**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10 - K**

**ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(D)**

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

**For      the fiscal year ended December 31, 2006**

**EUROBANCSHARES,      INC.**

| **Commonwealth                of Puerto Rico**                                           |   | **66-0608955**                     |
|------------------------------------------------------------------------------------------|--------|------------------------------------|
| (State                or other jurisdiction of                                           |   | (I.R.S.                Employer    |
| incorporation                or organization)                                            |   | Identification                No.) |
|                                                                                     |   |                               |
| 270                Muñoz Rivera Avenue, San Juan, Puerto Rico 00918                 |
| (Address                of principal executive offices, including zip code)              |
|                                                                                     |
| (787)                751-7340                                                            |
| (Registrant’s                telephone number, including area                code) |

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| Securities                registered pursuant to Section 12(b) of the Act:                     |
|------------------------------------------------------------------------------------------------|
|                                                                                           |
| Common                Stock, par value                                                         |
| $0.01                per share                                                                 |
|                                                                                           |
| Securities                registered pursuant to Section 12(g) of the Act:                None |

----

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| Large accelerated filer o | Accelerated                filer x  | Non-                accelerated filer o |
|---------------------------|------------------------------------------|-----------------------------------------|

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**Documents      Incorporated by Reference**

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**EUROBANCSHARES,      INC.**

|                    |                                                                                                                                                          | PAGE |
|-------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------|
| PART                I   | 1                                                                                                                                                             |
|                    | SPECIAL                  CAUTIONARY NOTICE REGARDING FORWARD-LOOKING INFORMATION                                                                              | 1    |
|                    | ITEM                  1. BUSINESS.                                                                                                                            | 1    |
|                    | ITEM                  1A. RISK FACTORS.                                                                                                                       | 28   |
|                    | ITEM                  1B. UNRESOLVED STAFF COMMENTS.                                                                                                          | 34   |
|                    | ITEM                  2. PROPERTIES.                                                                                                                          | 34   |
|                    | ITEM                  3. LEGAL PROCEEDINGS.                                                                                                                   | 37   |
|                    | ITEM                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                                                                 | 37   |
|                    |                                                                                                                                                          |
| PART                II  | 37                                                                                                                                                            |
|                    | ITEM                  5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND                  ISSUER PURCHASES OF EQUITY SECURITIES. | 37   |
|                    | ITEM                  6. SELECTED FINANCIAL DATA.                                                                                                             | 38   |
|                    | ITEM                  7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS                  OF OPERATION.                         | 40   |
|                    | ITEM                  7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET                  RISK.                                                        | 74   |
|                    | ITEM                  8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                                                                                         | 74   |
|                    | ITEM                  9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING                  AND                  FINANCIAL DISCLOSURE.              | 76   |
|                    | ITEM                  9A. CONTROLS AND PROCEDURES.                                                                                                            | 77   |
|                    | ITEM                  9B. OTHER INFORMATION.                                                                                                                  | 79   |
|                    |                                                                                                                                                          |
| PART                III | 80                                                                                                                                                            |
|                    | ITEM                  10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                                                                                 | 80   |
|                    | ITEM                  11. EXECUTIVE COMPENSATION.                                                                                                             | 80   |
|                    | ITEM                  12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                  AND                  RELATED STOCKHOLDER MATTERS.   | 80   |
|                    | ITEM                  13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                                                                                     | 80   |
|                    | ITEM                  14. PRINCIPAL ACCOUNTING FEES AND SERVICES.                                                                                             | 80   |
|                    |                                                                                                                                                          |
| PART                IV  | 80                                                                                                                                                            |
|                    | ITEM                  15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.                                                                                         | 80   |

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**PART        I**

**SPECIAL        CAUTIONARY NOTICE REGARDING FORWARD-LOOKING INFORMATION**

**ITEM        1. **
**Business.**

**Overview**

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**Our        Strategic Plan**

|   | ● | *Focus                  on Our Targeted Customers.*                  We                  focus our time and resources on the following types of customers:                  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                  Eurobank’s branches and personalized relationship banking. We have 23                  branch offices strategically located throughout Puerto Rico. Eurobank                  intends to open three additional branches by the end of 2007. After                  the                  addition of these new branch offices, we will have a branch office                  located                  within a convenient 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. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | ● | *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 loan portfolio                  with                  a short to medium-term fixed rate                  product. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | *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 Entities (IBE).*                  Because EBS Overseas, Eurobank’s IBE subsidiary, and EBS International                  Bank, a division of Eurobank, are generally not subject to federal                  or                  Puerto Rico income tax, we will seek to maximize the growth of                  these IBEs                  as interest rates and applicable law                  permit. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Our        De Novo Branch and Acquisition Strategy**

*De        Novo Branches*

*Mergers        and Acquisitions*

**BankTrust        Acquisition**

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**Banco        Financiero de Puerto Rico Acquisition**

**Products        and Services**

*Commercial        Banking*

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*Commercial        and Construction Loans*

| **As                  of December 31,** |   |
|-----------------------------------------|--------|
| **2006**                                |   | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
| **(In                  thousands)**     |   |
| $1,160,308                              |   | $ | 967,049 |   | $ | 786,438 |   | $ | 525,251 |   | $ | 435,322 |   |

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*Consumer        Loans*

*Leasing        Activities*

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|                                   |   | **As                  of or for the Year Ended December 31,** |    |
|----------------------------------------|--------|---------------------------------------------------------------|---------|
|                                   |   | **2006**                                                      |    | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                   |   | **(In                  thousands)**                           |    |
| Originations                           |   | $                                                             | 147,352 |   | $ | 230,985 |   | $ | 257,808 |   | $ | 185,321 |   | $ | 138,922 |   |
| End                  of period balance |   | $                                                             | 443,311 |   | $ | 487,863 |   | $ | 459,251 |   | $ | 315,935 |   | $ | 256,087 |   |

*Management’s        Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies — Servicing Assets,*
*Note        2 — Summary of Significant Accounting Policies*

*Mortgage        Banking*

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|                                   |   |  **As                  of or for the Year Ended December                  31,**       |   |
|----------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                   |   |  **2006**                                                                                                           |   | **2005**  |   |  **2004**  |   |  **2003** |   |  **2002**  |   |
|                                   |   |  **(In                  thousands)**                                                  |   |
| Originations                           |   | $                                                                                                                        | 55,097 |   | $ | 21,112 |   | $ | 28,028 |   | $ | 53,880 |   | $ | 32,635 |   |
| End                  of period balance |   | $                                                                                                                        | 76,277 |   | $ | 44,841 |   | $ | 51,730 |   | $ | 15,941 |   | $ | 34,198 |   |

*Trust        and Wealth Management*

*Insurance*

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**International        Banking Entities**

*“Supervision        and Regulation — International Banking Center Regulatory        Act.”*

**Eurobank        Statutory Trust I and II**

----

*“Note        17 - Notes Payable to Statutory Trusts”*
* *

**Market**

*“Risks        Relating to the Economic Environment”*
*Provision        for Income Taxes”*

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**Environmental        Compliance**

**Employees**

**Available        Information**

**SUPERVISION        AND REGULATION **

**General**

----

** **

*“Recent        Developments”*

**EuroBancshares**

*Regulatory        Restrictions on Dividends; Source of Strength*

*Activities        “Closely Related” to Banking*

*de        novo *

----

*Gramm-Leach        Bliley Act; Financial Holding Companies*

|   | ● | 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. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | financial                  in nature; |
|--------|---------|---------------------------------------|

|   | ● | incidental                  to such financial activity; or |
|--------|---------|------------------------------------------------------------|

|   | ● | 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.” |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Privacy        Policies*

----

*Safe        and Sound Banking Practices*

*Annual        Reporting; Examinations*

*Capital        Adequacy Requirements*

----

*Imposition        of Liability for Undercapitalized Subsidiaries*

*Acquisitions        by Bank Holding Companies*

*Control        Acquisitions*

*Cross-guarantees*

----

*Anti-Terrorism        Legislation*

|   | · | to                  conduct enhanced scrutiny of account relationships to guard against                  money                  laundering and report any suspicious transaction; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | to                  ascertain the identity of the nominal and beneficial owners of,                  and the                  source of funds deposited into, each account as needed to guard                  against                  money laundering and report any suspicious                  transactions; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | to                  ascertain for any foreign bank, the shares of which are not publicly                  traded, the identity of the owners of the foreign bank, and the                  nature and                  extent of the ownership interest of each such owner; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | to                  ascertain whether any foreign bank provides correspondent accounts                  to                  other foreign banks and, if so, the identity of those foreign banks                  and                  related due diligence information. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | expeditiously                  search its records to determine whether it maintains or has maintained                  accounts, or engaged in transactions with individuals or entities,                  listed                  in a request submitted by the Financial Crimes Enforcement Network                  (“FinCEN”); |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | notify                  FinCEN if an account or transaction is identified; |
|--------|--------|----------------------------------------------------------------------------|

|   | · | designate                  a contact person to receive information requests; |
|--------|--------|------------------------------------------------------------------------------|

----

|   | · | limit                  use of information provided by FinCEN to (i) reporting to FinCEN,                  (ii)                  determining whether to establish or maintain an account or engage                  in a                  transaction, and (iii) assisting the financial institution in complying                  with the Bank Secrecy Act; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | maintain                  adequate procedures to protect the security and confidentiality                  of FinCEN                  requests. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

*“Recent        Developments”*

*Sarbanes-Oxley        Act of 2002 *

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**Eurobank**

*Transactions        with Affiliates*

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*Loans        to Insiders*

*Dividends*

*FDIC        Capital Requirements*

|   | ● | 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 |
|--------|---------|------------------------------------------------------------------------------------------------------------|

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|   | ● | minority                  interests in the equity capital accounts of consolidated subsidiaries,                  and                  excludes goodwill and various intangible                  assets. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | 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. |
|--------|---------|-------------------------------------------------------------------------|

*“The        FDIC Improvement Act.”*

*FIRREA*

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*The        FDIC Improvement Act*

*Brokered        Deposits*

----

*Federal        Limitations on Activities and Investments*

*FDIC        Deposit Insurance Assessments*

----

*Check        Clearing for the 21*
*st*

*        Century Act*

|   | ● | allowing                  check truncation without making it                  mandatory; |
|--------|---------|------------------------------------------------------------------------------------------|

|   | ● | demanding                  that every financial institution communicate to accountholders                  in writing                  a description of its substitute check processing program and their                  rights                  under the law; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | legalizing                  substitutions for and replacements of paper checks without agreement                  from                  consumers; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | retaining                  in place the previously mandated electronic collection and return                  of                  checks between financial institutions only when individual agreements                  are                  in place; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | requiring                  that when accountholders request verification, financial institutions                  produce the original check (or a copy that accurately represents                  the                  original) and demonstrate that the account debit was accurate and                  valid;                  and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | requiring                  recrediting of funds to an individual’s account on the next business day                  after a consumer proves that the financial institution has                  erred. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Community        Reinvestment Act*

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*Consumer        Laws and Regulations*

*Interstate        Branching*

*Federal        Home Loan Bank System*

*i.e.*

**Mortgage        Banking Operations**

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**Puerto        Rico Regulation**

*“Supervision        and Regulation” *

*Puerto        Rico Banking Law*

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*Puerto        Rico Usury Law*

**International        Banking Center Regulatory Act**

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**EuroSeguros,        Inc.**

**Future        Legislation and Economic Policy**

**Recent        Developments**

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**ITEM        1A. Risk Factors.**

