)
Commitments to Extend Credit and Letters of Credit
The fair value of commitments to extend credit and letters of credit
was not readily available and not deemed significant.
(m)
Limitations
The fair value estimates are made at a discrete point in time based on
relevant market information and information about the financial
instruments. Because no market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could
significantly affect the estimates.
The fair value estimates are based on existing on- and
off-balance-sheet financial instruments without attempting to estimate
the value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments. As described
for investments and mortgage-backed securities, the tax ramifications
related to the realization of the unrealized gains and losses may have
a significant effect on fair value estimates and have not been
considered in many of the estimates.
(Continued)
F-43
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
Following are the carrying amount and fair value of financial
instruments as of December 31:
2003
2002
Carrying
Carrying
amount
Fair value
amount
Fair value
Financial assets:
Cash and cash equivalents
$
22,522,342
22,522,342
17,620,623
17,620,623
Interest-bearing deposits
19,324,216
19,324,216
29,881,975
29,881,975
Securities purchased under
agreements to resell
20,483,736
20,483,736
45,014,420
45,014,420
Investment securities
available for sale
324,938,042
324,938,042
145,794,865
145,794,865
Other investments
3,342,100
3,342,100
2,405,200
2,405,200
Loans held for sale
6,846,330
6,846,330
5,238,539
5,238,539
Loans, net
883,151,891
886,156,371
755,634,838
760,747,294
Accrued interest receivable
6,792,687
6,792,687
5,483,643
5,483,643
Financial liabilities:
Deposits
984,549,130
1,008,458,089
843,045,077
863,816,014
Securities sold under
agreements to repurchase
207,523,000
207,649,425
64,112,687
64,784,764
Notes payable to FHLB
10,700,000
11,543,272
18,850,000
19,917,351
Junior subordinated debentures
46,393,000
46,395,250
—
—
Trust Preferred Capital
Securities
—
—
45,000,000
45,018,004
Accrued interest payable
2,868,130
2,868,130
3,439,945
3,439,945
Accrued expenses and
other liabilities
3,267,464
3,267,464
3,241,347
3,241,347
(26)
Significant Group Concentrations of Credit Risk
Most of the Company's business activities are with customers located within
Puerto Rico. The Company has a commercial and industrial concentrated loan
portfolio with no significant concentration in any economic sector.
(27)
Regulatory Matters
The Company (on a consolidated basis) and the Bank are subject to various
regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that,
if undertaken, could have a direct material effect on the Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The capital amounts and classifications
are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors. Prompt corrective action
provisions are not applicable to bank holding companies.
(Continued)
F-44
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
Quantitative measures established by regulations to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios
(set forth in the following table) of total and Tier I capital (as defined
in the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (Leverage) (as defined). Management
believes, as of December 31, 2003 and 2002, that the Company and the Bank
met all capital adequacy requirements to which they are subject.
The most recent notification from the FDIC categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. To
be categorized as well capitalized, an institution must maintain minimum
total risk-based, Tier I risk-based, and Tier I Leverage ratios as set
forth in the following tables. There are no conditions or events since the
notification that management believes have changed the institution's
capital category. The Company's and the Bank's actual capital amounts and
ratios as of December 31, 2003 and 2002 are also presented in the table.
At December 31, required and actual regulatory capital amounts and ratios
are as follow (dollars in thousands):
2003
Well
Required
Actual
capitalized
amount
Ratio
amount
Ratio
ratio
Total capital (to risk-
weighted assets):
Consolidated
$
81,308
8.00
%
$
117,934
11.60
%
N/A
Eurobank
81,315
8.00
%
117,614
11.57
%
³
10.00
%
Tier I capital (to risk-
weighted assets):
Consolidated
40,654
4.00
%
84,400
8.30
%
N/A
Eurobank
40,657
4.00
%
75,638
7.44
%
³
6.00
%
Tier I capital (to average assets):
Consolidated
49,958
4.00
%
84,400
6.76
%
N/A
Eurobank
49,958
4.00
%
75,638
6.06
%
³
5.00
%
(Continued)
F-45
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
2002
Well
Required
Actual
capitalized
amount
Ratio
amount
Ratio
ratio
Total capital (to risk-
weighted assets):
Consolidated
$
65,952
8.00
%
$
105,461
12.79
%
N/A
Eurobank
65,960
8.00
%
104,033
12.78
%
³
10.00
%
Tier I capital (to risk-
weighted assets):
Consolidated
32,976
4.00
%
71,110
8.63
%
N/A
Eurobank
32,980
4.00
%
64,692
7.99
%
³
6.00
%
Tier I capital (to average assets):
Consolidated
35,879
4.00
%
71,110
7.93
%
N/A
Eurobank
35,879
4.00
%
64,692
7.37
%
³
5.00
%
(Continued)
F-46
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(28)
Parent Company Financial Information
As discussed in note 1, Eurobancshares became the holding company of
Eurobank effecive March 18, 2002. The following condensed financial
information presents the financial position of EuroBancshares as of
December 31, 2003 and 2002, and the results of its operations and its cash
flows for the years then ended.
Condensed Balance Sheets:
2003
2002
(In thousands)
Assets
Notes receivable from Eurobank
$
32,500
32,500
Interest receivable from Eurobank
38
67
Interest receivable from other subsidiaries
2
2
Due from Eurobank
331
171
Investment in Eurobank
77,255
69,785
Investment in other subsidiaries
1,412
1,393
Prepaid expenses
3
2
Total assets
$
111,541
103,920
Liabilities and Stockholders' Equity
Due to other subsidiary
$
10
106
Junior subordinated debentures held by subsidiaries
46,393
46,393
Accrued interest payable to other subsidiaries
63
85
Total liabilities
46,466
46,584
Stockholders' equity
65,075
57,336
Total liabilities and stockholders' equity
$
111,541
103,920
(Continued)
F-47
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
Condensed Statements of Income:
Year ended December 31
2003
2002
(In thousands)
Income:
Interest on note receivable from Eurobank
$
1,513
1,412
Dividend income from preferred stock
of Eurobank
610
16
Dividend income from other subsidiaries
66
44
Total interest income
2,189
1,472
Interest expense on junior subordinated
debentures
2,189
1,472
Net interest income
—
—
Equity in undistributed earnings of
subsidiaries
9,891
6,951
Noninterest expense
8
17
Earnings before income taxes
9,883
6,934
Provision for income taxes
—
—
Net income
$
9,883
6,934
(Continued)
F-48
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
Condensed Statements of Cash Flows:
Year ended December 31
2003
2002
(In thousands)
Cash flows from operating activities:
Net income
$
9,883
6,934
Adjustments to reconcile net income to
net cash used in operating activities:
Equity in undistributed earnings of
subsidiaries
(9,891
)
(6,951
)
Decrease (increase) in accrued
interest receivable from
subsidiaries
29
(15
)
Increase in prepaid expenses
(1
)
(2
)
Increase in due from Eurobank
(160
)
(171
)
Increase (decrease) in accrued
interest payable to subsidiaries
(128
)
30
Increase in due to other subsidiary
—
107
Other
—
(66
)
Net cash used in operating
activities
(268
)
(134
)
Cash flows from financing activities:
Proceeds from issuance of
common stock
268
221
Purchase and retirement of
common stock
—
(87
)
Net cash provided by
financing activities
268
134
Net increase (decrease) in
cash and cash equivalents
—
—
Cash and cash equivalents, beginning of year
—
—
Cash and cash equivalents, end of year
$
—
—
Supplemental disclosure:
Issuance of EuroBancshares common
stock on acquisition of Banco
Financiero
$
—
1,222
Conversion of note receivable from
Eurobank in Eurobank's preferred
stock
—
12,500
Note receivable resulting from Trust
Preferred Capital Securities issuance
—
20,000
Note payable to the Trust II in
connection with its creation
—
619
Equity in other comprehensive income
of subsidiary
(2,411
)
1,240
(Continued)
F-49
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(29)
Selected Quarterly Financial Data (Unaudited)
The quarterly results of operations for the years ended December 31, 2003
and 2002 are as follows:
Year ended December 31, 2003
Fourth
Third
Second
First
quarter
quarter
quarter
quarter
Interest income
$
18,735,453
18,113,546
17,398,785
17,268,067
Interest expense
8,050,132
7,972,925
7,944,189
7,955,002
Net interest income
10,685,321
10,140,621
9,454,596
9,313,065
Provision for loan losses
1,330,000
1,450,000
1,577,000
2,094,000
Net interest income
after provision
for loan losses
9,355,321
8,690,621
7,877,596
7,219,065
Total other income
2,811,942
1,843,708
3,283,312
1,108,668
Total other expenses
8,115,283
7,082,156
7,220,886
6,456,722
Income before
income taxes
4,051,980
3,452,173
3,940,022
1,871,011
Income tax
467,835
1,001,042
1,380,348
583,240
Net income
$
3,584,145
2,451,131
2,559,674
1,287,771
Net income per share:
Basic
$
0.51
0.35
0.37
0.19
Diluted
0.50
0.35
0.36
0.18
(Continued)
F-50
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
Year ended December 31, 2002
Fourth
Third
Second
First
quarter
quarter
quarter
quarter
Interest income
$
15,675,155
14,347,000
13,289,878
11,655,696
Interest expense
7,189,114
6,514,357
6,023,986
5,396,111
Net interest income
8,486,041
7,832,643
7,265,892
6,259,585
Provision for loan losses
1,034,462
1,006,000
540,224
773,000
Net interest income
after provision
for loan losses
7,451,579
6,826,643
6,725,668
5,486,585
Total other income
1,005,186
956,305
1,088,666
970,617
Total other expenses
6,358,082
5,092,489
5,572,576
4,911,379
Income before
income taxes
2,098,683
2,690,459
2,241,758
1,545,823
Income tax
706,625
841,416
718,061
457,749
Extraordinary gain
1,080,983
—
—
—
Net income
$
2,473,041
1,849,043
1,523,697
1,088,074
Earnings per share:
Basic earnings per share:
Income before extraordinary item
$
0.20
0.27
0.23
0.16
Extraordinary item
0.16
—
—
—
Net income
$
0.36
0.27
0.23
0.16
Diluted earnings per share:
Income before extraordinary item
$
0.20
0.27
0.22
0.16
Extraordinary item
0.16
—
—
—
Net income
$
0.36
0.27
0.22
0.16
(Continued)
F-51
Table of Contents
EUROBANCHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
(30)
Subsequent Events
The Bank was defendant in a suit filed in 1994 alleging that money was
permitted to be withdrawn from a corporate account at the Bank without full
written authorization. On March 30, 2004, the court ruled against the Bank
ordering restoration of approximately $890,000 in funds, interest thereon,
and attorney's fess. While the trial court found in favor of plaintiff, the
Bank intends to appeal the decision. Management, based on the opinion of
its legal counsel, expects to prevail.