**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.***

***We        have a concentration of exposure to a number of individual borrowers and        a        significant loss on any one of these credits could materially affect our        financial condition and results of operations.***

***A        significant portion of our leases are secured by automobiles, and the loss        of        purchasers for our leases or 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.***

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***We        rely heavily on short-term funding sources to meet our liquidity needs, such        as        brokered deposits and repurchase obligations, which are generally more sensitive        to changes in interest rates and can be adversely affected by local and general        economic conditions.***

***We        have experienced rapid growth in recent years, 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.***

***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.***

----

***The        regulatory capital treatment of our junior subordinated debentures and related        trust preferred securities is uncertain.***

***Eurobank        has entered into a Cease and Desist Order with the FDIC regarding its compliance        with anti-money laundering laws and the Bank Secrecy Act.***

**Risks        Relating to an Investment in Our Common Stock**

***Our        common stock has a short trading history and you may not be able to trade        our        common stock if an active trading market does not prevail. Additionally,        the        price of our common stock may fluctuate        significantly.***

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***Our        executive officers and directors own a significant number of shares of our        common stock, allowing management significant control over our corporate        affairs.***

***Your        share ownership may be diluted by the issuance of additional shares of our        common stock in the future.***

***Future        sales of common stock by existing stockholders may have an adverse impact        on the        market price of our common stock.***

***Holders        of our junior subordinated debentures have rights that are senior to those        of        our stockholders.***

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***Holders        of our Series A Preferred Stock have rights senior to those of our common        stockholders.***

***Provisions        of our amended and restated certificate of incorporation and amended and        restated bylaws could delay or prevent a takeover of us by a third        party.***

***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.***

***Your        shares are not an insured deposit.***

**Risks        Relating to the Economic Environment**

***The        recent economic and government budget crisis in Puerto Rico could adversely        affect our business, financial condition, results of operations, cash flows        and/or future prospects.***

*“Provision        for Income Taxes”*

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**Risks        Related to United States Taxation**

***If        we or any of our subsidiaries are determined to be a passive foreign investment        company, U.S. holders of our stock could be subject to adverse tax        consequences.***

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***Repeal        of foreign personal holding company rules.***

**ITEM        1B. Unresolved Staff Comments.**

**ITEM        2. **
**Properties.**

| **Location**                                                                  |   | **Lease                  Expiration Date****(1)** |   | **Owned                  or Leased** |
|-------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|--------------------------------------|
|                                                                          |   |                                              |   |                                 |
| Main                  Office:                                                 |   |                                              |   |                                 |
| 270                  Muñoz Rivera Avenue                                 |   | N/A                                               |   | Owned(2)                             |
| San                  Juan, Puerto Rico 00918                                  |   |                                              |   |                                 |
|                                                                          |   |                                              |   |                                 |
| *Departments*                                                                 |   |                                              |   |                                 |
| EuroLease                  Credit, Accounting, Marketing and Human Resources: |   |                                              |   |                                 |
| Fourth                  Floor                                                 |   | 12/31/2007                                        |   | Leased                               |
| 270                  Muñoz Rivera Avenue                                 |   |                                              |   |                                 |
| San                  Juan, Puerto Rico 00918                                  |   |                                              |   |                                 |
|                                                                          |   |                                              |   |                                 |
| EuroLease:                                                                    |   |                                              |   |                                 |
| State                  Road #2, Km. 2.5                                       |   | 8/31/2007                                         |   | Leased                               |
| Kennedy                  Avenue                                               |   |                                              |   |                                 |
| San                  Juan, Puerto Rico 00920                                  |   |                                              |   |                                 |
|                                                                          |   |                                              |   |                                 |
| EuroMortgage:                                                                 |   |                                              |   |                                 |
| State                  Road #190                                              |   | 5/31/2007                                         |   | Leased                               |
| Lot                  #1, Km. 0.7                                              |   |                                              |   |                                 |
| La                  Cerámica Industrial Park                             |   |                                              |   |                                 |
| Carolina,                  Puerto Rico 00983                                  |   |                                              |   |                                 |

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| **Location**                                                        |   | **Lease                  Expiration Date****(1)** |   | **Owned                  or Leased** |
|---------------------------------------------------------------------|--------|---------------------------------------------------|--------|--------------------------------------|
|                                                                |   |                                              |   |                                 |
| Compliance:                                                         |   |                                              |   |                                 |
| 1302                  Jesús T. Piñero Avenue              |   | 12/31/2011                                        |   | Leased                               |
| San                  Juan, Puerto Rico 00918                        |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| Credit                  Administration, Security and MIS:           |   |                                              |   |                                 |
| Old                  Corona Building                                |   | 4/30/2007                                         |   | Leased                               |
| Building                  #5, Second and Fifth Floor                |   |                                              |   |                                 |
| Santurce,                  Puerto Rico 00907                        |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| Operations:                                                         |   |                                              |   |                                 |
| Old                  Corona Building                                |   | 8/31/2007                                         |   | Leased                               |
| Building                  #5, Second Floor, Local #3                |   |                                              |   |                                 |
| Santurce,                  Puerto Rico 00907                        |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| *Branches*                                                          |   |                                              |   |                                 |
| Aguadilla                  Branch                                   |   | 10/31/2006(3)                                     |   | Leased                               |
| State                  Road No. PR2, Km. 129.3                      |   |                                              |   |                                 |
| Aguadilla,                  Puerto Rico 00603                       |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| 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                                   |   | 6/30/2010                                         |   | Leased                               |
| 32                  Acosta Street, corner of Ruiz Belvis            |   |                                              |   |                                 |
| Caguas,                  Puerto Rico 00725                          |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| Canóvanas                  Branch                              |   | 6/30/2025                                         |   | Leased                               |
| Marginal                  PR-3, Km. 20.3                            |   |                                              |   |                                 |
| Canóvanas,                  Puerto Rico 00729                  |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| Carolina                  Branch                                    |   | 9/30/2007                                         |   | Leased                               |
| State                  Road #190                                    |   |                                              |   |                                 |
| Lot                  #1, Km. 0.7                                    |   |                                              |   |                                 |
| La                  Cerámica Industrial Park                   |   |                                              |   |                                 |
| Carolina,                  Puerto Rico 00983                        |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| Cidra                  Branch                                       |   | 4/30/2006                                         |   | Leased                               |
| Luis                  Muñoz Rivera Street                      |   |                                              |   |                                 |
| corner                  of José de Diego                       |   |                                              |   |                                 |
| Cidra,                  Puerto Rico 00739                           |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| Condado                  Branch                                     |   | 3/31/2009                                         |   | Leased                               |
| 1408                  Magdalena Avenue                              |   |                                              |   |                                 |
| Santurce,                  Puerto Rico 00907                        |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| Hatillo                  Branch                                     |   | 11/30/2007                                        |   | Leased                               |
| State                  Road No. PR2, Km. 87.0                       |   |                                              |   |                                 |
| Hatillo,                  Puerto Rico 00659                         |   |                                              |   |                                 |
|                                                                |   |                                              |   |                                 |
| Hato                  Rey Branch                                    |   | N/A                                               |   | Owned(2)                             |
| 270                  Muñoz Rivera Avenue                       |   |                                              |   |                                 |
| San                  Juan, Puerto Rico 00918                        |   |                                              |   |                                 |

----

| **Location**                                             |   | **Lease                  Expiration Date****(1)** |   | **Owned                  or Leased** |
|----------------------------------------------------------|--------|---------------------------------------------------|--------|--------------------------------------|
|                                                     |   |                                              |   |                                 |
| Humacao                  Branch                          |   | 5/31/2026                                         |   | Leased                               |
| Plaza                  Mall Lot #3, State Road No. PR52  |   |                                              |   |                                 |
| Corner                  State Road No. PR3               |   |                                              |   |                                 |
| Humacao,                  Puerto Rico 00791              |   |                                              |   |                                 |
|                                                     |   |                                              |   |                                 |
| 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              |   | 4/01/2011                                         |   | 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                    |   | 4/30/2011                                         |   | 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        |   |                                              |   |                                 |

----

| (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, the mezzanine where it operates its trust business, 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                  Aguadilla Branch is currently under construction. Once the construction                  is                  finished, the lease term will be twenty years with an option to                  extend the                  contract for two additional terms of five years each. We started                  operating                  the branch in a trailer until construction is                  finished. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM        3. **
**Legal        Proceedings.**

**ITEM        4. **
**Submission        of Matters to a Vote of Security Holders.**

**PART        II**

**ITEM        5. **
**Market        for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases        of Equity Securities.**

**Market        Information**

| **Quarter                  Ended**  |   | **High** |   | **Low** |   |
|-------------------------------------|--------|----------|--------|---------|--------|
|                                |   |     |   |    |   |
| March                  31, 2005     |   | $        | 22.19  |    | $      | 16.80 |   |
| June                  30, 2005      |   | $        | 17.60  |    | $      | 13.58 |   |
| September                  30, 2005 |   | $        | 17.55  |    | $      | 14.78 |   |
| December                  31, 2005  |   | $        | 15.06  |    | $      | 10.20 |   |
|                                |   |     |   |    |   |   |   |
| March                  31, 2006     |   | $        | 15.13  |    | $      | 11.64 |   |
| June                  30, 2006      |   | $        | 12.00  |    | $      | 8.35 |   |
| September                  30, 2006 |   | $        | 9.90   |    | $      | 8.47 |   |
| December                  31, 2006  |   | $        | 9.47   |    | $      | 8.50 |   |

**Dividends**

----

*“Supervision        and Regulation — EuroBancshares — Regulatory Restrictions on Dividends; Source        of Strength” and “Supervision and Regulation — Eurobank —Dividends.”*

**Securities        Authorized for Issuance Under Equity Compensation Plans**

| **Equity                  Compensation Plan Information**               |   |
|-------------------------------------------------------------------------|--------|
|                                                                    |   |   |   |   |   |   |   |
| **Plan                  Category**                                      |   | **Number                  of securities to be issued upon exercise of outstanding options,                  warrants                  and rights****(a)** |   | **Weighted-average                  exercise price of outstanding options, warrants and                  rights****(b)** |   | **Number                  of securities remaining available for future issuance under equity                  compensation plans (excluding securities reflected in column                  (a))****(c)** |   |
|                                                                    |   |   |   |   |   |   |   |
| Equity                  compensation plans approved by security holders |   |   |   |   |   |   |   |
| 2002                  Stock Option Plan                                 |   |   | 984,362 |   | $ | 7.21 |   |   | — |   |
| 2005                  Stock Option Plan                                 |   |   | 78,800 |   |   | 14.17 |   |   | 621,200 |   |

**ITEM        6. **
**Selected        Financial Data.**

*“Management’s        Discussion and Analysis of Financial Condition and Results of        Operations”*

|                                                                                            |   | **As                  of or for the Year Ended December 31,**  |         |
|-------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|---------|
|                                                                                            |   | **2006**                                                            |    | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                                                            |   | **(Dollars                  in thousands, except per share data)**  |    |
| **Income                  Statement Data:**                                                     |   |                                                                |    |   |   |   |   |   |   |   |   |
| Total                  interest income                                                          |   | $                                                                   | 162,146 |   | $ | 133,233 |   | $ | 95,394 |   | $ | 64,949 |   | $ | 49,756 |   |
| Total                  interest expense                                                         |   |                                                                | 95,363  |   |   | 64,936 |   |   | 41,481 |   |   | 31,922 |   |   | 25,124 |   |
| Net                  interest income                                                            |   |                                                                | 66,783  |   |   | 68,297 |   |   | 53,913 |   |   | 33,027 |   |   | 24,632 |   |
| Provision                  for loan and lease losses                                            |   |                                                                | 16,903  |   |   | 12,775 |   |   | 7,100 |   |   | 6,451 |   |   | 3,354 |   |
| Net                  interest income after provision for loan                  and lease losses |   |                                                                | 49,880  |   |   | 55,522 |   |   | 46,813 |   |   | 26,576 |   |   | 21,278 |   |

----

|                                                                                                         |   | **As                  of or for the Year Ended December 31,**          |       |
|--------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                                         |   |  **2006**                                                                                                      |       |  **2005** |   |  **2004** |   |  **2003** |   |  **2002** |   |
|                                                                                                         |   |  **(Dollars                  in thousands, except per share data)**                                            |       |
| Noninterest                  income:                                                                         |   |                                                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                  charges and other fees                                                              |   |                                                                                                                | 8,476      |   |   | 9,069 |   |   | 8,057 |   |   | 5,456 |   |   | 4,331 |   |
| Net                  loss on non-hedging derivatives                                                         |   |                                                                                                                | -          |   |   | (944 | ) |   | — |   |   | — |   |   | — |   |
| Gain                  on sale of loans and leases, net                                                       |   |                                                                                                                | 401        |   |   | 945 |   |   | 1,395 |   |   | 3,547 |   |   | — |   |
| (Loss)                  gain on sale of securities, net                                                      |   |                                                                                                                | (1,092     | ) |   | (301 | ) |   | — |   |   | 707 |   |   | — |   |
| Gain                  (loss) on sale of other real estate owned and repossessed assets,                  net |   |                                                                                                                | 16         |   |   | (1,040 | ) |   | (359 | ) |   | (663 | ) |   | (310 | ) |
| Total                  noninterest income                                                                    |   |                                                                                                                | 7,801      |   |   | 7,729 |   |   | 9,093 |   |   | 9,047 |   |   | 4,021 |   |
| Noninterest                  expense:                                                                        |   |                                                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                  and benefits                                                                       |   |                                                                                                                | 17,507     |   |   | 14,727 |   |   | 11,111 |   |   | 8,867 |   |   | 6,731 |   |
| Professional                  fees                                                                           |   |                                                                                                                | 4,104      |   |   | 3,912 |   |   | 2,196 |   |   | 1,402 |   |   | 1,055 |   |
| Other                  noninterest expense                                                                   |   |                                                                                                                | 21,775     |   |   | 19,005 |   |   | 15,635 |   |   | 12,039 |   |   | 8,936 |   |
| Total                  noninterest expense                                                                   |   |                                                                                                                | 43,386     |   |   | 37,644 |   |   | 28,942 |   |   | 22,308 |   |   | 16,722 |   |
| Income                  before income taxes and extraordinary gain                                           |   |                                                                                                                | 14,295     |   |   | 25,607 |   |   | 26,964 |   |   | 13,315 |   |   | 8,577 |   |
| Income                  taxes                                                                                |   |                                                                                                                | 6,283      |   |   | 9,077 |   |   | 8,663 |   |   | 3,432 |   |   | 2,724 |   |
| Extraordinary                  gain(1)                                                                       |   |                                                                                                                | —    |   |   | — |   |   | 4,419 |   |   | — |   |   | 1,081 |   |
| Net                  income                                                                                  |   | $                                                                                                                   | 8,012      |   | $ | 16,530 |   | $ | 22,720 |   | $ | 9,883 |   | $ | 6,934 |   |
| **Common                  Share Data:**                                                                      |   |                                                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                  per common share — basic:                                                    |   |                                                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  before extraordinary gain                                                            |   | $                                                                                                                   | 0.38       |   | $ | 0.81 |   | $ | 1.08 |   | $ | 0.71 |   | $ | 0.43 |   |
| Extraordinary                  gain                                                                          |   |                                                                                                                | —    |   |   | — |   |   | 0.27 |   |   | — |   |   | 0.08 |   |
| Net                  income                                                                                  |   |                                                                                                                | 0.38       |   |   | 0.81 |   |   | 1.35 |   |   | 0.71 |   |   | 0.51 |   |
| Earnings                  per common share — diluted:                                                  |   |                                                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  before extraordinary gain                                                            |   |                                                                                                                | 0.37       |   |   | 0.78 |   |   | 1.04 |   |   | 0.69 |   |   | 0.42 |   |
| Extraordinary                  gain                                                                          |   |                                                                                                                | —    |   |   | — |   |   | 0.26 |   |   | — |   |   | 0.08 |   |
| Net                  income                                                                                  |   |                                                                                                                | 0.37       |   |   | 0.78 |   |   | 1.30 |   |   | 0.69 |   |   | 0.50 |   |
| Cash                  dividends declared                                                                     |   |                                                                                                                | —    |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Book                  value per common share                                                                 |   |                                                                                                                | 8.32       |   |   | 7.95 |   |   | 7.54 |   |   | 4.67 |   |   | 4.13 |   |
| Common                  shares outstanding at end of period                                                  |   |                                                                                                                | 19,123,821 |   |   | 19,398,848 |   |   | 19,564,086 |   |   | 13,947,396 |   |   | 13,879,370 |   |
| Average                  diluted shares outstanding                                                          |   |                                                                                                                | 19,657,559 |   |   | 20,277,799 |   |   | 17,152,261 |   |   | 14,234,168 |   |   | 13,724,248 |   |
| **Balance                  Sheet Data (at end of period):**                                                  |   |                                                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  assets                                                                                |   | $                                                                                                                   | 2,500,920  |   | $ | 2,391,283 |   | $ | 2,102,789 |   | $ | 1,320,934 |   | $ | 1,035,305 |   |
| Investment                  securities available-for-sale                                                    |   |                                                                                                                | 535,159    |   |   | 627,080 |   |   | 555,482 |   |   | 324,938 |   |   | 145,795 |   |
| Investment                  securities held-to-maturity                                                      |   |                                                                                                                | 38,433     |   |   | 42,471 |   |   | 49,504 |   |   | — |   |   | — |   |
| Total                  loans and leases, net of unearned                                                     |   |                                                                                                                | 1,750,838  |   |   | 1,577,196 |   |   | 1,387,613 |   |   | 899,392 |   |   | 767,792 |   |
| Allowance                  for loan and lease losses                                                         |   |                                                                                                                | 18,937     |   |   | 18,188 |   |   | 19,039 |   |   | 9,394 |   |   | 6,918 |   |
| Deposits                                                                                                     |   |                                                                                                                | 1,905,356  |   |   | 1,734,128 |   |   | 1,409,036 |   |   | 984,549 |   |   | 843,045 |   |
| Other                  borrowings                                                                            |   |                                                                                                                | 394,991    |   |   | 475,712 |   |   | 520,206 |   |   | 264,616 |   |   | 127,963 |   |
| Total                  stockholders’ equity                                                            |   |                                                                                                                | 169,878    |   |   | 164,967 |   |   | 158,302 |   |   | 65,075 |   |   | 57,335 |   |
| **Performance                  Ratios:**                                                                     |   |                                                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return                  on average common stockholders’ equity(2)                                 |   |                                                                                                                | 5.19       | % |   | 10.70 | % |   | 18.67 | % |   | 16.50 | % |   | 11.45 | % |
| Return                  on average assets(3)                                                                 |   |                                                                                                                | 0.33       |   |   | 0.74 |   |   | 1.03 |   |   | 0.87 |   |   | 0.77 |   |
| Net                  interest margin(4)                                                                      |   |                                                                                                                | 2.86       |   |   | 3.29 |   |   | 3.29 |   |   | 3.15 |   |   | 3.57 |   |
| Efficiency                  ratio(5)                                                                         |   |                                                                                                                | 57.89      |   |   | 47.84 |   |   | 44.44 |   |   | 51.48 |   |   | 56.33 |   |
| Loans                  and leases to deposits                                                                |   |                                                                                                                | 91.89      |   |   | 90.95 |   |   | 98.48 |   |   | 91.35 |   |   | 91.07 |   |
| **Asset                  Quality Data:**                                                                     |   |                                                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming                  loans and leases                                                              |   | $                                                                                                                   | 49,978     |   | $ | 36,263 |   | $ | 40,533 |   | $ | 26,758 |   | $ | 22,060 |   |
| Other                  real estate owned and repossessed assets                                              |   |                                                                                                                | 13,048     |   |   | 9,517 |   |   | 6,441 |   |   | 6,417 |   |   | 7,644 |   |
| Total                  nonperforming assets                                                                  |   |                                                                                                                | 63,026     |   |   | 45,780 |   |   | 46,974 |   |   | 33,175 |   |   | 29,704 |   |
| Nonperforming                  assets to total assets                                                        |   |                                                                                                                | 2.52       | % |   | 1.91 | % |   | 2.23 | % |   | 2.51 | % |   | 2.87 | % |
| Nonperforming                  loans to total loans and leases                                               |   |                                                                                                                | 2.85       |   |   | 2.30 |   |   | 2.92 |   |   | 2.98 |   |   | 2.87 |   |
| Allowance                  for loan and lease losses to nonperforming loans                                  |   |                                                                                                                | 37.89      |   |   | 50.16 |   |   | 46.97 |   |   | 35.11 |   |   | 31.36 |   |
| Allowance                  for loan and lease losses to total loans                                          |   |                                                                                                                | 1.08       |   |   | 1.15 |   |   | 1.37 |   |   | 1.04 |   |   | 0.90 |   |
| Net                  charge-offs to average loans                                                            |   |                                                                                                                | 0.97       |   |   | 0.92 |   |   | 0.69 |   |   | 0.47 |   |   | 0.51 |   |

----

|                                                       |   | **As                  of or for the Year Ended December 31,**                                |   |
|------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                       |   |  **2006**                                                                                                                            |   |  **2005** |   |  **2004** |   |  **2003** |   |  **2002** |   |
|                                                       |   |  **(Dollars                  in thousands, except per share                  data)**         |   |
| **Capital                  Ratios:**                       |   |                                                                                                                                 |   |    |   |    |   |    |   |    |   |
| Leverage                  ratio                            |   |                                                                                                                                      | 7.92   | % |   | 9.35 | % |   | 9.91 | % |   | 6.76 | % |   | 7.93 | % |
| Tier                  1 risk-based capital                 |   |                                                                                                                                      | 10.25  |   |   | 12.45 |   |   | 12.73 |   |   | 8.30 |   |   | 8.63 |   |
| Total                  risk-based capital                  |   |                                                                                                                                      | 11.25  |   |   | 13.49 |   |   | 13.94 |   |   | 11.60 |   |   | 12.79 |   |
| Tangible                  common equity to tangible assets |   |                                                                                                                                      | 6.44   |   |   | 6.91 |   |   | 7.54 |   |   | 4.93 |   |   | 5.54 |   |

----

| (1) | Extraordinary                  gains resulting from the negative goodwill on the acquisition of                  BankTrust                  and Banco Financiero in 2004 and 2002, respectively. The excess                  of the                  fair value of the assets acquired over the purchase price resulted                  in a                  negative goodwill of $5.7 million and 1.5 million, respectively.                  The                  negative goodwill of BankTrust was allocated between a $4.4 million                  extraordinary gain, $670,000 of the fair value of intangible assets,                  net                  of their tax effect, and the $627,000 of the fair value of the                  acquired                  furniture, fixtures and equipment. The negative goodwill of Banco                  Financiero was allocated between a $1.1 million extraordinary gain                  and the                  $456,000 of the fair value of the acquired furniture, fixtures                  and                  equipment. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Return                  on average common equity is determined by dividing net income before                  extraordinary gain by average common                  equity. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Return                  on average assets is determined by dividing net income before                  extraordinary gain by average                  assets. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Net                  interest margin is determined by dividing net interest income (fully                  taxable equivalent) by average interest-earning                  assets. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | The                  efficiency ratio is determined by dividing total noninterest expense                  by an                  amount equal to net interest income (fully taxable equivalent)                  plus                  noninterest income. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM        7. **
**Management’s        Discussion and Analysis of Financial Condition and Results of        Operation.**