On May 3, 2004, the Company acquired all of the capital stock of The Bank &
Trust Company of Puerto Rico (BankTrust) for approximately $23.3 million
for which the Company issued 357,747 common shares (valued at $16.25 per
share) and 429,507 shares of noncumulative preferred stock, Series A
(valued at $25 per share) and made cash payments of approximately $6.7
million. BankTrust was a commercial bank operating in Puerto Rico through
an existing network of five branches and whose total assets at December 31,
2003 amounted to approximately $567 million. The BankTrust acquisition is
consistent with the Company's growth strategy.
The following table (unaudited) summarizes the estimated value of the
assets acquired and liabilities assumed as of December 31, 2003 (in
thousands):
Cash and cash equivalents
$
36,109
Investments securities
130,156
Loans, net
381,169
Other assets
12,200
Total assets acquired
559,634
Deposits
(433,571
)
Borrowings
(90,662
)
Other liabilities
(11,821
)
Total liabilities acquired
(536,054
)
Net assets acquired
$
23,580
The Company has received a private letter ruling from the Puerto Rico
Treasury Department to the effect that the acquisition will be treated for
Puerto Rico income taxes as a tax-free reorganization.
In connection with the acquisition of BankTrust, on May 12, 2004, the
Company issued 369,231 shares of common stock to its common stockholders
and to holders of options to purchase its common stock who were not
otherwise stockholders, through a private placement offering. The net
proceeds received by the Company from the private placement of its common
stock were $6,000,004.
F-52
Table of Contents
Eurobank
Consolidated Financial Statements
As of December 31, 2001 and
2000
Together with Auditors' Report
F-53
Table of Contents
TABLE OF CONTENTS
Page
Report of Independent Public
    Accountants
F-55
Consolidated Balance Sheets
December 31, 2001 and 2000
F-56
Consolidated Statements of Income
For the Years Ended December 31,
    2001, 2000 and 1999
F-57
Consolidated Statements of Changes in
    Stockholders' Equity and Other Comprehensive Income
For the Years Ended December 31,
    2001, 2000 and 1999
F-58
Consolidated Statements of Cash Flows
For the Years Ended December 31,
    2001, 2000 and 1999
F-60
Notes to Consolidated Financial
    Statements
F-61
F-54
Table of Contents
THIS IS A COPY OF AN AUDIT REPORT PREVIOUSLY
ISSUED BY ARTHUR ANDERSEN LLP IN CONNECTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF EUROBANCSHARES, INC. AND
SUBSIDIARIES AS OF DECEMBER 31, 2000 AND 2001 AND EACH OF
THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001. THIS
AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH THE FILING OF THIS REGISTRATION STATEMENT.
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS
To the Shareholders and Board of Directors of
Eurobank:
We have audited the accompanying consolidated
balance sheets of Eurobank (a Puerto Rico corporation) as of
December 31, 2001 and 2000, and the related consolidated
statements of income, changes in stockholders' equity and
other comprehensive income, and cash flows for each of the three
years in the period ended December 31, 2001. These
consolidated financial statements are the responsibility of the
Bank's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Eurobank as of December 31, 2001 and 2000, and
the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the
United States.
/s/ ARTHUR ANDERSEN LLP
San Juan, Puerto Rico,
January 11, 2002.
F-55
Table of Contents
EUROBANK
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
2001
2000
ASSETS
Cash and Cash Equivalents
$
16,085,242
$
14,533,238
Interest Bearing Deposits
14,656,543
—
Securities Purchased under Agreements to Resell
8,049,613
4,790,128
Trading Securities
—
149,130
Investment Securities Available for Sale
88,708,791
103,736,957
Investment Securities
1,476,193
2,467,473
Loans Held for Sale
5,051,600
1,078,400
Loans, net
449,115,342
308,068,792
Accrued Interest Receivable
3,881,525
3,864,961
Customers' Liability on Acceptances
543,956
333,630
Bank Premises and Equipment, net
8,675,281
7,606,626
Other Assets
11,471,234
5,379,900
Total assets
$
607,715,320
$
452,009,235
LIABILITIES AND STOCKHOLDERS'
    EQUITY
Deposits:
Demand
$
101,364,666
$
84,294,352
Savings
66,836,935
49,464,441
Time
317,461,386
216,637,045
Total deposits
485,662,987
350,395,838
Securities Sold under Agreements to Repurchase
27,363,500
50,062,584
Acceptances Outstanding
543,956
333,630
Notes Payable
15,250,000
11,250,000
Accrued Interest Payable
2,241,658
1,948,462
Accrued Expenses and Other Liabilities
3,847,294
1,955,379
Trust Preferred Capital Securities
25,000,000
—
559,909,395
415,945,893
Commitments and Contingencies (Notes 14 and
    20)
Stockholders' Equity:
Preferred stock —
$10 par value; 1,000,000 shares authorized, none issued
—
—
Common stock —
Class A, $5 par value; 4,000,000 shares authorized,
    4,000,000 shares issued and outstanding in 2000
—
20,000,000
Class B, $1, par value; 2,500,000 shares
    authorized, 2,026,032 shares issued and outstanding in 2000
—
2,026,032
Common stock, $1 par value;
    12,500,000 shares authorized, 6,778,497 shares issued
    and outstanding in 2001
6,778,497
—
Capital paid in excess of par value
34,610,787
13,746,145
Accumulated other comprehensive income
363,467
41,961
Retained earnings —
Reserve fund
602,857
24,920
Undivided profits
5,450,317
224,284
Total stockholders' equity
47,805,925
36,063,342
Total liabilities and stockholders' equity
$
607,715,320
$
452,009,235
The accompanying notes are an integral part of
these consolidated balance sheets.
F-56
Table of Contents
EUROBANK
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2001,
2000 and 1999
2001
2000
1999
Interest Income:
Loans, including loan fees
$
37,719,014
$
27,701,238
$
16,209,408
Securities
6,284,082
6,480,609
4,070,663
Interest-bearing deposits, securities purchased
    under agreements to resell, and other
586,497
606,609
449,528
Total interest income
44,589,593
34,788,456
20,729,599
Interest Expense:
Deposits
18,471,478
12,383,322
8,988,219
Securities sold under agreements to repurchase,
    notes payable and other
2,907,063
4,489,105
403,134
Total interest expense
21,378,541
16,872,427
9,391,353
Net interest income
23,211,052
17,916,029
11,338,246
Provision for Loan Losses
2,377,000
1,343,000
1,103,000
Net Interest Income after Provision for Loan
    Losses
20,834,052
16,573,029
10,235,246
Non-Interest Income:
Service charges, fees and other
3,640,658
3,059,386
2,782,814
Net gain on sale of securities
194,842
354,063
—
Net loss on sale of other real estate owned,
    repossessed assets and on disposition of other assets
(86,143
)
—
—
Gain on sale of loans
974,669
—
—
Total non-interest income
4,724,026
3,413,449
2,782,814
Non-Interest Expense:
Salaries and employee benefits
9,374,586
7,639,986
5,039,122
Occupancy
3,971,872
3,313,706
2,445,503
Professional services
951,460
575,945
547,537
Insurance
352,558
310,789
206,839
Promotional
289,108
269,316
150,493
Other
2,667,434
1,938,162
1,674,023
Total non-interest expense
17,607,018
14,047,904
10,063,517
Income before Income Taxes
7,951,060
5,938,574
2,954,543
Provision for Income Taxes
2,147,090
1,907,990
1,170,284
Net Income
$
5,803,970
$
4,030,584
$
1,784,259
Earnings Per Share:
Basic earnings per common share
$
.94
$
.80
$
.36
Diluted earnings per common share
$
.93
$
.80
$
.36
The accompanying notes are an integral part of
these consolidated statements.
F-57
Table of Contents
EUROBANK
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
AND OTHER COMPREHENSIVE INCOME
For the Years Ended December 31, 2001,
2000 and 1999
2001
2000
1999
Class A Common Stock:
Balance at beginning of year
$
20,000,000
$
15,004,850
$
15,004,850
Issuance of common stock
—
4,995,150
—
Transfer to common stock and capital paid in
    excess of par value (see Note 17)
(20,000,000
)
—
—
Balance at end of year
—
20,000,000
15,004,850
Class B Common Stock:
Balance at beginning of year
2,026,032
2,026,032
1,958,196
Issuance of common stock
—
—
67,836
Transfer to common stock (see Note 17)
(2,026,032
)
—
—
Balance at end of year
—
2,026,032
2,026,032
Common Stock:
Balance at beginning of year
—
—
—
Issuance of common stock
752,465
—
—
Transfer from Class A common stock (see Note 17)
4,000,000
—
—
Transfer from Class B common stock (see Note 17)
2,026,032
—
—
Balance at end of year
6,778,497
—
—
Capital Paid in Excess of Par Value:
Balance at beginning of year
13,746,145
12,096,731
12,000,137
Issuance of common stock
4,864,642
1,649,414
97,164
Acquisition of treasury stock
—
—
(570
)
Transfer from Class A common stock (see Note 17)
16,000,000
—
—
Balance at end of year
34,610,787
13,746,145
12,096,731
Treasury Stock, at cost:
Balance at beginning of year
—
(156
)
—
Stock sold (purchased) at cost
—
156
(156
)
Balance at end of year
—
—
(156
)
Accumulated Other Comprehensive Income (Loss),
    net of taxes:
Balance at beginning of year
41,961
(1,186,148
)
(345,540
)
Unrealized net gain (loss) on investment
    securities available for sale
321,506
1,228,109
(840,608
)
Balance at end of year
363,467
41,961
(1,186,148
)
Reserve Fund:
Balance at beginning of year
24,920
—
—
Transfer from undivided profits
577,937
24,920
—
Balance at end of year
602,857
24,920
—
Undivided Profits (Accumulated
    Deficit):
Balance at beginning of year
224,284
(3,781,380
)
(5,565,639
)
Net Income
5,803,970
4,030,584
1,784,259
Transfer to reserve fund
(577,937
)
(24,920
)
—
Balance at end of year
5,450,317
224,284
(3,781,380
)
Total stockholders' equity
$
47,805,925
$
36,063,342
$
24,159,929
F-58
Table of Contents
2001
2000
1999
Comprehensive Income:
Net income
$
5,803,970
$
4,030,584
$
1,784,259
Other comprehensive income (loss), net of tax-
Unrealized net gains (losses) on investment
    securities available for sale
420,135
1,228,109
(840,608
)
Reclassification adjustment for realized gains
    included in net income
(98,629
)
—
—
Unrealized net gains (losses) on investment
    securities available for sale, net of tax
321,506
1,228,109
(840,608
)
Comprehensive income
$
6,125,476
$
5,258,693
$
943,651
The accompanying notes are an integral part of
these consolidated statements.