*“Selected        Consolidated Financial Data,”*

**Executive        Overview**

***Introduction***

*“Note        17 - Notes Payable to Statutory Trusts”*

----

***2006        Key Performance Indicators***

|  | ● | the                  write-off of approximately $626,000 in unamortized placement costs                  in 2006                  related to the redemption of $25.8 million of floating rate junior                  subordinated deferrable interest debentures on December 18,                  2006; |
|--|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ● | our                  net loss on sale of securities increased to $1.1 million in 2006,                  representing a $791,000 increase, from $301,000 in                  2005; |
|--|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ● | our                  total revenue grew to $169.9 million in 2006, representing an increase                  of                  20.56%, from $141.0 million in 2005; |
|--|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | our                  net interest margin and spread on a fully taxable equivalent basis                  decreased to 2.86% and 2.33% in 2006, respectively, compared to                  3.29% and                  2.88% in 2005; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | our                  provision for loan and lease losses grew to $16.9 million in 2006,                  representing an increase of 32.31%, from $12.8 million in 2005; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | our                  total noninterest expense grew to $43.4 million in 2006, representing                  an                  increase of 15.25%, from $37.6 million in                  2005; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | our                  effective tax rate increased to 43.95% in 2006, from 35.45% in                  2005; |
|--------|---------|------------------------------------------------------------------------------------------------------------|

|  | ● | our                  total assets grew to $2.501 billion at the end of 2006, representing                  an                  increase of 4.58%, from $2.391 billion at the end of                  2005; |
|--|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ● | our                  net loans and leases grew to $1.732 billion at the end of 2006,                  representing an increase of 11.09%, from $1.559 billion at the                  end of                  2005; and |
|--|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ● | our                  total deposits grew to $1.905 billion at the end of 2006, representing                  an                  increase of 9.87%, from $1.734 billion at the end of                  2005. |
|--|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*“Management’s        Discussion and Analysis of Financial Condition and Results of Operations”*

----

***Critical        Accounting Policies***

*Loans        and Allowance for Loan and Lease Losses*

*“Allowance        for Loan and Lease Losses.”*

----

*Other        Real Estate Owned and Repossessed Assets*

*“Nonperforming        Loans, Leases and Assets.”*

----

**Results        of Operations as of and for the Years Ended December 31, 2006, 2005 and        2004**

***Net        Interest Income and Net Interest Margin***

----

|                                                                                                     |   | **Year                  Ended December 31,** |      |
|----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|
|                                                                                                     |   | **2006**                                     |      | **2005** |   | **2004** |   |
|                                                                                                     |   | **Average                  Balance**         |      | **Interest** |   | **Average                  Rate/****Yield****(1)** |   | **Average                  Balance** |   | **Interest** |   | **Average                  Rate/****Yield****(1)** |   | **Average                  Balance** |   | **Interest** |   | **Average                  Rate/****Yield****(1)** |   |
|                                                                                                     |   | **(Dollars                  in thousands)**  |      |
| ASSETS:                                                                                                  |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning                  assets:                                                                |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loans and leases(2)                                                                 |   | $                                            | 1,643,587 |   | $ | 130,003 |   |   | 8.00 | % | $ | 1,470,256 |   | $ | 107,971 |   |   | 7.41 | % | $ | 1,200,445 |   | $ | 82,790 |   |   | 6.94 | % |
| Securities                  of U.S. government agencies(3)                                               |   |                                         | 604,606   |   |   | 27,137 |   |   | 6.45 |   |   | 600,461 |   |   | 21,795 |   |   | 5.14 |   |   | 433,456 |   |   | 11,180 |   |   | 3.53 |   |
| Other                  investment securities(3)                                                          |   |                                         | 46,083    |   |   | 2,296 |   |   | 7.03 |   |   | 38,811 |   |   | 1,726 |   |   | 6.12 |   |   | 18,116 |   |   | 602 |   |   | 4.34 |   |
| Puerto                  Rico government obligations(3)                                                   |   |                                         | 9,397     |   |   | 412 |   |   | 6.29 |   |   | 8,783 |   |   | 352 |   |   | 5.67 |   |   | 7,515 |   |   | 306 |   |   | 5.66 |   |
| Securities                  purchased under agreements to resell and federal funds                  sold |   |                                         | 34,841    |   |   | 1,791 |   |   | 5.57 |   |   | 32,297 |   |   | 1,150 |   |   | 4.19 |   |   | 29,556 |   |   | 380 |   |   | 1.29 |   |
| Interest-earning                  deposits                                                               |   |                                         | 9,565     |   |   | 507 |   |   | 5.30 |   |   | 6,767 |   |   | 239 |   |   | 3.53 |   |   | 12,754 |   |   | 135 |   |   | 1.06 |   |
| Total                  interest-earning assets                                                           |   | $                                            | 2,348,079 |   | $ | 162,146 |   |   | 7.53 | % | $ | 2,157,375 |   | $ | 133,233 |   |   | 6.69 | % | $ | 1,701,842 |   | $ | 95,393 |   |   | 5.90 | % |
| Total                  noninterest-earning assets                                                        |   |                                         | 80,735    |   |   |   |   |   |   |   |   | 77,612 |   |   |   |   |   |   |   |   | 71,084 |   |   |   |   |   |   |   |
| TOTAL                  ASSETS                                                                            |   | $                                            | 2,428,814 |   |   |   |   |   |   |   | $ | 2,234,987 |   |   |   |   |   |   |   | $ | 1,772,926 |   |   |   |   |   |   |   |
|                                                                                                     |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES                  AND STOCKHOLDERS’ EQUITY:                                             |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                                                           |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Money                  market deposits                                                                   |   | $                                            | 25,470    |   | $ | 584 |   |   | 2.31 | % | $ | 51,787 |   | $ | 1,090 |   |   | 2.13 | % | $ | 62,346 |   | $ | 1,335 |   |   | 2.17 | % |
| NOW                  deposits                                                                            |   |                                         | 46,330    |   |   | 1,035 |   |   | 2.24 |   |   | 46,421 |   |   | 858 |   |   | 1.85 |   |   | 40,931 |   |   | 738 |   |   | 1.81 |   |
| Savings                  deposits                                                                        |   |                                         | 184,824   |   |   | 4,386 |   |   | 2.37 |   |   | 254,923 |   |   | 5,861 |   |   | 2.30 |   |   | 261,660 |   |   | 6,217 |   |   | 2.38 |   |
| Time                  certificates of deposit in denominations of $100,000 or                  more      |   |                                         | 1,240,403 |   |   | 58,351 |   |   | 5.13 |   |   | 869,054 |   |   | 32,384 |   |   | 3.96 |   |   | 599,660 |   |   | 19,409 |   |   | 3.38 |   |
| Other                  time deposits                                                                     |   |                                         | 113,097   |   |   | 4,189 |   |   | 3.71 |   |   | 152,787 |   |   | 4,741 |   |   | 3.11 |   |   | 192,046 |   |   | 5,610 |   |   | 2.92 |   |
| Other                  borrowings(4)                                                                     |   |                                         | 499,275   |   |   | 26,818 |   |   | 7.17 |   |   | 548,141 |   |   | 20,002 |   |   | 4.81 |   |   | 369,064 |   |   | 8,172 |   |   | 2.73 |   |
| Total                  interest-bearing liabilities                                                      |   | $                                            | 2,109,399 |   | $ | 95,363 |   |   | 5.20 | % | $ | 1,923,113 |   | $ | 64,936 |   |   | 3.81 | % | $ | 1,525,707 |   | $ | 41,481 |   |   | 2.90 | % |
| Noninterest-bearing                  liabilities:                                                        |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing                  deposits                                                            |   |                                         | 128,551   |   |   |   |   |   |   |   |   | 129,676 |   |   |   |   |   |   |   |   | 119,847 |   |   |   |   |   |   |   |
| Other                  liabilities                                                                       |   |                                         | 25,830    |   |   |   |   |   |   |   |   | 16,962 |   |   |   |   |   |   |   |   | 19,234 |   |   |   |   |   |   |   |
| Total                  noninterest-bearing liabilities                                                   |   |                                         | 154,381   |   |   |   |   |   |   |   |   | 146,638 |   |   |   |   |   |   |   |   | 139,081 |   |   |   |   |   |   |   |
| STOCKHOLDERS’                  EQUITY                                                              |   |                                         | 165,034   |   |   |   |   |   |   |   |   | 165,236 |   |   |   |   |   |   |   |   | 108,138 |   |   |   |   |   |   |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS’ EQUITY                                        |   | $                                            | 2,428,814 |   |   |   |   |   |   |   | $ | 2,234,987 |   |   |   |   |   |   |   | $ | 1,772,926 |   |   |   |   |   |   |   |
| Net                  interest income(5)                                                                  |   |                                         |      |   | $ | 66,783 |   |   |   |   |   |   |   | $ | 68,297 |   |   |   |   |   |   |   | $ | 53,912 |   |   |   |   |
| Net                  interest spread(6)                                                                  |   |                                         |      |   |   |   |   |   | 2.33 | % |   |   |   |   |   |   |   | 2.88 | % |   |   |   |   |   |   |   | 3.00 | % |
| Net                  interest margin(7)                                                                  |   |                                         |      |   |   |   |   |   | 2.86 | % |   |   |   |   |   |   |   | 3.29 | % |   |   |   |   |   |   |   | 3.29 | % |