F-59
Table of Contents
EUROBANK
CONSOLIDATED STATEMENTS OF CASH
FLOWS
For the Years Ended December 31, 2001,
2000 and 1999
2001
2000
1999
Cash Flows from Operating
    Activities:
Net income
$
5,803,970
$
4,030,584
$
1,784,259
Adjustments to reconcile net income to net cash
    provided by operating activities —
Depreciation and amortization
1,058,957
921,825
759,167
Provision for loan losses
2,377,000
1,343,000
1,103,000
Deferred tax (benefit) provision
(145,846
)
1,470,544
1,132,788
Net gain on sale of securities
(194,842
)
(354,063
)
—
Gain on sale of loans
(974,669
)
—
—
Net (discount accretion) premium amortization on
    securities, net
(166,237
)
26,975
(65,725
)
Decrease in deferred loan costs
(1,088,410
)
(524,073
)
(395,024
)
Proceeds from sale of trading securities
150,000
129,676,563
—
Purchases of trading securities
—
(129,763,387
)
—
Increase in accrued interest receivable
(16,564
)
(1,300,642
)
—
Increase in other assets
(6,052,656
)
(760,799
)
(418,741
)
Increase in accrued interest payable, accrued
    expenses and other liabilities
2,185,111
1,578,047
43,457
Total adjustments
(2,868,156
)
2,313,990
1,396,860
Net cash provided by operating activities
2,935,814
6,344,574
3,181,119
Cash Flows from Investing
    Activities:
(Increase) decrease in securities purchased under
    agreements to resell
(3,259,485
)
207,339
1,921,880
(Increase) decrease of interest bearing deposits
(14,656,543
)
—
150,000
Purchases of investment securities available for
    sale
(69,970,575
)
(104,559,757
)
(50,801,002
)
Proceeds from maturities and sales of investment
    securities available for sale
85,786,804
83,771,730
37,626,743
Purchases of investment securities
—
(848,200
)
(593,000
)
Proceeds from investment securities called
992,100
—
3,430,000
Net increase in loans
(145,333,671
)
(126,118,444
)
(31,772,105
)
Capital expenditures, net
(2,127,612
)
(1,065,923
)
(728,809
)
Net cash used in investing activities
(148,568,982
)
(148,613,255
)
(40,766,293
)
Cash Flows from Financing
    Activities:
Net increase in demand deposits and savings
    accounts
34,442,808
10,832,586
10,749,046
Net increase in time deposits
100,824,341
88,327,890
12,253,423
(Decrease) increase in securities sold under
    agreements to repurchase
(22,699,084
)
40,107,584
9,955,000
Repayment of notes payable
(600,000
)
(10,000,000
)
—
Issuance of notes payable
4,600,000
3,400,000
13,850,000
Proceeds from issuance of trust preferred capital
    securities
25,000,000
—
—
Proceeds from sale of treasury stock
—
1,170
—
Purchase of treasury stock
—
—
(726
)
Proceeds from issuance of common stock
5,617,107
6,643,550
165,000
Net cash provided by financing activities
147,185,172
139,312,780
46,971,743
Net Increase (Decrease) in Cash and Cash
    Equivalents
1,552,004
(2,955,901
)
9,386,569
Cash and Cash Equivalents, beginning of year
14,533,238
17,489,139
8,102,570
Cash and Cash Equivalents, end of year
$
16,085,242
$
14,533,238
$
17,489,139
The accompanying notes are an integral part of
these consolidated statements.
F-60
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2001, 2000 and
1999
1.
Organization and Summary of Significant
    Accounting Policies:
Organization and Basis of
    Presentation
Eurobank (the Bank) is a full service commercial
bank with a delivery system of fifteen branches in Puerto Rico.
During December 2001, Eurobank organized EuroBancshares, Inc.
(the Subsidiary), a wholly owned subsidiary incorporated in
Puerto Rico. The Subsidiary in turn formed a special purpose
vehicle, Eurobank Statutory Trust I (the Trust),
incorporated in the state of Connecticut. The Trust entered into
a financing transaction involving the issuance of trust
preferred capital securities. It is the intent of the Bank to
restructure this wholly owned subsidiary into a holding company
during year 2002.
The accounting and reporting policies of the
Bank, its Subsidiary and the Trust conform with accounting
principles generally accepted and banking industry practices in
the United States. The accompanying financial statements have
been consolidated during 2001 to include the newly formed
entities. Consequently, the accompanying financial statements as
of December 31, 2000, and for the years ended
December 31, 2000 and 1999, do not include any accounts
from the Subsidiary and/or the Trust.
Principles of consolidation
The consolidated financial statements include the
accounts of the Bank, its subsidiary, and the Trust. All
intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of the consolidated financial
statements in conformity with accounting principles generally
accepted in the United States requires management to make
estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amount of revenues and expenses during the
reporting periods. Actual results could differ from those
estimates.
Securities Purchased under Agreements to
    Resell
The Bank purchases securities under agreements to
resell. The amounts advanced under these agreements represent
short-term financing transactions and are carried at the amounts
at which the transactions will be settled.
Trading Securities
The Bank acquires securities for trading and
carries its trading account at market. The Bank classifies as
trading those securities that are acquired and held principally
for the purpose of selling them in the near term. Realized and
unrealized changes in market value are recorded separately in
the trading profit or loss account in the periods in which the
changes occur. Interest revenue and expense arising from trading
instruments are included in the consolidated income statements
as part of net interest income rather than in the trading profit
or loss account.
Investment Securities Available for
    Sale
Investment securities available for sale are
recorded at fair value and unrealized gains and losses on these
investments are reflected as a separate component of
stockholders' equity in accumulated other comprehensive
income. Gains or losses on sales of investments securities
available for sale are recognized when realized and are computed
on the basis of specific identification.
F-61
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Investment Securities
Investment securities are carried at cost,
adjusted for premium amortization and discount accretion. The
Bank classifies as investment securities those investments which
it has the intent and the ability to hold until maturity.
Interest Income
Interest income on loans and investment
securities is recognized on a basis which produces a constant
yield over the term of the loan or security. Accrual of interest
income is discontinued when collectibility of the related loan
appears doubtful or after 90 days of delinquency, unless
the credit is well secured and in process of collection. The
interest on these loans is accounted on the cash basis or cost
recovery method, until qualifying for return to accrual. Loans
are returned to accrual status when all the principal and
interest amounts contractually due are brought current and
future payments are reasonably assured.
Loans Held for Sale
Loans originated and intended for sale in the
secondary market are carried at the lower of cost or estimated
fair value. Net unrealized losses, if any, are recognized
through a valuation allowance by charges to income.
Loans and Allowance for Loan
    Losses
Loans are stated at the amount of unpaid
principal, reduced by unearned finance charges, allowance for
loan losses and net deferred nonrefundable fees. The allowance
for loan losses is an estimate to provide for probable
collection losses in the loan portfolio. Losses are charged and
recoveries are credited to the allowance account at the time a
loss is incurred or a recovery takes place.
The Bank provides for loan losses based on
factors which, in management's judgment, deserve
recognition in estimating loan losses. Factors considered by
management include the growth and composition of the loan
portfolio, economic conditions, the value and adequacy of
collateral, and the current level of the allowance. These
factors are reviewed periodically and adjustments, as they
become necessary, are reported in the periods in which they
become known.
Management believes that the allowance for loan
losses is adequate; however, regulatory agencies, including the
Federal Deposit Insurance Corporation (the FDIC), as an integral
part of their examination process, periodically review the
Bank's allowance for loan losses.
The Bank classifies loans as non-performing when
they become 90 days past due.
The Bank measures impaired loans based on the
present value of expected future cash flows discounted at the
loan's original effective interest rate. As a practical
expedient, impairment may be measured based on the loan's
observable market price or the fair value of the collateral (if
the loan is collateral dependent). When the measure of the
impaired loan is less than the recorded amount, the impairment
is recorded through a valuation allowance.
Bank Premises and Equipment
Bank premises and equipment are stated at cost,
less accumulated depreciation and amortization, which is
computed utilizing the straight-line method over the estimated
useful lives of the depreciable assets. Leasehold improvements
are stated at cost and are amortized using the straight-line
method over the estimated useful lives of the assets or the term
of the lease, whichever is lower. Expenditures for major
improvements and remodeling are capitalized while maintenance
and repairs are charged to expense. Gains or
F-62
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
losses on disposition of Bank premises and
equipment, and related operating income and maintenance expenses
are included in current operations.
Other Real Estate and Repossessed
    Assets
Other real estate and repossessed assets,
normally obtained through foreclosure or other workout
situations, are stated at the lower of the outstanding loan
balance at the time of acquisition, or the fair market value of
the property or repossessed asset based on appraisals. Any
resulting loss is charged to the allowance for loan losses. An
appraisal of other real estate properties and repossessed assets
is made periodically after its acquisition and comparison
between the appraised value and the carrying value is performed.
Additional declines in value after acquisition, if any, are
charged to current operations. Gains or losses on disposition of
other real estate and repossessed assets and related operating
income and maintenance expenses are included in current
operations.
Trust Services
In connection with its trust activities, the Bank
administers and is custodian of assets which amounted to
approximately $1,255,000 and $1,028,000 at December 31,
2001 and 2000, respectively.
Securities Sold under Agreement to
    Repurchase
The Bank sells securities under agreements to
repurchase the same or similar securities. Amounts received
under these agreements represent short-term financing
transactions and the securities underlying the agreements remain
in the asset accounts.
Income Taxes
The Bank uses the asset and liability method for
the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Bank's consolidated financial statements
or tax returns. Deferred income tax assets and liabilities are
determined for differences between financial statement and tax
bases of assets and liabilities that will result in taxable or
deductible amounts in the future. The computation is based on
enacted tax laws and rates applicable to periods in which the
temporary differences are expected to be recovered or settled.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
Reserve Fund
The Banking Law of Puerto Rico requires that a
reserve fund be created and that annual transfers of at least
10% of annual consolidated net income be made, until such fund
equals total paid-in capital. Such transfers restrict the
retained earnings, which would otherwise be available for
dividends. On the other hand, if net losses are experienced,
such losses will be initially charged to retained earnings and
the balance, if any, will be then charged to or included as a
reduction of the reserve fund.
Loan Origination and Commitment
    Fees
Loan origination and commitment fees and certain
loan origination costs are deferred. These are amortized over
the life of the related loans as a yield adjustment.
Transfers and Servicing of Financial Assets
    and Extinguishment of Liabilities
The Bank recognizes financial and servicing
assets based on a financial component approach that focuses on
assets controlled and the liabilities that have been incurred.
Financial assets are derecognized when control has been
surrendered and liabilities are derecognized when extinguished.
F-63
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Statement of Cash Flows
The Bank considers all highly liquid instruments
with original maturities of three months or less to be cash
equivalents.
•
Supplemental Disclosures of Cash Flow Information:
2001
2000
1999
Cash paid during the years for—
Interest
$
21,085,000
$
16,195,000
$
9,177,000
Income taxes
$
923,995
$
20,000
$
—
Noncash transactions during the years 2001 and
2000 consist of the acquisition of other repossessed assets and
other real estate of approximately of $6,625,000 and $1,222,000,
respectively. During 1999, noncash transactions consisted of the
acquisition of other real estate of approximately $25,000.