----

| (1) | Interest                  yield and expense is calculated on a fully taxable equivalent basis                  assuming a 43.5% tax rate for the year ended December 31, 2006,                  a 41.5%                  tax rate for 2005, and a 39% tax rate for                  2004. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Loan                  costs (fees) have been included in the calculation of interest                  income.                  Loan costs (fees) were approximately $539,000, $780,000 and $(201,000)                  for                  the years ended December 31, 2006, 2005 and 2004, respectively.                  Loans                  includes nonaccrual loans, which balance as of the periods ended                  December                  31, 2006, 2005 and 2004 was $37.3 million, $27.7 million and $32.2                  million, respectively, and are net of the allowance for loan and                  lease                  losses, deferred fees, unearned income, and related direct                  costs. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Available-for-sale                  investments are adjusted for unrealized gain or                  loss. |
|-----|------------------------------------------------------------------------------------------------------------|

| (4) | For                  2006, interest expense on other borrowings includes the write-off                  of                  approximately $626,000 in unamortized placement costs related to                  the                  redemption of $25.8 million of floating rate junior subordinated                  deferrable interest debentures on December 18, 2006, as previously                  mentioned. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (5) | Net                  interest income on a tax equivalent basis was $67.2 million, $71.0                  million                  and $56.0 million for the years ended December 31, 2006, 2005 and                  2004,                  respectively. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Represents                  the average rate earned on interest-earning assets less the average                  rate                  paid on interest-bearing liabilities on a fully taxable equivalent                  basis. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Represents                  net interest income on a fully taxable equivalent basis as a percentage                  of                  average interest-earning assets. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                     |   | **Year                  Ended December 31,**                                                      |   |
|----------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|
|                                                                                                     |   | **2006                  Over 2005****Increases/(Decreases)****Due                  to Change in** |   | **2005                  Over 2004****Increases/(Decreases)****Due                  to Change in** |   |
|                                                                                                     |   | **Volume**                                                                                        |   | **Rate** |   | **Net** |   | **Volume** |   | **Rate** |   | **Net** |   |
|                                                                                                     |   | **(In                  thousands)**                                                               |   |
| INTEREST                  EARNED                  ON:                                                    |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loans(1)                                                                            |   | $                                                                                                 | 12,729 |   | $ | 9,303 |   | $ | 22,032 |   | $ | 18,608 |   | $ | 6,573 |   | $ | 25,181 |   |
| Securities                  of U.S. government agencies                                                  |   |                                                                                              | 150    |   |   | 5,192 |   |   | 5,342 |   |   | 4,308 |   |   | 6,307 |   |   | 10,615 |   |
| Other                  investment securities                                                             |   |                                                                                              | 323    |   |   | 247 |   |   | 570 |   |   | 688 |   |   | 436 |   |   | 1,124 |   |
| Puerto                  Rico government obligations                                                      |   |                                                                                              | 25     |   |   | 35 |   |   | 60 |   |   | 52 |   |   | (6 | ) |   | 46 |   |
| Securities                  purchased under agreements to resell and federal funds                  sold |   |                                                                                              | 91     |   |   | 550 |   |   | 641 |   |   | 35 |   |   | 735 |   |   | 770 |   |
| Interest-earning                  deposits                                                               |   |                                                                                              | 99     |   |   | 169 |   |   | 268 |   |   | (63 | ) |   | 167 |   |   | 104 |   |
|                                                                                                     |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  interest-earning assets                                                           |   | $                                                                                                 | 13,417 |   | $ | 15,496 |   | $ | 28,913 |   | $ | 23,628 |   | $ | 14,212 |   | $ | 37,840 |   |
| INTEREST                  PAID ON:                                                                       |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Money                  market deposits                                                                   |   | $                                                                                                 | (554   | ) | $ | 48 |   | $ | (506 | ) | $ | (226 | ) | $ | (19 | ) | $ | (245 | ) |
| NOW                  deposits                                                                            |   |                                                                                              | (2     | ) |   | 179 |   |   | 177 |   |   | 99 |   |   | 21 |   |   | 120 |   |
| Savings                  deposits                                                                        |   |                                                                                              | (1,612 | ) |   | 137 |   |   | (1,475 | ) |   | (160 | ) |   | (196 | ) |   | (356 | ) |
| Time                  certificates of deposit in denominations of $100,000 or                  more      |   |                                                                                              | 13,838 |   |   | 12,129 |   |   | 25,967 |   |   | 8,719 |   |   | 4,256 |   |   | 12,975 |   |
| Other                  time deposits                                                                     |   |                                                                                              | (1,232 | ) |   | 680 |   |   | (552 | ) |   | (1,147 | ) |   | 278 |   |   | (869 | ) |
| Other                  borrowings(2)                                                                     |   |                                                                                              | (1,783 | ) |   | 8,599 |   |   | 6,816 |   |   | 3,965 |   |   | 7,865 |   |   | 11,830 |   |
|                                                                                                     |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  interest-bearing liabilities                                                      |   | $                                                                                                 | 8,655  |   | $ | 21,772 |   | $ | 30,427 |   | $ | 11,250 |   | $ | 12,205 |   | $ | 23,455 |   |
|                                                                                                     |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                                                     |   | $                                                                                                 | 4,762  |   | $ | (6,276 | ) | $ | (1,514 | ) | $ | 12,378 |   | $ | 2,007 |   | $ | 14,385 |   |

----

| (1) | Loan                  costs (fees) have been included in the calculation of interest                  income.                  Loan costs (fees) were approximately $539,000, $780,000 and $(201,000)                  for                  the years ended December 31, 2006, 2005 and 2004, respectively.                  Loans                  includes nonaccrual loans, which balance as of the periods ended                  December                  31, 2006, 2005 and 2004 was $37.3 million, $27.7 million and $32.2                  million, respectively, and are net of the allowance for loan and                  lease                  losses, deferred fees, unearned income, and related direct                  costs. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | For                  2006, interest expense on other borrowings includes the write-off                  of                  approximately $626,000 in unamortized placement costs related to                  the                  redemption of $25.8 million of floating rate junior subordinated                  deferrable interest debentures on December 18, 2006, as previously                  mentioned. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Provision        for Loan and Lease Losses***

*“Allowance        for Loan and Lease Losses.”*

----

*“Allowance        for Loan and Lease Losses”*

*“Allowance        for Loan and Lease Losses.”*

***Noninterest        Income***

|                                                                                                                                                                            |   | **Year                  Ended December 31,** |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|------------|
|                                                                                                                                                                            |   | **2006**                                     |       | **2005**  |   | **2004**  |   |
|                                                                                                                                                                            |   | **Amount**                                        | ** ** | **%** | ** ** | **Amount** | ** ** | ** %** | ** ** | **Amount** | ** ** | ** %** |   |
|                                                                                                                                                                            |   | **(Dollars                  in thousands)**       |       |
| Service                  charges and other fees                                                                                                                                 |   | $                                                 | 8,476      |   |   | 108.7 | % | $ | 9,069 |   |   | 117.4 | % | $ | 8,057 |   |   | 88.6 | % |
| Loss                  on sale of non-hedging derivatives, net                                                                                                                   |   |                                              | -          |   |   | - |   |   | (944 | ) |   | (12.2 | ) |   | — |   |   | — |   |
| Gain                  on sale of loans and leases, net                                                                                                                          |   |                                              | 401        |   |   | 5.1 |   |   | 945 |   |   | 12.2 |   |   | 1,395 |   |   | 15.3 |   |
| Loss                  on sale of securities, net                                                                                                                                |   |                                              | (1,092     | ) |   | (14.0 | ) |   | (301 | ) |   | (3.9 | ) |   | — |   |   | — |   |
| Gain                  (loss) on sale of other real estate owned, repossessed assets,                  and                  on                  disposition of other assets, net |   |                                              | 16         |   |   | 0.2 |   |   | (1,040 | ) |   | (13.5 | ) |   | (359 | ) |   | (3.9 | ) |
|                                                                                                                                                                            |   |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  noninterest income                                                                                                                                       |   | $                                                 | 7,801      |   |   | 100.0 | % | $ | 7,729 |   |   | 100.0 | % | $ | 9,093 |   |   | 100.0 | % |

----

*“Note        20 - Sales of Receivables”*

----

***Noninterest        Expense***

|                                                                           |   | **Year                  Ended December 31,** |       |
|--------------------------------------------------------------------------------|--------|---------------------------------------------------|------------|
|                                                                           |   | **2006**                                          |       | **2005** |   | **2004** |   |
|                                                                           |   | **Amount**                                        | ** ** | **%** | ** ** | **Amount** | ** ** | ** %** | ** ** | **Amount** | ** ** | ** %** |   |
|                                                                           |   | **(Dollars                  in thousands)**       |       |
| Salaries                  and employee benefits                                |   | $                                                 | 17,507     |   |   | 40.3 | % | $ | 14,727 |   |   | 39.2 | % | $ | 11,111 |   |   | 38.2 | % |
| Occupancy                  and equipment                                       |   |                                              | 9,565      |   |   | 22.0 |   |   | 8,555 |   |   | 22.7 |   |   | 6,943 |   |   | 24.0 |   |
| Professional                  services, including directors’ fees        |   |                                              | 4,104      |   |   | 9.5 |   |   | 3,912 |   |   | 10.4 |   |   | 2,196 |   |   | 7.6 |   |
| Office                  supplies                                               |   |                                              | 1,394      |   |   | 3.2 |   |   | 1,163 |   |   | 3.1 |   |   | 1,033 |   |   | 3.6 |   |
| Other                  real estate owned and other repossessed assets expenses |   |                                              | 2,290      |   |   | 5.3 |   |   | 1,096 |   |   | 2.9 |   |   | 1,060 |   |   | 3.7 |   |
| Promotion                  and advertising                                     |   |                                              | 1,200      |   |   | 2.8 |   |   | 686 |   |   | 1.8 |   |   | 545 |   |   | 1.9 |   |
| Lease                  expenses                                                |   |                                              | 776        |   |   | 1.8 |   |   | 862 |   |   | 2.3 |   |   | 687 |   |   | 2.4 |   |
| Insurance                                                                      |   |                                              | 1,053      |   |   | 2.4 |   |   | 1,095 |   |   | 2.9 |   |   | 804 |   |   | 2.8 |   |
| Municipal                  and other taxes                                     |   |                                              | 1,657      |   |   | 3.8 |   |   | 1,674 |   |   | 4.4 |   |   | 1,254 |   |   | 4.3 |   |
| Commissions                  and service fees credit and debit cards           |   |                                              | 1,324      |   |   | 3.1 |   |   | 1,364 |   |   | 3.6 |   |   | 1,206 |   |   | 4.2 |   |
| Other                  noninterest expense                                     |   |                                              | 2,516      |   |   | 5.8 |   |   | 2,509 |   |   | 6.7 |   |   | 2,103 |   |   | 7.3 |   |
| Total                  noninterest expense                                     |   | $                                                 | 43,386     |   |   | 100.0 | % | $ | 37,643 |   |   | 100.0 | % | $ | 28,942 |   |   | 100.0 | % |

----

----

***Provision        for Income Taxes***

*“Note        2 - Summary of Significant Accounting Policies”*
*“Note        21 - Income Taxes”*
*“Financial        Condition.”*

----

***Extraordinary        Gain on Acquisition of BankTrust***

*“Note        3 - Acquisition”*

**Financial        Condition**

*“Deposits.”*

*Explanatory        Note on the Adoption of SAB 108 *

*Considering        the Effects of Prior Year Misstatements when Quantifying Misstatements in        Current Year Financial Statements*
*Financial        Statements*

----

*Accounting        for Nonrefundable Fees and Costs Associated with Originating or Acquiring        Loans        and Initial Direct Costs of Leases (“FAS 91”) *
*Accounting        for Leases (“FAS 13”) *
*Accounting        for operating Leases with Scheduled Rent Increases (“FTB85-3”) *

***Short-Term        Investments and Interest-bearing Deposits in Other Financial        Institutions***

***Investment        Securities***

----

|                                                  |   | **Available-for-Sale**                      |       | **Held-to-Maturity**                         |   | **Other                  Investments** |   | **Total**                                    |    |
|-------------------------------------------------------|--------|---------------------------------------------|------------|----------------------------------------------|--------|----------------------------------------|--------|----------------------------------------------|---------|
|                                                  |   | **Amortized****Cost**                       |       | **Estimated****Fair                  Value** |   | **Amortized****Cost**                  |   | **Estimated****Fair                  Value** |    | **Amortized****Cost** |   | **Estimated****Fair                  Value** |   | **Amortized****Cost** |   | **Estimated****Fair                  Value** |   |
|                                                  |   | **(Dollars                  in thousands)** |       |
| **December                  31, 2006:**               |   |                                        |       |                                         |   |                                   |   |                                         |    |   |   |   |   |   |   |   |   |
| U.S.                  government agencies obligations |   | $                                           | 178,533    |                                         | $      | 176,255                                |   | $                                            | 3,165   |   | $ | 3,072 |   | $ | — |   | $ | — |   | $ | 181,698 |   | $ | 179,327 |   |
| Collateralized                  mortgage obligations  |   |                                        | 305,044    |                                         |   | 300,192                                |   |                                         | 29,878  |   |   | 29,142 |   |   | — |   |   | — |   |   | 334,922 |   |   | 329,333 |   |
| Mortgage-backed                  securities           |   |                                        | 49,628     |                                         |   | 49,149                                 |   |                                         | 5,390   |   |   | 5,260 |   |   | — |   |   | — |   |   | 55,018 |   |   | 54,409 |   |
| State                  and municipal obligations      |   |                                        | 9,518      |                                         |   | 9,563                                  |   |                                         | — |   |   | — |   |   | — |   |   | — |   |   | 9,518 |   |   | 9,563 |   |
| Other                  investments                    |   |                                        | —    |                                         |   | —                                |   |                                         | — |   |   | — |   |   | 4,329 |   |   | 4,329 |   |   | 4,329 |   |   | 4,329 |   |
| Total                                                 |   | $                                           | 542,723    |                                         | $      | 535,159                                |   | $                                            | 38,433  |   | $ | 37,474 |   | $ | 4,329 |   | $ | 4,329 |   | $ | 585,485 |   | $ | 576,962 |   |
| **December                  31, 2005:**               |   |                                        |       |                                         |   |                                   |   |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                  government agencies obligations |   | $                                           | 230,892    |                                         | $      | 227,081                                |   | $                                            | 3,763   |   | $ | 3,663 |   | $ | — |   | $ | — |   | $ | 234,655 |   | $ | 230,744 |   |
| Collateralized                  mortgage obligations  |   |                                        | 333,154    |                                         |   | 327,399                                |   |                                         | 32,386  |   |   | 31,590 |   |   | — |   |   | — |   |   | 365,540 |   |   | 358,989 |   |
| Mortgage-backed                  securities           |   |                                        | 65,560     |                                         |   | 64,779                                 |   |                                         | 6,322   |   |   | 6,158 |   |   | — |   |   | — |   |   | 71,882 |   |   | 70,937 |   |
| State                  and municipal obligations      |   |                                        | 7,902      |                                         |   | 7,821                                  |   |                                         | — |   |   | — |   |   | — |   |   | — |   |   | 7,902 |   |   | 7,821 |   |
| Other                  investments                    |   |                                        | —    |                                         |   | —                                |   |                                         | — |   |   | — |   |   | 10,652 |   |   | 10,652 |   |   | 10,652 |   |   | 10,652 |   |
| Total                                                 |   | $                                           | 637,508    |                                         | $      | 627,080                                |   | $                                            | 42,471  |   | $ | 41,411 |   | $ | 10,652 |   | $ | 10,652 |   | $ | 690,631 |   | $ | 679,143 |   |
| **December                  31, 2004:**               |   |                                        |       |                                         |   |                                   |   |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                  treasury securities             |   | $                                           | 84,882     |                                         | $      | 84,392                                 |   | $                                            | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 84,882 |   | $ | 84,392 |   |
| U.S.                  government agencies obligations |   |                                        | 89,376     |                                         |   | 88,799                                 |   |                                         | 4,813   |   |   | 4,775 |   |   | — |   |   | — |   |   | 94,189 |   |   | 93,574 |   |
| Collateralized                  mortgage obligations  |   |                                        | 303,016    |                                         |   | 301,070                                |   |                                         | 37,128  |   |   | 36,991 |   |   | — |   |   | — |   |   | 340,144 |   |   | 338,061 |   |
| Mortgage-backed                  securities           |   |                                        | 71,304     |                                         |   | 71,707                                 |   |                                         | 7,563   |   |   | 7,540 |   |   | — |   |   | — |   |   | 78,867 |   |   | 79,247 |   |
| State                  and municipal obligations      |   |                                        | 9,477      |                                         |   | 9,514                                  |   |                                         | — |   |   | — |   |   | — |   |   | — |   |   | 9,477 |   |   | 9,514 |   |
| Other                  investments                    |   |                                        | —    |                                         |   | —                                |   |                                         | — |   |   | — |   |   | 8,716 |   |   | 8,716 |   |   | 8,716 |   |   | 8,716 |   |
| Total                                                 |   | $                                           | 558,055.00 |                                         | $      | 555,482                                |   | $                                            | 49,504  |   | $ | 49,303 |   | $ | 8,716 |   | $ | 8,716 |   | $ | 616,275 |   | $ | 613,504 |   |

|  | · | prepayments                  for approximately $100.4 million of mortgage backed                  securities; |
|--|--------|---------------------------------------------------------------------------------------------------------------|

|  | · | the                  purchase of $55.4 million in mortgage backed securities, $30.0                  million in                  US government agencies obligations and FHLB stocks, and $5.0 million                  of                  Puerto Rico Agency Notes; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a                  $50.1 million sale of FHLB and mortgage backed securities available                  for                  sale with an average book yield of 3.64% at the time of sale, which                  were sold in December 2006 in an effort to improve our net interest                  margin                  resulting in a net loss on sale of investments of $1.1 million,                  as                  previously mentioned; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a                  decrease of $38.3 million in US government agencies obligations                  due to                  monthly principal prepayments and maturity of FHLB, FNMA & FHLMC                  obligations and the redemption of FHLB                  stocks; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the                  maturity and monthly principal prepayments of $3.4 million in Puerto                  Rico                  Agency Notes; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a                  decrease of $2.9 million in the unrealized net loss on investment                  securities available for sale; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | a                  decrease of $774,000 in other investments upon redemption of $25.8                  million                  of floating rate junior subordinated deferrable interest debentures                  on                  December 18, 2006, as previously                  mentioned; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a                  net premium amortization of                  $368,000. |
|--|--------|---------------------------------------------------------------------------|

|   | ● | the                  purchase of $142.1 million in US government agencies obligations,                  $8.3                  million in FHLB stocks and $159.8 million in mortgage backed securities                  and collateralized mortgage obligations, to offset the effect of                  monthly                  prepayments and sales during the year and to reinvest cash flows                  at higher                  market interest rates in order to improve the average yield of                  the                  investment portfolio; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | the                  monthly prepayments for approximately $136.8 million of mortgage                  backed                  securities; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | a                  $85.0 million sale of US Treasury obligations which would have                  matured                  between August and November of 2005 and averaged a book yield of                  1.94% at                  the time of sale, which                  were sold in an effort to improve the yields of the available for                  sale                  securities portfolio and resulted in a net loss on sale of investments                  of                  $301,000, as previously mentioned; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | a                  decrease of $7.9 million in FHLB investments due to monthly principal                  prepayments and maturity of FHLB obligations, and the redemption                  of FHLB                  stocks; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | a                  net premium amortization of $4.6 million;                  and |
|--------|---------|-----------------------------------------------------------------------------------|

|   | ● | a                  decrease of $1.5 million in Puerto Rico Bonds due to maturity of                  the PR                  Public Finance Corp. Bonds. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Investment        Portfolio — Maturity and Yields***

|                                                          |   | **Year                    Ended December 31, 2006** |    |
|---------------------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                                          |   | **Within                    One Year**              |    | **After                    One but****Within                    Five Years** |   | **After                    Five but****Within                    Ten Years** |   | **After                    Ten Years** |   | **Total** |   |
|                                                          |   | **Amount**                                          |    | **Yield** |   | **Amount** |   | **Yield** |   | **Amount** |   | **Yield** |   | **Amount** |   | **Yield** |   | **Amount** |   | **Yield** |   |
|                                                          |   | **(Dollars                    in thousands)**       |    |
| **Investments                    available-for-sale:**(1)(2)  |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                    government agencies obligations  |   | $                                                   | 15,765  |   |   | 3.28 | % | $ | 142,564 |   |   | 4.64 | % | $ | 17,926 |   |   | 5.66 | % | $ | — |   |   | — | % | $ | 176,255 |   |   | 4.62 | % |
| Mortgage                    backed securities(3)         |   |                                                | 5,612   |   |   | 4.37 |   |   | 36,358 |   |   | 4.42 |   |   | 2,094 |   |   | 5.80 |   |   | 5,085 |   |   | 4.80 |   |   | 49,149 |   |   | 4.52 |   |
| Collateral                    mortgage obligations(3)    |   |                                                | 31,113  |   |   | 4.28 |   |   | 234,658 |   |   | 4.66 |   |   | 34,420 |   |   | 5.29 |   |   | — |   |   | — |   |   | 300,191 |   |   | 4.70 |   |
| State                    & political subdivisions    |   |                                                | 2,631   |   |   | 3.38 |   |   | 1,660 |   |   | 6.14 |   |   | 5,273 |   |   | 4.71 |   |   | — |   |   | — |   |   | 9,564 |   |   | 4.59 |   |
| Total                    investments available-for-sale       |   | $                                                   | 55,121  |   |   | 3.96 | % | $ | 415,240 |   |   | 4.64 | % | $ | 59,713 |   |   | 5.37 | % | $ | 5,085 |   |   | 4.80 | % | $ | 535,159 |   |   | 4.65 | % |
|                                                          |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Investments                    held-to-maturity:**(2)       |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                    government agencies obligations  |   | $                                                   | — |   |   | — | % | $ | 3,165 |   |   | 3.95 | % | $ | — |   |   | — | % | $ | — |   |   | — | % | $ | 3,165 |   |   | 3.95 | % |
| Mortgage                    backed securities(3)         |   |                                                | — |   |   | — |   |   | — |   |   | — |   |   | 5,390 |   |   | 4.98 |   |   | — |   |   | — |   |   | 5,390 |   |   | 4.98 |   |
| Collateral                    mortgage obligations(3)    |   |                                                | — |   |   | — |   |   | 13,556 |   |   | 3.96 |   |   | 16,322 |   |   | 5.22 |   |   | — |   |   | — |   |   | 29,878 |   |   | 4.65 |   |
| State                    & political subdivisions    |   |                                                | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |
| Total                    investments held-to-maturity    |   | $                                                   | — |   |   | — | % | $ | 16,721 |   |   | 3.96 | % | $ | 21,712 |   |   | 5.16 | % | $ | — |   |   | — | % | $ | 38,433 |   |   | 4.64 | % |
|                                                          |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                    Investments:**                     |   |                                                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| FHLB                    stock                            |   |                                                | 3,718   |   |   | 6.25 | % |   | — |   |   | — | % |   | — |   |   | — | % |   | — |   |   | — | % |   | 3,718 |   |   | 6.25 | % |
| Investment                    in statutory trust         |   |                                                | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 611 |   |   | 8.62 |   |   | 611 |   |   | 8.62 |   |
| Total                    other investments               |   | $                                                   | 3,718   |   |   | 6.25 | % | $ | — |   |   | — | % | $ | — |   |   | — | % | $ | 611 |   |   | 8.62 | % | $ | 4,329 |   |   | 6.58 | % |
| Total                    investments                     |   | $                                                   | 58,839  |   |   | 4.10 | % | $ | 431,961 |   |   | 4.62 | % | $ | 81,425 |   |   | 5.31 | % | $ | 5,696 |   |   | 5.21 | % | $ | 577,921 |   |   | 4.67 | % |