Stock Option Plan
As allowed by Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation", the Bank elected to continue to
measure cost for its stock compensation plans using the
intrinsic value based method prescribed by Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees". Under the intrinsic value method,
cost is the excess, if any, of the quoted market price of the
stock at grant date or other measurement date over the amount an
employee must pay to acquire the stock. Entities choosing to
continue applying APB Opinion No. 25 on employee stock
options granted on or after January 1996 must provide pro forma
disclosures of the consolidated net income, as if the fair value
method of accounting had been applied. Under this method cost is
measure at the grant date based on the fair value of the
employee stock option and is recognized ratably over the service
period of the option, which is usually the vesting period. The
difference between applying the provisions of APB Opinion
No. 25 and the pro forma disclosure required by
SFAS No. 123 is not material to the accompanying
consolidated financial statements or to the computation of
earnings per share.
Comprehensive Income
Comprehensive income is defined as the change in
equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner
sources. In addition to net income, the Bank recognizes
unrealized holding gains and losses arising during the year in
comprehensive income.
Earnings Per Common Share
Basic earnings per common share are computed by
dividing net income attributable to common stock, by the
weighted average number of common shares outstanding during each
year. The Bank's average number of common shares
outstanding used in the computation of earnings per common share
was 6,175,843, 5,035,176 and 4,993,249 at December 31,
2001, 2000 and 1999, respectively. Diluted earnings per share
are computed by dividing net income to common stock, by the
weighted average number of common shares outstanding during each
year, plus any stock options outstanding. The Bank's
average number of common shares outstanding used in the
computation of diluted earnings per share was 6,213,820,
5,063,629 and 5,021,702 at December 31, 2001, 2000 and
1999, respectively.
Other Accounting
    Pronouncements
During 2000, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 140 (SFAS No. 140), "Accounting for Transfers
and Servicing of Financial Assets and
F-64
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Extinguishments of Liabilities". This
statement replaces SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities", revising the standards for accounting for
securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over
most of SFAS No. 125's provisions without
reconsideration. This statement was effective for transfers and
servicing of financial assets and extinguishments of liabilities
occurring after March 31, 2001, and for recognition and
reclassification of collateral and for disclosure relating to
securitization transactions and collateral for fiscal years
ending after December 15, 2000. It is management's
opinion that the implementation of all other provisions of
SFAS No. 140 did not have a significant impact on the
Bank's consolidated financial statements.
During 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 141 (SFAS No. 141), "Business
Combinations", which supersedes APB Opinion No. 16,
"Business Combinations", and FASB Statement
No. 38, "Accounting for Preacquisition Contingencies
of Purchased Enterprises". All business combinations in the
scope of this Statement are to be accounted for using one
method, the purchase method. The provisions of this Statement
apply to all business combinations initiated after June 30,
2001. This Statement also applies to all business combinations
accounted for using the purchase method for which the date of
acquisition is July 1, 2001, or later. It is the opinion of
management that the implementation of SFAS No. 141 will not
have a material impact on the Bank's consolidated results
of operations or financial position.
During 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 142 (SFAS No. 142), "Goodwill and Other
Intangible Assets", which supersedes APB Opinion
No. 17, "Intangible Assets". This statement
addresses how intangible assets that are acquired individually
or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial
statements upon their acquisition. This Statement also addresses
how goodwill and other intangible assets should be accounted for
after they have been initially recognized in the financial
statements. The provisions of this Statement are required to be
applied starting with fiscal years beginning after
December 31, 2001. It is the opinion of management that the
implementation of SFAS No. 142 will not have a material
impact on the Bank's consolidated results of operations or
financial position.
During 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 143 (SFAS No. 143), "Accounting for Asset
Retirement Obligations". This Statement amends
SFAS No. 19, "Financial Accounting and Reporting
by Oil and Gas Producing Companies". This Statement applies
to all entities and applies to legal obligations associated with
the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal
operation of a long-lived asset, except for certain obligations
of lessees. As described in this Statement, a legal obligation
is an obligation that a party is required to settle as a result
of an existing or enacted law, statute, ordinance, or written or
oral contract or by a legal construction of a contract under the
doctrine of promissory estoppel. The provisions of this
Statement is effective for financial statements issued for
fiscal years beginning after June 15, 2002. It is the
opinion of management that the implementation of SFAS
No. 143 will not have a material impact on the Bank's
consolidated results of operations or financial position.
During 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 144 (SFAS No. 144), "Accounting for the
Impairment or Disposal of Long-Lived Assets". This
Statement supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", and the accounting and reporting provisions
of APB Opinion No. 30, "Reporting the Results of
Operations — Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the disposal
of a segment of a business. This Statement also amends
ARB No. 51, "Consolidated Financial
Statements", to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary.
The provisions of this Statement are effective for financial
statements issued for fiscal years beginning after
December 15, 2001. It is
F-65
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
the opinion of management that the implementation
of SFAS No. 144 will not have a material impact on the
Bank's consolidated results of operations or financial
position.
2.
Trading Securities:
Proceeds from sales and redemption of trading
securities during the years ended December 31, 2001 and
2000, were approximately $150,000 and $129,677,000,
respectively. No gain or loss was recognized during the year
2001. Gross gains of approximately $92,000 and gross losses of
approximately $38,000 were realized during 2000. During 2000 the
Bank conducted its trading activities mostly with
U.S. Treasury securities. At December 31, 2000, the
trading securities outstanding consisted of a U.S. Treasury
Bill, which matured during 2001.
3.
Investment Securities Available for
    Sale:
Investment securities available for sale and
related contractual maturities as of December 31, are as
follows:
2001
Amortized
Unrealized
Unrealized
Market
Cost
Gains
Losses
Value
Commonwealth of Puerto Rico
    obligations —
One through five years
$
2.000.000
$
—
$
—
$
2,000,000
U.S. Corporate Notes —
One through five years
3,000,000
52,140
—
3,052,140
U.S. Treasury Notes —
Less than one year
17,498,609
238,440
—
17,737,049
Federal Home Loan Bank Notes —
One through five years
7,983,024
64,275
—
8,047,299
Federal Farm Credit Bank Notes —
Less than one year
2,499,811
8,939
—
2,508,750
Federal National Mortgage Association
    Notes —
Less than one year
274,312
905
—
275,217
One through five years
555,196
5,415
—
560,611
More than five years
4,073,817
131,702
—
4,205,519
Mortgage-Backed Securities —
Less than one year
840,456
13,023
—
853,479
More than five years
49,498,943
364,186
(394,402
)
49,468,727
Total
$
88,224,168
$
879,025
$
(394,402
)
$
88,708,791
F-66
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
2000
Amortized
Unrealized
Unrealized
Market
Cost
Gains
Losses
Value
U.S. Treasury Bills — Less than
    one year
$
9,752,500
$
17,800
$
—
$
9,770,300
U.S. Treasury Notes —
Less than one year
11,969,793
93,957
—
12,063,750
One through five years
27,487,121
303,504
—
27,790,625
Federal Home Loan Bank Notes —
Less than one year
22,519,453
6,048
(84,188
)
22,441,313
One through five years
5,000,000
—
(450,000
)
4,550,000
Federal Farm Credit Bank Notes —
Less than one year
4,999,142
—
(10,892
)
4,988,250
One through five years
2,497,588
24,287
—
2,521,875
Federal National Mortgage Association
    Notes —
One through five years
2,500,000
—
(7,750
)
2,492,250
Mortgage-Backed Securities —
Less than one year
2,496,572
7,227
(6,507
)
2,497,292
One through five years
4,154,742
12,442
(7,352
)
4,159,832
More than five years
10,304,099
164,637
(7,266
)
10,461,470
Total
$
103,681,010
$
629,902
$
(573,955
)
$
103,736,957
Contractual maturities on certain investment
securities available for sale could differ from actual
maturities since certain issuers have the right to call or
prepay these securities.
Proceeds from sales of investment securities
available for sale during the years ended December 31, 2001
and 2000, were approximately $16,483,000 and $45,361,000,
respectively. Gross gains of approximately $195,000 and $300,000
were realized during 2001 and 2000, respectively. During 1999,
there were no sales of investment securities available for sale.
4.
Investment Securities:
Investment securities and related contractual
maturities at December 31, are as follows:
2001
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
Commonwealth of Puerto Rico
    obligations —
Less than one year
$
224,793
$
207
$
—
$
225,000
Other securities
1,251,400
—
—
1,251,400
$
1,476,193
$
207
$
—
$
1,476,400
2000
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
Commonwealth of Puerto Rico
    obligations —
One through five years
$
228,973
$
4,052
$
—
$
233,025
Other securities
2,238,500
—
—
2,238,500
$
2,467,473
$
4,052
$
—
$
2,471,525
F-67
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Contractual maturities on certain investment
securities could differ from actual maturities since certain
issuers have the right to call or prepay these securities.
During 2001 approximately $992,000 of investment
securities were called by the issuer. During 2000, no investment
securities were called by the issuer. During 1999, proceeds from
investment securities that were called by the issuer were
approximately $3,430,000. No gains or losses were realized on
securities called during the years 2001, 2000 and 1999.
5.
Investments Pledged:
At December 31, 2001, various securities and
loans were pledged to secure the following:
Asset Pledged
Approximate Amount
Items Secured/Collateralized
Securities
$
3,187,000
Deposits of public funds
Loans
$
4,851,000
Deposits of public funds
Securities
$
15,628,000
Notes payable from Federal Home Loan Bank (see
    Note 12)
Securities
$
152,000
Assets pledged with Puerto Rico Treasury
    Department for IRA Trust
Securities
$
2,403,000
Assets pledged with Federal Reserve for discount
    window
Securities
$
431,000
Assets pledged with Commissioner of Financial
    Institutions of the Commonwealth of Puerto Rico for the trust
    and international bank operations
Securities
$
27,720,000
Securities sold under agreements to repurchase
    (see Note 11)
Securities
$
300,000
Treasury, tax and loan account
6.     Loans,
Net:
A summary of the Bank's loan portfolio at
December 31, is as follows:
2001
2000
Commercial and industrial
$
243,923,044
$
190,840,433
Construction
32,524,384
8,082,600
Mortgage
18,566,607
15,116,916
Consumer
19,615,416
18,677,250
Lease financing contracts
138,629,173
80,269,950
Other
2,613,134
2,130,101
455,871,758
315,117,250
Deferred loan costs
1,776,562
688,152
Unearned finance charges
(4,020,046
)
(4,686,054
)
Allowance for loan losses
(4,512,932
)
(3,050,556
)
Loans, net
$
449,115,342
$
308,068,792
F-68
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
At December 31, the approximate recorded
investment in loans that were considered impaired is as follows:
2001
2000
Impaired loans with related allowance
$
3,000,000
$
1,839,000
Impaired loans that did not require allowance
3,300,000
2,767,000
Total impaired loans
$
6,300,000
$
4,606,000
Allowance for impaired loans
$
299,000
$
192,000
Interest income recognized on impaired loans
$
220,000
$
198,000
The average outstanding amount of impaired loans
during the years ended December 31, 2001 and 2000, was
approximately $5,769,000 and $4,803,000, respectively.
The following schedule reflects the approximate
outstanding principal amount and the effect on earnings of
nonperforming loans.
2001
2000
1999
Principal balance as of December 31
$
6,292,000
$
4,968,000
$
3,303,000
Interest income which would have been recorded
    had the loans not been classified as nonperforming
$
584,000
$
477,000
$
852,000
At December 31, 2001 and 2000, $2,849,000 and
$2,900,000, respectively, of these nonperforming loans were
guaranteed by U.S. Department of Agriculture and or the
Small Business Administration.
Commercial and industrial loans with principal
outstanding balances amounting to approximately $2,364,000 and
$1,908,000 in 2001 and 2000, respectively, are guaranteed by the
U.S. government through the Small Business Administration
at percentages varying from 75% to 90% and 70% to 75% in 2001
and 2000, respectively. As of December 31, 2001 and 2000,
industrial loans with a principal outstanding balance of
approximately $2,650,000 and $2,847,000, respectively, were
guaranteed by the U.S. government through the
U.S. Department of Agriculture.
During 2001 and 2000, $4,851,000 and $3,935,000
of the guaranteed loans were pledged to secure public funds.
7.     Allowance for
Loan Losses:
The following analysis summarizes the changes in
the allowance for loan losses for the years ended
December 31:
2001
2000
1999
Balance, January 1
3,050,556
$
2,143,324
$
2,032,960
Provision for loan losses
2,377,000
1,343,000
1,103,000
Loans charged off
(1,396,326
)
(766,992
)
(1,417,383
)
Recoveries credited
481,702
331,224
424,747
Balance, December 31
$
4,512,932
$
3,050,556
$
2,143,324
F-69
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
8.     Bank Premises
and Equipment, Net:
Bank premises and equipment at December 31, are
as follows:
Estimated
Useful Lives
2001
2000
Building
40
$
5,744,611
$
5,738,981
Leasehold improvements
5 to 20
2,910,947
2,661,999
Furniture, fixtures and equipment
2 to 5
6,684,016
5,615,216
Construction in progress
857,607
142,491
16,197,181
14,158,687
Accumulated depreciation and amortization
(7,521,900
)
(6,552,061
)
$
8,675,281
$
7,606,626
9.     Other
Assets:
Other assets at December 31, consist of the
following:
2001
2000
Deferred tax assets, net
$
946,029
$
907,348
Accounts receivable
3,707,448
969,235
Other real estate
29,000
534,775
Other repossessed assets
3,006,835
1,121,680
Prepaid expenses and deposits
2,345,651
885,163
Other
1,436,271
961,699
$
11,471,234
$
5,379,900
10.     Time
Deposits:
The Bank's time deposits include
certificates of deposit in denominations of $100,000 or more
amounting to approximately $223,903,000 and $147,479,000 at
December 31, 2001 and 2000, respectively. Interest expense
on these deposits amounted to approximately $11,146,000 and
$5,963,000 for the years ended December 31, 2001 and 2000,
respectively.
11.     Securities
Sold under Agreements to Repurchase:
Securities sold under agreements to repurchase
represent short-term financing transactions with securities
dealers and the Federal Home Loan Bank. The following table
summarizes certain information on securities sold under
agreements to repurchase at December 31:
2001
2000
Amount outstanding at year-end
$
27,363,500
$
50,062,584
Maximum aggregate balance outstanding at any
    month-end
$
63,803,500
$
88,521,630
Average monthly aggregate balance outstanding
    during the year
$
40,822,996
$
54,350,198
Weighted average interest rate —
For the year ended December 31
4.54
%
6.35
%
At December 31
2.43
%
6.43
%
F-70
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
The investment securities underlying such
agreements were delivered to the dealers with whom the
agreements were transacted. The dealers may have sold, loaned,
or otherwise disposed of such securities in the normal course of
business operations, but have agreed to resell to the Bank
substantially the same securities on the maturity dates of the
agreements.
At December 31, 2001 and 2000, investment
securities with a carrying value of $27,720,000 and $49,884,528
were pledged as collateral under these agreements.
12.     Notes
Payable:
At December 31, the Bank owes several
advances to the Federal Home Loan Bank as follows:
Maturity
Interest Rate Range
2001
2000
2001
5.32%
$
—
$
600,000
2002
1.93% to 5.72%
1,950,000
1,350,000
2003
4.95% to 7.28%
6,800,000
6,800,000
2004
6.50% to 6.81%
2,500,000
2,500,000
2005
5.72%
4,000,000
—
$
15,250,000
$
11,250,000
These notes are guaranteed by approximately
$15,628,000 in securities outstanding as of December 31,
2001. Interest rates are fixed for the term of each advance and
payable on the first business day of the following month when
the original maturity of the note exceeds six months. In notes
with original terms of six months or less, interest is paid at
maturity. Interest payments during 2001, 2000 and 1999, amounted
to approximately $902,000, $1,100,000 and $282,000, respectively.
13.     Trust
Preferred Capital Securities:
On December 18, 2001, the Trust issued
$25,000,000 of floating rate Trust Preferred Capital Securities
Series 1 due in 2031 with a liquidation amount of $1,000
per security. Distributions payable on each capital security
will be payable at an annual rate equal to 5.60% beginning on
(and including) the date of original issuance and ending on (but
excluding) March 18, 2002, and at an annual rate for each
successive period equal to the 3-month LIBOR, plus 3.60% with a
ceiling rate of 12.50%. The capital securities of the Trust are
fully and unconditionally guaranteed by the Bank's wholly
owned subsidiary (EuroBancshares).
EuroBancshares then issued $25,000,000 floating
rate junior subordinated deferrable interest debentures to the
Trust due in 2031. The terms of the EuroBancshares debentures,
which comprises substantially all of the assets of the Trust,
are equal to the terms of the capital securities issued by the
Trust. These debentures are fully and unconditionally guaranteed
by the Bank.
The Bank subsequently issued an unsecured
promissory note to EuroBancshares at an annual rate equal to
that being paid on the Trust Preferred Capital Securities
Series 1 due in 2031. Consequently, the Bank holds as of
December 31, 2001, $25,000,000 in trust preferred capital
securities in the accompanying consolidated balance sheets.
F-71
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
14.     Commitments
and Contingencies:
The Bank leases certain premises used in its
operations under operating lease agreements expiring at various
dates through 2017. The total approximated minimum rental
payments under the agreements, including rentals based upon
increases in taxes and other costs, are approximately as follows:
Year
Amount
2002
$
1,360,000
2003
1,357,000
2004
1,026,000
2005
942,000
2006
788,000
Thereafter
6,343,000
$
11,816,000
Rent expense for the years ended
December 31, 2001, 2000 and 1999, was approximately
$1,127,000, $841,000 and $787,000, respectively.
The Bank is involved as plaintiff or defendant in
a variety of routine litigation incidental to the normal course
of business. Management believes, based on the opinion of legal
counsel, that it has adequate defense or insurance protection
with respect to such litigation and that any losses therefrom,
whether or not insured, would not have a material adverse effect
on the consolidated results of operations or financial position
of the Bank.
15.     Sale of
Receivables:
During December 2001 the Bank sold a portion of
its lease financing contracts portfolio with a current net value
of $9,015,447 as of December 28, 2001 (the Agreement). In
this sale, the Bank retained various interests such as servicing
responsibilities, certain subordinated interests, such as late
payment fees, assumption fees and other. The Bank surrendered
control of the lease financing receivables, as defined by
SFAS 140, and accounted for this transaction as sale and
recognized a gain of approximately $975,000 during the year
ended December 31, 2001.
The Bank has a limited recourse obligation as per
the Agreement that requires the Bank to repurchase any defaulted
lease up to 7.5% of the sales price of all leases sold, which
amounts to approximately $750,000. Nevertheless, it is
management's expectation, based on prior loss experience,
that such limited recourse will not exceed $60,000 during the
average portfolio life which approximates five years.
Management has estimated that the compensation to
be received for servicing the portfolio approximates the
expenses the Bank is expected to incur in the servicing.
Therefore, it is management's opinion that the net effect
of these items did not have a significant impact on the
Bank's consolidated financial statements. As a result, no
servicing asset or liability was recorded.
No receivables were sold during 2002 and 1999.
16.     Income
Taxes:
The Bank is subject to Puerto Rico income tax at
statutory rates. Under the provisions of the Puerto Rico
Internal Revenue Code of 1994, as amended, the Bank is subject
to regular tax or the alternative minimum tax, whichever is
higher. Customarily, the effective tax rate is lower than the
statutory rate primarily because interest income on certain U.S.
and Puerto Rico securities is exempt from Puerto Rico income
taxes.
F-72
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
The Bank is also subject to federal income tax on
its U.S. source income. However, the Bank had no taxable
U.S. income for the years ended December 31, 2001,
2000 and 1999. As a result of the U.S. Tax Reform Act of
1986, effective January 1, 1990, the Bank is not subject to
federal income tax on U.S. Treasury securities that qualify
as portfolio interest, nor to the branch profit tax and the
branch level interest tax.
During 2000, the Bank established an
International Bank Unit engaged in investment securities,
deposits and other funding transactions outside Puerto Rico. The
revenues generated by these transactions, net of related
interest costs and operating expenses, are exempt from Puerto
Rico taxes.
The components of the income tax provision for
the years ended December 31, are as follows:
2001
2000
1999
Current tax provision
$
2,292,936
$
437,446
$
37,496
Deferred tax (benefit) provision
(145,846
)
1,470,544
1,132,788
Total income tax provision
$
2,147,090
$
1,907,990
$
1,170,284
The difference between the income tax provision
and the amount computed using the statutory rate at
December 31, is due to the following:
2001
2000
1999
Amount
Rate
Amount
Rate
Amount
Rate
Income tax at statutory rate
$
3,100,913
39.00
%
$
2,316,043
39.00
%
$
1,152,272
39.00
%
Benefits of tax-exempt interest income, net
(339,094
)
(4.26
)
(413,502
)
(6.96
)
—
—
International banking unit
(435,460
)
(5.48
)
(11,287
)
(0.19
)
—
—
(Allowance) disallowance of certain expenses for
    tax purposes and other items
(179,269
)
(2.26
)
16,736
0.28
18,012
0.61
$
2,147,090
27.00
%
$
1,907,990
32.13
%
$
1,170,284
39.61
%
Deferred income taxes reflect 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. Significant components of the
Bank's deferred tax assets and liabilities at
December 31, were as follows:
2001
2000
1999
Net operating loss carryforward
$
—
$
—
$
1,389,796
Alternative minimum tax credit
—
—
217,314
Allowance for loan losses
1,760,044
1,189,714
835,896
Deferred loan costs
(692,859
)
(268,380
)
(63,991
)
Tax effect of unrealized (gains) and losses on
    securities available for sale
(121,156
)
(13,986
)
395,380
Other temporary differences
—
—
12,869
$
946,029
$
907,348
$
2,787,264
17.     Stock
Transactions:
During 2001, the Bank converted its
4,000,000 Class A shares and
2,026,032 Class B shares outstanding with a par value
of $5 and $1, respectively, into 6,026,032 shares of common
stock with a par value of $1 and capital paid in excess of par
value of $34,610,787.