----

| (1) | Based                  on estimated fair value. |
|-----|-------------------------------------------------|

| (2) | Almost                  all of our income from investments in securities is tax exempt                  because                  99.16% of these securities are held in our IBEs. 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        Investments***

|                              |   | **Year                  Ended December 31,** |   |
|-----------------------------------|--------|----------------------------------------------|--------|
| **Type**                          |   | **2006**                                     |   | **2005** |   | **2004** |   |
|                              |   | **(In                  thousands)**          |   |
| Statutory                  trusts |   | $                                            | 611    |   | $ | 1,382 |   | $ | 1,386 |   |
| FHLB                  stock       |   |                                         | 3,718  |   |   | 9,270 |   |   | 7,330 |   |
| Total                             |   | $                                            | 4,329  |   | $ | 10,652 |   | $ | 8,716 |   |

----

**Loan        and Lease Portfolio**

|                                                             |   | **Year                  Ended December 31,** |      |
|------------------------------------------------------------------|--------|----------------------------------------------|-----------|
|                                                             |   | **2006**                                     |      | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                             |   | **(In                  thousands)**          |      |
| Real                  estate secured                             |   | $                                            | 813,615   |   | $ | 658,123 |   | $ | 516,542 |   | $ | 317,491 |   | $ | 263,600 |   |
| Leases                                                           |   |                                         | 443,311   |   |   | 487,863 |   |   | 459,251 |   |   | 315,935 |   |   | 256,087 |   |
| Other                  commercial and industrial                 |   |                                         | 297,512   |   |   | 272,205 |   |   | 243,603 |   |   | 177,989 |   |   | 155,622 |   |
| Consumer                                                         |   |                                         | 60,682    |   |   | 63,980 |   |   | 74,755 |   |   | 26,592 |   |   | 31,376 |   |
| Real                  estate - construction                      |   |                                         | 126,241   |   |   | 82,468 |   |   | 79,334 |   |   | 47,370 |   |   | 52,226 |   |
| Other                  loans                                     |   |                                         | 5,015     |   |   | 5,336 |   |   | 6,134 |   |   | 4,236 |   |   | 3,665 |   |
| Gross                  loans and leases                          |   | $                                            | 1,746,376 |   | $ | 1,569,975.00 |   | $ | 1,379,619.00 |   | $ | 889,613 |   | $ | 762,576.00 |   |
| Plus:                  Deferred loan costs, net                  |   |                                         | 4,880     |   |   | 7,442 |   |   | 6,480 |   |   | 4,707 |   |   | 3,018 |   |
| Total                  loans, including deferred loan costs, net |   | $                                            | 1,751,256 |   | $ | 1,577,417 |   | $ | 1,386,099 |   | $ | 894,320 |   | $ | 765,594 |   |
| Less:                  Unearned income                           |   |                                         | (1,297    | ) |   | (1,157 | ) |   | (1,170 | ) |   | (1,774 | ) |   | (3,041 | ) |
| Total                  loans, net of unearned income             |   | $                                            | 1,749,959 |   | $ | 1,576,260 |   | $ | 1,384,929 |   | $ | 892,546 |   | $ | 762,553 |   |
| Less:                  Allowance for loan and lease losses       |   |                                         | (18,937   | ) |   | (18,188 | ) |   | (19,039 | ) |   | (9,394 | ) |   | (6,918 | ) |
| Loans,                  net                                      |   | $                                            | 1,731,022 |   | $ | 1,558,072 |   | $ | 1,365,890 |   | $ | 883,152 |   | $ | 755,635 |   |

----

|                                                   |   | **As                  of December 31, 2006**                     |    |
|---------------------------------------------------|--------|------------------------------------------------------------------|---------|
|                                              |   |                                                             |    | **Over                  1 Year****through                  5 Years** |   | **Over                  5 Years** |   |   |   |
|                                              |   | **One                  Year****or                  Less****(1)** |    | **Fixed****Rate** |   | **Floating                  or Adjustable Rate** |   | **Fixed****Rate** |   | **Floating                  or Adjustable Rate** |   | **Total** |   |
|                                              |   | **(In                  thousands)**                              |    |
| Real                  estate — construction |   | $                                                                | 163,906 |   | $ | 330 |   | $ | 3,465 |   | $ | 559 |   | $ | 2,512 |   | $ | 170,772 |   |
| Real                  estate — secured      |   |                                                             | 215,800 |   |   | 115,441 |   |   | 258,499 |   |   | 128,896 |   |   | 25,917 |   |   | 744,553 |   |
| Other                  commercial and industrial  |   |                                                             | 212,374 |   |   | 20,687 |   |   | 43,028 |   |   | 2,683 |   |   | 13,912 |   |   | 292,684 |   |
| Consumer                                          |   |                                                             | 12,302  |   |   | 12,099 |   |   | 1,326 |   |   | 34,505 |   |   | 370 |   |   | 60,602 |   |
| Leases                                            |   |                                                             | 10,178  |   |   | 391,304 |   |   | - |   |   | 38,661 |   |   | - |   |   | 440,143 |   |
| Other                  loans                      |   |                                                             | 4,829   |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 4,829 |   |
| Total                                             |   | $                                                                | 619,389 |   | $ | 539,861 |   | $ | 306,318 |   | $ | 205,304 |   | $ | 42,711 |   | $ | 1,713,583 |   |

----

| (1) | Maturities                  are based upon contract dates. Demand loans are included in the                  one year                  or less category and totaled $424.0 million as of December 31,                  2006. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Nonperforming        Loans, Leases and Assets***

|                                                                                                                         |   | **As                  of December 31,**     |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                                                                                         |   | **2006**                                    |   | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                                                                                         |   | **(Dollars                  in thousands)** |   |
| Loans                  contractually past due 90 days or more but still accruing                  interest                   |   | $                                           | 12,723 |   | $ | 8,560 |   | $ | 8,365 |   | $ | 9,700 |   | $ | 6,171 |   |
| Nonaccrual                  loans                                                                                            |   |                                        | 37,255 |   |   | 27,703 |   |   | 32,168 |   |   | 17,058 |   |   | 15,889 |   |
| Total                  nonperforming loans                                                                                   |   |                                        | 49,978 |   |   | 36,263 |   |   | 40,533 |   |   | 26,758 |   |   | 22,060 |   |
| Other                  real estate owned                                                                                     |   |                                        | 3,629  |   |   | 1,542 |   |   | 2,875 |   |   | 2,774 |   |   | 1,963 |   |
| Other                  repossessed assets                                                                                    |   |                                        | 9,419  |   |   | 7,975 |   |   | 3,566 |   |   | 3,643 |   |   | 5,681 |   |
| Total                  nonperforming assets                                                                                  |   | $                                           | 63,026 |   | $ | 45,780 |   | $ | 46,974 |   | $ | 33,175 |   | $ | 29,704 |   |
| Nonperforming                  loans to total loans and leases, net of unearned                                              |   |                                        | 2.85   | % |   | 2.30 | % |   | 2.92 | % |   | 2.98 | % |   | 2.90 | % |
| Nonperforming                  assets to total loans and leases, net of unearned, plus repossessed                  property |   |                                        | 3.57   |   |   | 2.89 |   |   | 3.37 |   |   | 3.66 |   |   | 3.87 |   |
| Nonperforming                  assets to total assets                                                                        |   |                                        | 2.52   |   |   | 1.91 |   |   | 2.23 |   |   | 2.51 |   |   | 2.87 |   |
| Allowance                  for loan and lease losses to nonperforming loans                                                  |   |                                        | 37.89  |   |   | 50.16 |   |   | 46.97 |   |   | 35.11 |   |   | 31.36 |   |

----

----

***Allowance        for Loan and Lease Losses***

|   | · | credit                  quality; |
|--------|--------|----------------------------------|

|   | · | sufficiency                  of credit and collateral documentation; |
|--------|--------|----------------------------------------------------------------------|

|   | · | proper                  lien perfection; |
|--------|--------|------------------------------------------|

|   | · | appropriate                  approval by the loan officer and the loan                  committees; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | adherence                  to any loan agreement covenants; and |
|--------|--------|-----------------------------------------------------------------|

|   | · | compliance                  with internal policies and procedures and laws and                  regulations. |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | 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. |
|--------|--------|------------------------------------------------------------------------------|

----

*Accounting        by Creditors for Impairment of a Loan (“SFAS No. 114”)*
*Accounting        by Creditors for Impairment of a Loan - Income Recognition and        Disclosures*

----

|                                                                                                                                  |   | **Year                  Ended December 31,** |      |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|
|                                                                                                                                  |   | **2006**                                     |      | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                                                                                                  |   | **(Dollars                  in thousands)**  |      |
| Average                  total loans and leases outstanding during period                                                             |   | $                                            | 1,663,330 |   | $ | 1,487,850 |   | $ | 1,217,723 |   | $ | 842,033 |   | $ | 577,995 |   |
| Total                  loans and leases outstanding at end of period, including loans                  held for                  sale |   |                                         | 1,750,838 |   |   | 1,577,196 |   |   | 1,387,613 |   |   | 899,392 |   |   | 767,791 |   |
| Allowance                  for loan and lease losses:                                                                                 |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                  at beginning of period                                                                                     |   |                                         | 18,188    |   |   | 19,039 |   |   | 9,394 |   |   | 6,918 |   |   | 4,513 |   |
| Charge-offs:                                                                                                                          |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real                  estate — secured                                                                                          |   |                                         | 685       |   |   | - |   |   | 5 |   |   | - |   |   | - |   |
| Commercial                  and industrial                                                                                            |   |                                         | 3,050     |   |   | 4,848 |   |   | 3,329 |   |   | 966 |   |   | 887 |   |
| Consumer                                                                                                                              |   |                                         | 1,978     |   |   | 2,600 |   |   | 1,196 |   |   | 1,347 |   |   | 1,718 |   |
| Leases                                                                                                                                |   |                                         | 12,927    |   |   | 8,991 |   |   | 5,806 |   |   | 2,715 |   |   | 767 |   |
| Other                  loans                                                                                                          |   |                                         | 149       |   |   | 150 |   |   | 164 |   |   | 37 |   |   | 16 |   |
| Total                  charge-offs                                                                                                    |   |                                         | 18,789    |   |   | 16,589 |   |   | 10,500 |   |   | 5,065 |   |   | 3,388 |   |
| Recoveries:                                                                                                                           |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real                  estate — secured                                                                                          |   |                                         | 11        |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Commercial                  and industrial                                                                                            |   |                                         | 534       |   |   | 486 |   |   | 154 |   |   | 160 |   |   | 97 |   |
| Consumer                                                                                                                              |   |                                         | 465       |   |   | 256 |   |   | 233 |   |   | 254 |   |   | 180 |   |
| Leases                                                                                                                                |   |                                         | 1,604     |   |   | 2,210 |   |   | 1,741 |   |   | 675 |   |   | 142 |   |
| Other                  loans                                                                                                          |   |                                         | 21        |   |   | 11 |   |   | 15 |   |   | 1 |   |   | 2 |   |
| Total                  recoveries                                                                                                     |   |                                         | 2,635     |   |   | 2,963 |   |   | 2,143 |   |   | 1,090 |   |   | 421 |   |
| Net                  loan and lease charge-offs                                                                                       |   |                                         | 16,154    |   |   | 13,626 |   |   | 8,357 |   |   | 3,975 |   |   | 2,967 |   |
| Provision                  for loan and lease losses                                                                                  |   |                                         | 16,903    |   |   | 12,775 |   |   | 7,100 |   |   | 6,451 |   |   | 3,354 |   |
| Allowance                  of acquired bank — BankTrust (2004) and Banco Financiero                  (2002)                     |   |                                         | -         |   |   | - |   |   | 10,902 |   |   | - |   |   | 2,018 |   |
| Allowance                  at end of period                                                                                           |   | $                                            | 18,937    |   | $ | 18,188 |   | $ | 19,039 |   | $ | 9,394 |   | $ | 6,918 |   |
| Ratios:                                                                                                                               |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loan and lease charge-offs to average total loans                                                                |   |                                         | 0.97      | % |   | 0.92 | % |   | 0.69 | % |   | 0.47 | % |   | 0.51 | % |
| Allowance                  for loan and lease losses to total loans at end of period                                                  |   |                                         | 1.08      |   |   | 1.15 |   |   | 1.37 |   |   | 1.04 |   |   | 0.90 |   |
| Net                  loan and lease charge-offs to allowance for loan losses at end                  of                  period       |   |                                         | 85.30     |   |   | 74.92 |   |   | 43.89 |   |   | 42.31 |   |   | 42.89 |   |
| Net                  loan and lease charge-offs to provision for loan and lease                  losses                               |   |                                         | 95.57     |   |   | 106.66 |   |   | 117.70 |   |   | 61.62 |   |   | 55.23 |   |