F-73
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
During 2001, the Bank issued 699,739 of the new
common stock shares at $7.65 per share through a private
placement on September 24, 2001, and 52,726 through stock
options exercised.
During 2001, the Bank amended its articles of
incorporation and authorized the issuance of
1,000,000 shares of preferred stock at $10 par value, of
which none had been issued.
During 2000, the Bank issued 999,030 of its
Class A common stock at $6.65 per share through a private
placement on December 29, 2000. In addition, during 2000,
the Bank sold the Class B common stock held in treasury at
$7.50 per share.
During 1999, the Bank issued 26,586 shares
of its Class B common stock in accordance with certain
provisions of its merger agreement with another commercial bank.
During 1997, the Bank had placed in escrow 180,000 shares
of Class B common stock to provide for any contingency
resulting from those matters. In accordance with the merger
agreement, the Bank maintained the shares in escrow until
June 30, 1999, when the final settlement was made.
During 1999, the Bank purchased 156 shares
of its own $1 par value stock, Class B common stock at
$4.65 per share.
18.     Stock Option
Plan:
During 1997, the Board of Directors approved and
the shareholders ratified the Stock Option Plan (the Plan).
Under the Plan an aggregate of 550,000 shares of authorized
but unissued common stock Class B of the Bank, representing
10% of the shares of common stock outstanding on June 30,
1997, were reserved for issuance under the Plan.
All officers and directors of Eurobank are
eligible under the Plan, provided, however, that stock options
shall not be exercisable by an optionee who is the owner of 5%
or more of the issued and outstanding shares of the Bank or in
exercising the stock options would become the owner of 5% or
more of the issued and outstanding shares of the Bank, unless
the optionee obtains the approvals required from the appropriate
regulatory agencies to hold shares in excess of such percent.
Any eligible person may hold more than one option at a time.
The compensation committee, appointed by the
Board of Directors, has absolute discretion to select which of
the eligible persons will be granted stock options, the number
of shares of the Bank's common stock subject to such
options, whether stock appreciation rights will be granted for
such options and generally, to determine the terms and
conditions of such options in accordance with the provisions of
the Plan. Options are exercisable within five years after
the grant date at the discretion of the optionee. The options
are granted at the approximate fair value of the Bank's
common stock at the date of issuance.
At December 31, 2001, the options issued and
outstanding were as follows:
Date
Options
Options
Options
Options
Exercise
Granted
Granted
Exercised
Cancelled
Outstanding
Price
Date Exercisable
Expiration Date
1997
137,400
84,213
14,437
38,750
$
4.00
November 18, 1997
November 18, 2002
1999
4,164
—
—
4,164
6.65
December 30, 1999
December 30, 2004
2001
165,000
20,076
—
144,924
6.65
February 28, 2001
February 28, 2005
306,564
104,289
14,437
187,838
The cost of these options is measured as the
excess, if any, of the quoted market price of the stock at grant
date or other measurement date over the amount and employee must
pay to acquire the stock. The cost recognized by the Bank for
its stock compensation plan was approximately $139,000 during
2001. No cost was recognized during 2000 and 1999.
F-74
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
19.     Related Party
Transactions:
The Bank makes loans to its directors, principal
stockholders, officers, employees and organizations and
individuals associated with them in the normal course of
business. At December 31, 2001 and 2000, loans outstanding
with these parties amounted to $4,972,265 and $4,475,893,
respectively. Management believes that none of the above loans
to related parties involve more than the normal risk of
collectibility, nor present other features considered
unfavorable as compared to loans to nonrelated parties. Deposits
of $8,693,695 and $8,638,698 from these parties were outstanding
as of December 31, 2001 and 2000, respectively.
20.
Financial Instruments with Off-Balance Sheet
    Risk:
The Bank is a party to financial instruments with
off-balance sheet risk in the normal course of business to meet
the financial needs of its customers, such as standby letters of
credit. Such instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheets. The contract or
notional amount of the standby letters of credit reflect the
extent of involvement the Bank has in this particular class of
financial instrument.
The Bank's exposure to credit loss in the
event of nonperformance by the other party to the financial
instrument for standby letters of credit is represented by the
contractual notional amount of those instruments. The Bank uses
the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
Unless noted otherwise, the Bank requires
collateral or other security to support financial instruments
with credit risk. The Bank performs its normal credit granting
due diligence procedures, to the extent necessary, in evaluating
its involvement in financial instruments with credit risk.
At December 31, the approximate contract or
notional amount of the Bank's financial instruments with
off-balance sheet risk follows:
2001
2000
Financial instruments whose contract amounts
    represent credit risk —
Stand-by and commercial letters of credit
$
2,655,000
$
3,570,000
Commitments to extend credit, approved loans not
    yet disbursed and unused lines of credit
$
103,000,000
$
79,000,000
Stand-by letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a
customer to a third party. Those guarantees are primarily issued
to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. All
guarantees will expire within a year. The credit risk involved
in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The Bank
holds certificates of deposit as collateral supporting those
commitments for which collateral is deemed necessary.
21.
Fair Value of Financial Instruments:
The following methods and assumptions were used
to estimate the fair value of each class of financial
instruments in accordance with SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments."
F-75
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Cash and Cash Equivalents, Securities
    Purchased under Agreements to Resell and Interest-Bearing
    Deposits
The carrying amount of cash and cash equivalents,
securities purchased under agreements to resell and
interest-bearing deposits is a reasonable estimate of fair value.
Trading Securities, Investment Securities
    Available for Sale and Investment Securities
The fair value of trading securities, investment
securities available for sale and investment securities are
estimated based on bid prices published in financial newspapers
or bid quotations received from securities dealers. If a quoted
market price is not available, fair value is estimated using
quoted market prices for similar securities.
Loans and Loans Held for Sale
Fair values are estimated for portfolios of loans
with similar financial characteristics. Loans are segregated by
type such as commercial, consumer, mortgage and other loans.
Each loan category is further segmented into fixed and
adjustable interest rate terms.
The fair value of loans is calculated by
discounting scheduled cash flows through the estimated maturity
using estimated market discount rates that reflect the credit
and interest rate risk inherent in the loan.
The estimate of fair value of loans considers the
credit risk inherent in the portfolio through the allowance for
loan losses. Assumptions regarding credit risk, cash flows and
discount rates are judgmentally determined using available
market information and specific borrower information.
Accrued Interest Receivable
The carrying amount of accrued interest
receivable is a reasonable estimate of its fair value.
Deposits
The fair value of deposits with no stated
maturity, such as demand deposits, savings accounts, money
market and checking accounts is equal to the amount payable on
demand as of December 31, 2001 and 2000. The fair value of
fixed maturity certificates of deposit is based on the
discounted value of contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of
similar remaining maturities.
Notes Payable
The fair value of notes payable is calculated by
discounting scheduled cash flows through the estimated maturity
using market discount rates.
Accrued Interest Payable, Accrued Expenses
    and Other Liabilities
The carrying amount of accrued interest payable,
accrued expenses and other liabilities is a reasonable estimate
of fair value.
Trust Preferred Capital
    Securities
The fair value of trust preferred capital
securities outstanding is calculated by discounting scheduled
cash flows through the estimated maturity using the annual rate
for each successive period equal to the 3-month LIBOR, plus
3.60%.
F-76
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Commitments to Extend Credit and Letters of
    Credit
The fair value of commitments to extend credit
and letters of credit is estimated considering these commitments
as loan equivalents. Fair values are estimated for commitments
to extent credit with similar financial characteristics.
Commitments to extend credit are segregated by type such as
commercial, consumer, mortgage and other loans. Each commitment
category is further segmented into fixed and adjustable interest
rate terms.
The fair value of commitments to extend credit
and letters of credit is calculated by discounting scheduled
cash flows at market discount rates that reflect the credit and
interest rate risks inherent in the commitments to extend credit
guarantees and letters of credit. Assumptions regarding credit
risks, cash flows and discount rates are judgmentally determined
using available market information and specific borrower
information.
Limitations
The fair value estimates are made at a discrete
point in time based on relevant market information and
information about the financial instruments. Because no market
exists for a significant portion of the Bank's financial
instruments, fair value estimates are based on judgments
regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subject in
nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
The fair value estimates are based on existing
on- and off-balance sheet financial instruments without
attempting to estimate the value of anticipated future business
and the value of assets and liabilities that are not considered
financial instruments. As described for investments and
mortgage-backed securities, the tax ramifications related to the
realization of the unrealized gains and losses may have a
significant effect on fair value estimates and have not been
considered in many of the estimates.
F-77
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
Following are the cost and fair value of
financial instruments as of December 31:
2001
2000
Carrying
Carrying
Amount
Fair Value
Amount
Fair Value
Balance sheet financial instruments —
Cash and cash equivalents
$
16,085,242
$
16,085,242
$
14,533,238
$
14,533,238
Interest bearing deposits
$
14,656,543
$
14,656,543
$
—
$
—
Securities purchased under agreements to resell
$
8,049,613
$
8,049,613
$
4,790,128
$
4,790,128
Trading securities
$
—
$
—
$
149,130
$
149,130
Investment securities available for sale
$
88,708,791
$
88,708,791
$
103,736,957
$
103,736,957
Investment securities
$
1,476,193
$
1,476,400
$
2,467,473
$
2,471,525
Loans held for sale
$
5,051,600
$
5,051,600
$
1,078,400
$
1,078,400
Loans, net
$
449,115,342
$
451,396,376
$
308,068,792
$
312,046,360
Accrued interest receivable
$
3,881,525
$
3,881,525
$
3,864,961
$
3,864,961
Deposits —
Demand deposits
$
101,364,666
$
101,364,666
$
84,294,352
$
84,294,352
Savings and time deposits
384,298,321
392,263,169
266,101,486
266,569,691
Total
$
485,662,987
$
493,627,835
$
350,395,838
$
350,864,043
Securities sold under agreements to repurchase
$
27,363,500
$
27,330,100
$
50,062,584
$
50,062,584
Notes payable
$
15,250,000
$
15,931,549
$
11,250,000
$
11,383,988
Accrued interest payable
$
2,241,658
$
2,241,658
$
1,948,462
$
1,948,462
Accrued expenses and other liabilities
$
3,847,294
$
3,847,294
$
1,955,379
$
1,955,379
Trust preferred capital securities
$
25,000,000
$
25,010,003
$
—
$
—
2001
2000
Contract or
Contract or
Notional Amount
Fair Value
Notional Amount
Fair Value
Off-balance sheet financial
    instruments —
Stand-by and commercial letters of credit
$
2,655,000
$
2,655,000
$
3,570,000
$
3,570,000
Commitments to extend credit
$
103,000,000
$
103,000,000
$
79,000,000
$
79,000,000
F-78
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
22.
Significant Group Concentrations of Credit
    Risk:
Most of the Bank's business activities are
with customers located within Puerto Rico. The Bank has a
commercial and industrial concentrated loan portfolio with no
significant concentration in any economic sector.
23.
Regulatory Matters:
The Bank is subject to various regulatory capital
requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material
effect on the Bank's financial statements. Under capital
adequacy guidelines, the regulators require the Bank to meet
specific capital guidelines that involve quantitative measures
of the Bank's assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices.
The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation
to ensure capital adequacy require the Bank to maintain minimum
amounts and ratios, as indicated above, of Total and Tier I
Capital (as defined) to risk-weighted assets (as defined), and
of Tier I Capital (as defined) to average assets (Leverage)
(as defined).
The most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as
well capitalized the Bank must maintain minimum Tier I
Leverage, Tier I risk based and Total risk-based ratios of
not less than 5.0%, 6.0% and 10.0%, respectively. At
December 31, 2001, the Bank's actual leverage ratio,
Tier I/Core and Total Capital Ratios to risk weighted
assets were 8.27%, 15.26%, and 9.57%, respectively. Management
believes that as of December 31, 2001, the Bank maintains
all capital adequacy requirements to which it is subject.
Further, there are no conditions or events since that
notification that management believes have changed the
institution's capital category.
At December 31, required and actual
regulatory capital amounts and ratios follow:
2001
Required
Actual
Well Capitalized
Amount
Ratio
Amount
Ratio
Ratio
(Dollars in thousands)
Tier 1 Capital
(to Risk Weighted Assets)
$
19,834
4.00
%
$
47,443
9.57
%
2/36.00
%
Total Capital
(to Risk Weighted Assets)
$
39,668
8.00
%
$
75,677
15.26
%
1/210.00
%
Tier I Capital
(to Average Assets)
$
22,947
4.00
%
$
47,443
8.27
%
2/35.00
%
F-79
Table of Contents
EUROBANK
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
2000
Required
Actual
Well Capitalized
Amount
Ratio
Amount
Ratio
Ratio
(Dollars in thousands)
Tier 1 Capital
(to Risk Weighted Assets)
$
13,270
4.00
%
$
36,021
10.86
%
2/36.00
%
Total Capital
(to Risk Weighted Assets)
$
28,540
8.00
%
$
39,072
11.78
%
2/310.00
%
Tier I Capital
(to Average Assets)
$
17,681
4.00
%
$
36,021
8.15
%
2/35.00
%
F-80
Table of Contents
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
commissions and fees of the underwriters. All of the amounts shown are
estimates, except the SEC registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.
Securities and Exchange Commission registration fee
$
8,235.50
NASD filing fee
7,000.00
Printing and mailing expenses
*
Nasdaq National Market listing fee
*
Nasdaq National Market annual fee (prorated for 2004)
*
Accounting fees and expenses
*
Legal fees and expenses
*
Marketing expenses
*
Miscellaneous expenses
*
Total
$
*
*To be filed by subsequent amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 2602(b)(6) of the Puerto Rico General Corporations Law of 1995
(the "PR-GCL"), provides that a corporation may include in its certificate of
incorporation a provision eliminating or limiting the personal liability of its
directors or stockholders in cases of monetary claims for damages resulting
from the breach of a director's fiduciary duties. However, no such provision
may eliminate or limit the liability of a director for (1) a breach of his duty
of loyalty to the corporation or its stockholders; (2) any act or omission not
in good faith, or which involves intentional misconduct or a knowing violation
of the law; (3) the payment of an unlawful dividend, or the approval of an
unlawful stock repurchase or redemption; or (4) any transaction in which the
director derives an improper personal benefit.
Article 6 of our amended and restated certificate of incorporation
provides that the personal liability of our directors for monetary claims for
damages resulting from the breach of their fiduciary duties as directors shall
be eliminated, provided that this provision does not eliminate or limit the
liability of any director for: (1) any breach of the duty of loyalty of the
director to us, or our stockholders; (2) acts or omissions not in good faith,
or which involve intentional misconduct or knowing violations of law; (3)
unlawful payments of dividends or purchase and redemption of our stock; or (iv)
any transaction where the director derives an improper personal benefit.
Section 2728 of the PR-GCL authorizes a Puerto Rico corporation, under
certain circumstances, to indemnify its officers and directors who are, have
been or are under threat of becoming a party to any imminent, pending or
resolved civil, criminal, administrative or investigative action, suit or
proceeding; indemnification may include expenses incurred in a reasonable
manner (including attorneys' fees), provided that the director or officer acted
in good faith and in a manner reasonably deemed to be in the best interests of
the corporation or not opposed thereto (and with respect to any criminal
action, the director or officer did not have reasonable cause to believe his
conduct was unlawful). The PR-GCL does not allow indemnification for a claim
in which it has been determined that a director or officer is liable to the
corporation, unless the court presiding over such claim determines through a
motion to that effect that, in light of all of the circumstances, such person
has the fair and reasonable right to be compensated for those expenses which
the court deems proper. These rights of indemnification are not exclusive of
any other rights to which such officers or directors may be entitled under any
bylaw, agreement, vote of uninvolved stockholders or directors, or otherwise.
Our certificate of incorporation provides for indemnification of agents
including directors, officers and employees to the maximum extent allowed by
Puerto Rico law. Article 13 of our amended and restated certificate of
incorporation requires indemnification of any person who was or is a party, or
is threatened to be made a party, to any imminent, pending or resolved action,
suit or proceeding, whether civil, criminal, administrative or
II-1
Table of Contents
investigative, by reason of the fact that he is or was a director,
officer, employee or agent if the Board of Directors (or other committee or
entity empowered to make such a determination) formally determines that he
acted in good faith and in a manner reasonably deemed consistent with, or not
opposed to, our best interests. With respect to any criminal action or
proceeding, the Board of Directors (or other committee or entity empowered to
make such a determination) must formally determine that he had no reasonable
cause to believe his conduct was unlawful. In the case of any action, suit or
proceeding by or in the right of the Company, no indemnification shall be made
if such person is determined to be liable to us, unless and only to the extent
that the court in which such proceeding was brought determines upon application
that such person is fairly and reasonably entitled to indemnity. To the extent
that a director, officer, employee or agent has prevailed in defense of any
such action, suit or proceeding, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him. The
indemnification provided by our certificate of incorporation is not exclusive
of any other rights to which those seeking indemnification may be entitled
under any statute, bylaw, agreement, vote of uninvolved stockholders, directors
or otherwise.
Section 2728(g) of the PR-GCL authorizes a Puerto Rico corporation to
purchase and maintain insurance on behalf of any person who is or has been an
officer or director of the corporation against any liability assertible against
such person, or which arises out of his status as such, regardless of whether
the corporation has the power to indemnify such person.
Article 13 of our amended and restated certificate of incorporation
provides that we may purchase and maintain insurance covering certain
liabilities of our officers, directors, employees and agents, regardless of
whether we would have the power to indemnify them against such liabilities
under Article 13 or applicable law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three-year period ended May 3, 2004, we have sold the following
unregistered securities:
On May 3, 2004, we issued 357,747 shares of our common stock and 429,507
shares of our Series A Preferred Stock to the former stockholders of BankTrust
as partial consideration for our acquisition of all of the outstanding shares
of the capital stock of BankTrust. The value of the consideration deemed
received by us for each share of our common stock issued was $16.25 per share,
and for each share of our Series A Preferred Stock issued was $25.00 per share.
The shares of our common stock and our Series A Preferred Stock exchanged in
the BankTrust acquisition were issued in reliance upon certain exemptions from
federal, Puerto Rico, and other applicable registration requirements, including
Section 3(a)(11) of the Securities Act and Rule 147 of the regulations
promulgated thereunder and Section 881(j) of the Puerto Rico Securities Act.
On May 12, 2004, we issued 369,231 shares of our common stock in a private
placement at a price of $16.25 to our common stockholders, and to holders of
options to purchase our common stock who were not otherwise stockholders. The
issuance of our common stock in the private placement was made in reliance upon
the exemption from compliance with the registration requirements contained in
Section 3(a)(11) of the Securities Act and Section 882(b)(11) of the Puerto
Rico Securities Act. The net proceeds of the private placement were $6.0
million and these proceeds were used to fund the cash portion of the purchase
price for our acquisition of BankTrust.
On April 26, 2004, our Board voted and agreed to issue 1,850 shares of our
common stock (valued at $16.25 per shares) to certain of our officers and
employees in consideration for prior service to us. These stock grants were
effected pursuant to the terms of certain Restricted Stock Purchase Agreements
between us and the officers and employees. Under the terms of these Restricted
Stock Purchase Agreements the stock remains unvested until the 5th anniversary
of the date of the grant. In the event the restricted stock grantee leaves
prior to the 5th anniversary, the restricted stock grantee forfeits all right,
title and interest in the restricted stock. These shares were issued pursuant
to the exemption from registration requirements of the Securities Act provided
by Rule 701 of the Securities Act.
On March 15, 2004, we granted options to purchase an aggregate of 100,000
shares of our common stock to certain of our directors, executive officers and
employees under our 2002 Stock Option Plan. The options were granted for
services provided by the grantees during the year ended December 31, 2003.
These options were granted pursuant to the exemption from registration
requirements of the Securities Act provided by Rule 701 of the Securities Act.
The options have an exercise price of $16.25 per share. None of these options
has been exercised.
II-2
Table of Contents
On March 24, 2003, we granted options to purchase an aggregate of 285,000
shares of our common stock to certain of our directors, executive officers and
employees under our 2002 Stock Option Plan. The options were granted for
services provided by the grantees during the year ended December 31, 2002.
These options were granted pursuant to the exemption from registration
requirements of the Securities Act provided by Rule 701 of the Securities Act.
The options have an exercise price of $10.00 per share. 50,000 of these
options have been exercised.
On December 15, 2002, we issued 122,228 shares of our common stock to
former stockholders of Banco Financiero as partial consideration for our
acquisition of all of the outstanding shares of the capital stock of Banco
Financiero. The value deemed received by us for each share of our common stock
issued in the Banco Financiero acquisition was $10.00 per share. The shares of
our common stock were issued in reliance upon certain exemptions from federal,
Puerto Rico, and other applicable registration requirements, including Section
4(2) of the Securities Act and regulations promulgated thereunder and Section
881(j) of the Puerto Rico Securities Act.
On July 1, 2002, we issued 6,788,421 shares of our common stock to certain
former stockholders of Eurobank as consideration for our acquisition of all of
the outstanding shares of capital stock of Eurobank in connection with the
establishment of EuroBancshares as the bank holding company for Eurobank. The
value of the consideration deemed received by us for each share of our common
stock issued was $9.00 per share. The shares of our common stock issued in the
establishment of the bank holding company were issued in reliance upon certain
exemptions from federal, Puerto Rico and other applicable registration
requirements, including Section 3(a)(11) of the Securities Act and Rule 147 of
the regulations promulgated thereunder and Section 881(j) of the Puerto Rico
Securities Act.
March 18, 2002, our Board of Directors adopted the 2002 Stock Option Plan,
which became effective when we became the parent holding company for Eurobank.
At that time, all of the Eurobank options granted under Eurobank's previous
1997 Stock Option Plan were assumed by EuroBancshares under the 2002 Stock
Option Plan and became options to purchase shares of EuroBancshares common
stock. Our executive officers, senior management and directors are eligible to
participate in the 2002 Stock Option Plan. Under the 2002 Stock Option Plan a
maximum of 750,000 shares of common stock may be issued upon the exercise of
options granted under the plan. As of March 15, 2004, 578,432 shares of our
common stock were issuable in connection with the exercise of outstanding
options and [363,000] shares of our common stock remain available for option
grants. Options granted under the 2002 Stock Option Plan are exempt from the
registration requirements of the Securities Act pursuant to Rule 701 of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
(a) Exhibits
Exhibit Number
Description of Exhibits
1
Form of Underwriting Agreement*
2
Agreement and Plan of Merger, dated as of February 24, 2004, by and among
EuroBancshares, Inc., Eurobank, and The Bank & Trust of Puerto Rico
3.1
Amended and Restated Certificate of Incorporation of EuroBancshares, Inc.
3.2
Amended and Restated Bylaws of EuroBancshares, Inc.
3.3
Certificate of Designation of EuroBancshares, Inc. Noncumulative Preferred
Stock, Series A
4.1
Specimen stock certificate representing EuroBancshares,
Inc. Common Stock*
4.2
Indenture, dated as of December 18, 2001, between EuroBancshares, Inc. and
U.S. Bank National Association (f/k/a State Street Bank & Trust Company of
Connecticut, National Association)
4.3
Amended and Restated Declaration of Trust, dated as of December 18, 2001,
by and among EuroBancshares, Inc. and U.S. Bank National Association (f/k/a
State Street Bank & Trust
II-3
Table of Contents
Exhibit Number
Description of Exhibits
Company of Connecticut, National Association),
and Rafael Arrillaga-Torréns, Jr., Jorge Calderón Drowett, and William
Torres-Torres, as Administrators
4.4
Guarantee Agreement, dated as of December 18, 2001, between EuroBancshares,
Inc. and U.S. Bank National Association (f/k/a State Street Bank & Trust
Company of Connecticut, National Association)
4.5
Indenture, dated as of December 19, 2002, between EuroBancshares, Inc. and
U.S. Bank National Association (f/k/a State Street Bank & Trust Company of
Connecticut, National Association)
4.6
Amended and Restated Declaration of Trust, dated as of December 19, 2002,
by and among EuroBancshares, Inc. and U.S. Bank National Association (f/k/a
State Street Bank & Trust Company of Connecticut, National Association),
and Jose Martinez Recondo, Isabella Arrillaga, as Administrators
4.7
Guarantee Agreement, dated as of December 19, 2002, between EuroBancshares,
Inc. and U.S. Bank National Association (f/k/a State Street Bank & Trust
Company of Connecticut, National Association)
5.1
Opinion of Jenkens & Gilchrist, a Professional Corporation, related to the
shares of common stock being sold in the initial public offering*
5.2
Opinion of Fiddler, Gonzalez & Rodriguez, P.S.C., related to the shares of
common stock being sold in the initial public offering*
8.1
Opinion of Jenkens & Gilchrist, a Professional Corporation, regarding
certain tax matters*
8.2
Opinion of Acosta & Ramirez, LLP, regarding certain tax matters*
10.1
EuroBancshares, Inc. 2002 Stock Option Plan
10.2
Form of EuroBancshares, Inc. Incentive Stock Option Award Agreement
10.3
Form of EuroBancshares, Inc. Non-Qualified Stock Option Award Agreement
10.4
Executive Severance Compensation Agreement, dated as of April 12, 1999,
between Eurobank and Ms. Yadira R. Mercado
10.5
Eurobank Master Trust Retirement Plan Program
10.6
Form of EuroBancshares, Inc. Restricted Stock Purchase Agreement
10.7
Agreement and Plan of Merger, dated as of September 6, 2002, by and among
EuroBancshares, Inc. and Banco Financiero de Puerto Rico
21
List of Subsidiaries of EuroBancshares, Inc.
23.1
Consent of KPMG LLP, independent auditors
23.2
Consent of Jenkens & Gilchrist, a Professional Corporation (contained in
Exhibits 5.1 and 8.1)*
23.3
Consent of Fiddler, Gonzalez & Rodriguez, P.S.C. (contained in Exhibit 5.2)*
23.4
Consent of Acosta & Ramirez, LLP (contained in Exhibit 8.2)*
24
Power of Attorney (included on signature page of the Registration Statement)
*
To be filed by subsequent amendment.
II-4
Table of Contents
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be shown
in the schedules is not applicable or is included elsewhere in our financial
statements or accompanying notes.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To provide the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
(2) For purposes of determining any liability under the Securities Act of
1933, that the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act
of 1933, that each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in San Juan, Puerto Rico, on
the 14th
day of May, 2004.
EUROBANCSHARES, INC
.
By:
/s/ Rafael Arrillaga-Torréns, Jr.
Rafael Arrillaga-Torréns, Jr.,
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Rafael Arrillaga-Torréns, Jr. and Yadira
R. Mercado, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution, for him and in his name place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and proposes as he might or could
do in person, hereby ratifying and confirming all that each said
attorneys-in-fact and agents, or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated:
SIGNATURE
TITLE
DATE
/s/ Rafael Arrillaga-Torréns, Jr.
Rafael Arrillaga-Torréns, Jr.
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)
May 10, 2004
/s/ Yadira R. Mercado
Yadira R. Mercado
Executive Vice
President, Chief
Financial Officer and
Corporate Secretary
(Principal Financial
and Accounting
Officer)
May 10, 2004
/s/ Pedro Feliciano Benítez
Pedro Feliciano Benítez
Director and Vice
Chairman of the Board
May 10, 2004
/s/ Juan Ramón Gómez-Cuétara Aguilar
Juan Ramón Gómez-Cuétara Aguilar
Director
May 10, 2004
II-6
Table of Contents
SIGNATURE
TITLE
DATE
/s/ Antonio Pavía Bibiloni
Antonio Pavía Bibiloni
Director
May 10, 2004
/s/ Plácido González Córdova
Plácido González Córdova
Director
May 10, 2004
/s/ Jorge Calderón Drowett
Jorge Calderón Drowett
Director
May 10, 2004
/s/ Ricardo Levy Echeandía
Ricardo Levy Echeandía
Director
May 10, 2004
/s/ Diana López-Feliciano
Diana López-Feliciano
Director
May 10, 2004
/s/ William Torres Torres
William Torres Torres
Director
May 10, 2004
II-7
Table of Contents
EXHIBIT INDEX
Exhibit Number
Description of Exhibits
1
Form of Underwriting Agreement*
2
Agreement and Plan of Merger, dated as of February 24, 2004, by and among
EuroBancshares, Inc., Eurobank, and The Bank & Trust of Puerto Rico
3.1
Amended and Restated Certificate of Incorporation of EuroBancshares, Inc.
3.2
Amended and Restated Bylaws of EuroBancshares, Inc.
3.3
Certificate of Designation of EuroBancshares, Inc. Noncumulative Preferred
Stock, Series A
4.1
Specimen stock certificate
representing EuroBancshares, Inc. Common Stock*
4.2
Indenture, dated as of December 18, 2001, between EuroBancshares, Inc. and
U.S. Bank National Association (f/k/a State Street Bank & Trust Company of
Connecticut, National Association)
4.3
Amended and Restated Declaration of Trust, dated as of December 18, 2001,
by and among EuroBancshares, Inc. and U.S. Bank National Association (f/k/a
State Street Bank & Trust Company of Connecticut, National Association),
and Rafael Arrillaga-Torréns, Jr., Jorge Calderón Drowett, and William
Torres-Torres, as Administrators
4.4
Guarantee Agreement, dated as of December 18, 2001, between EuroBancshares,
Inc. and U.S. Bank National Association (f/k/a State Street Bank & Trust
Company of Connecticut, National Association)
4.5
Indenture, dated as of December 19, 2002, between EuroBancshares, Inc. and
U.S. Bank National Association (f/k/a State Street Bank & Trust Company of
Connecticut, National Association)
4.6
Amended and Restated Declaration of Trust, dated as of December 19, 2002,
by and among EuroBancshares, Inc. and U.S. Bank National Association (f/k/a
State Street Bank & Trust Company of Connecticut, National Association),
and Jose Martinez Recondo, Isabella Arrillaga, as Administrators
4.7
Guarantee Agreement, dated as of December 19, 2002, between EuroBancshares,
Inc. and U.S. Bank National Association (f/k/a State Street Bank & Trust
Company of Connecticut, National Association)
5.1
Opinion of Jenkens & Gilchrist, a Professional Corporation, related to the
shares of common stock being sold in the initial public offering*
5.2
Opinion of Fiddler, Gonzalez & Rodriguez, P.S.C., related to the shares of
common stock being sold in the initial public offering*
8.1
Opinion of Jenkens & Gilchrist, a Professional Corporation, regarding
certain tax matters*
8.2
Opinion of Acosta & Ramirez, LLP, regarding certain tax matters*
10.1
EuroBancshares, Inc. 2002 Stock Option Plan
10.2
Form of EuroBancshares, Inc. Incentive Stock Option Award Agreement
10.3
Form of EuroBancshares, Inc. Non-Qualified Stock Option Award Agreement
10.4
Executive Severance Compensation Agreement, dated as of April 12, 1999,
between Eurobank and Ms. Yadira R. Mercado
10.5
Eurobank Master Trust Retirement Plan Program
II-8
Table of Contents
Exhibit Number
Description of Exhibits
10.6
Form of EuroBancshares, Inc. Restricted Stock Purchase Agreement
10.7
Agreement and Plan of Merger, dated as of September 6, 2002, by and among
EuroBancshares, Inc. and Banco Financiero de Puerto Rico
21
List of Subsidiaries of
EuroBancshares, Inc.
23.1
Consent of KPMG LLP, independent auditors
23.2
Consent of Jenkens & Gilchrist, a Professional Corporation (contained in
Exhibits 5.1 and 8.1)*
23.3
Consent of Fiddler, Gonzalez & Rodriguez, P.S.C. (contained in Exhibit 5.2)*
23.4
Consent of Acosta & Ramirez, LLP (contained in Exhibit 8.2)*
24
Power of Attorney (included on signature page of the Registration Statement)
*
To be filed by subsequent amendment.
II-9