----

----

|                                                       |   | **As                  of December 31,**     |   |
|------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                       |   | **2006**                                    |   | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                       |   | **Amt.**                                    |   | **Loan                  Category to Gross****Loans(1)** |   | **Amt.** |   | **Loan                  Category to Gross****Loans(1)** |   | **Amt.** |   | **Loan                  Category to Gross****Loans(1)** |   | **Amt.** |   | **Loan                  Category to Gross****Loans(1)** |   | **Amt.** |   | **Loan                  Category to Gross****Loans(1)** |   |
|                                                       |   | **(Dollars                  in thousands)** |   |
| **Allocated:**                                             |   |                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Real                  estate — construction          |   | $                                           | 610    |   |   | 7.23 | % | $ | 714 |   |   | 5.25 | % | $ | 1,200 |   |   | 5.75 | % | $ | 464 |   |   | 5.32 | % | $ | 495 |   |   | 6.85 | % |
| Real                  estate — secured               |   |                                        | 525    |   |   | 46.60 |   |   | 1,137 |   |   | 41.92 |   |   | 1,997 |   |   | 37.44 |   |   | 1,212 |   |   | 35.69 |   |   | 1,037 |   |   | 34.57 |   |
| Commercial                  and industrial                 |   |                                        | 4,836  |   |   | 17.03 |   |   | 4,597 |   |   | 17.34 |   |   | 6,470 |   |   | 17.66 |   |   | 4,067 |   |   | 20.01 |   |   | 2,265 |   |   | 20.41 |   |
| Consumer                                                   |   |                                        | 1,433  |   |   | 3.47 |   |   | 1,499 |   |   | 4.08 |   |   | 3,239 |   |   | 5.42 |   |   | 750 |   |   | 2.99 |   |   | 992 |   |   | 4.11 |   |
| Leases                                                     |   |                                        | 11,089 |   |   | 25.38 |   |   | 9,701 |   |   | 31.07 |   |   | 3,815 |   |   | 33.29 |   |   | 1,950 |   |   | 35.51 |   |   | 1,825 |   |   | 33.58 |   |
| Other                  loans                               |   |                                        | 436    |   |   | 0.29 |   |   | 212 |   |   | 0.34 |   |   | 134 |   |   | 0.44 |   |   | 21 |   |   | 0.48 |   |   | 18 |   |   | 0.48 |   |
| Unallocated                                                |   |                                        | 8      |   |   | — |   |   | 328 |   |   | — |   |   | 2,184 |   |   | — |   |   | 930 |   |   | — |   |   | 286 |   |   | — |   |
| Total                  allowance for loan and lease losses |   | $                                           | 18,937 |   |   | 100.00 | % | $ | 18,188 |   |   | 100.00 | % | $ | 19,039 |   |   | 100.00 | % | $ | 9,394 |   |   | 100.00 | % | $ | 6,918 |   |   | 100.00 | % |

----

| (1) | Excludes                  mortgage loans held-for-sale. |
|-----|---------------------------------------------------------|

***Nonearning        Assets***

----

***Deposits***

|                                                                                                     |   | **Year                  Ended December 31,** |      |
|----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|
|                                                                                                     |   | **2006**                                     |      | **2005** |   | **2004** |   |
|                                                                                                     |   | **Average                  Balance**         |      | **Percent                  of Deposits** |   | **Average                  Rate** |   | **Average                  Balance** |   | **Percent                  of Deposits** |   | **Average                  Rate** |   | **Average                  Balance** |   | **Percent                  of Deposits** |   | **Average                  Rate** |   |
|                                                                                                     |   | **(Dollars                  in thousands)**  |      |
| Noninterest-bearing                  demand deposits                                                     |   | $                                            | 128,551   |   |   | 7.39 | % |   | - | % | $ | 129,676 |   |   | 8.62 | % |   | - | % | $ | 119,847 |   |   | 9.39 | % |   | - | % |
| Money                  market deposits                                                                   |   |                                         | 25,470    |   |   | 1.46 |   |   | 2.29 |   |   | 51,787 |   |   | 3.44 |   |   | 2.10 |   |   | 62,346 |   |   | 4.88 |   |   | 2.14 |   |
| NOW                  deposits                                                                            |   |                                         | 46,330    |   |   | 2.66 |   |   | 2.23 |   |   | 46,421 |   |   | 3.09 |   |   | 1.85 |   |   | 40,931 |   |   | 3.21 |   |   | 1.80 |   |
| Savings                  deposits                                                                        |   |                                         | 184,824   |   |   | 10.63 |   |   | 2.37 |   |   | 254,923 |   |   | 16.94 |   |   | 2.30 |   |   | 261,660 |   |   | 20.50 |   |   | 2.38 |   |
| Time                  certificates of deposit in denominations of $100,000 or                  more      |   |                                         | 205,510   |   |   | 11.82 |   |   | 4.30 |   |   | 202,099 |   |   | 13.43 |   |   | 3.24 |   |   | 203,129 |   |   | 15.91 |   |   | 2.16 |   |
| Brokered                  certificates of deposits in denominations of $100,000 or                  more |   |                                         | 1,034,893 |   |   | 59.54 |   |   | 4.78 |   |   | 666,955 |   |   | 44.33 |   |   | 3.87 |   |   | 396,531 |   |   | 31.07 |   |   | 3.79 |   |
| Other                  time deposits                                                                     |   |                                         | 113,097   |   |   | 6.50 |   |   | 3.70 |   |   | 152,787 |   |   | 10.15 |   |   | 3.10 |   |   | 192,046 |   |   | 15.04 |   |   | 2.92 |   |
| Total                  deposits                                                                          |   | $                                            | 1,738,675 |   |   | 100.00 | % |   |   |   | $ | 1,504,648 |   |   | 100.00 | % |   |   |   | $ | 1,276,490 |   |   | 100.00 | % |   |   |   |

|                                                                                                    |   | **As                  of December 31,** |      |
|---------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|-----------|
|                                                                                                    |   | **2006**                                |      | **2005** |   | **2004** |   |
|                                                                                                    |   | **(In                  thousands)**     |      |
| Interest                  bearing deposits:                                                             |   |                                    |      |   |   |   |   |
| Now                  and money market                                                                   |   | $                                       | 62,673    |   | $ | 70,962 |   | $ | 118,076 |   |
| Savings                                                                                                 |   |                                    | 156,069   |   |   | 223,665 |   |   | 278,802 |   |
| Broker                  certificates of deposits in denominations ofless                  than $100,000 |   |                                    | 707       |   |   | 2,972 |   |   | 24,115 |   |
| Brokered                  certificates of deposits in denominations of$100,000                  or more |   |                                    | 1,225,449 |   |   | 964,233 |   |   | 487,890 |   |
| Time                  certificates of deposits in denominations of$100,000                  or more     |   |                                    | 224,741   |   |   | 203,708 |   |   | 200,474 |   |
| Other                  time deposits in denominations ofless                  than $100,000             |   |                                    | 95,396    |   |   | 121,950 |   |   | 161,783 |   |
| Total                  interest bearing deposits                                                        |   | $                                       | 1,765,035 |   | $ | 1,587,490 |   | $ | 1,271,140.00 |   |
| Plus:                  non interest bearing deposits                                                    |   |                                    | 140,321   |   |   | 146,638 |   |   | 137,896 |   |
| Total                  deposits                                                                         |   | $                                       | 1,905,356 |   | $ | 1,734,128 |   | $ | 1,409,036 |   |

----

|                                                  |   | **As                  of December 31,** |      |
|-------------------------------------------------------|--------|-----------------------------------------|-----------|
|                                                  |   | **2006**                                |      | **2005** |   | **2004** |   |
|                                                  |   | **(In                  thousands)**     |      |
| Three                  months or less                 |   | $                                       | 547,837   |   | $ | 421,582 |   | $ | 140,228 |   |
| Over                  three months through six months |   |                                    | 294,784   |   |   | 250,982 |   |   | 74,461 |   |
| Over                  six months through 12 months    |   |                                    | 188,691   |   |   | 184,880 |   |   | 108,084 |   |
| Over                  12 months                       |   |                                    | 418,878   |   |   | 310,497 |   |   | 365,591 |   |
| Total                                                 |   | $                                       | 1,450,190 |   | $ | 1,167,941 |   | $ | 688,364 |   |

***Other        Sources of Funds***

|                                                                             |   | **Year                  Ended December 31,** |    |
|----------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                             |   | **2006**                                     |    | **2005** |   | **2004** |   |
|                                                                             |   | **(Dollars                  in thousands)**  |    |
| Balance                  at period-end                                           |   | $                                            | 365,664 |   | $ | 419,860 |   | $ | 463,409 |   |
| Average                  monthly aggregate balance outstanding during the period |   |                                         | 432,459 |   |   | 489,110 |   |   | 312,169 |   |
| Maximum                  aggregate balance outstanding at any month-end          |   |                                         | 501,182 |   |   | 614,650 |   |   | 465,302 |   |
| Weighted                  average interest rate for the year                     |   |                                         | 4.94    | % |   | 3.33 | % |   | 1.70 | % |
| Weighted                  average interest rate for the last month of the year   |   |                                         | 5.27    | % |   | 4.25 | % |   | 2.47 | % |

*FHLB        Advances*

|                                                                           |   | **Year                  Ended December 31,** |    |
|--------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                           |   | **2006**                                     |    | **2005** |   | **2004** |   |
|                                                                           |   | **(Dollars                  in thousands)**  |    |
| Balance                  at period-end                                         |   | $                                            | 8,707   |   | $ | 8,759 |   | $ | 10,404 |   |
| Average                  balance during the period                             |   |                                         | 19,016  |   |   | 10,059 |   |   | 10,450 |   |
| Maximum                  amount outstanding at any month-end                   |   |                                         | 121,292 |   |   | 10,404 |   |   | 10,700 |   |
| Weighted                  average interest rate for the year                   |   |                                         | 5.06    | % |   | 4.93 | % |   | 5.59 | % |
| Weighted                  average interest rate for the last month of the year |   |                                         | 5.51    | % |   | 5.37 | % |   | 4.97 | % |

*Notes        Payable to Statutory Trusts*

*“*
*Eurobank        Statutory Trust I and II*
*”*
*“Note        17 - Notes Payable to Statutory Trusts”*

----

***Capital        Resources and Capital Adequacy Requirements***

*“Note        17 - Notes Payable to Statutory Trusts”*

----

*Risk        Factors,*

|                                                      |   |   **Actual**                      |    | **For                  Minimum Capital****Adequacy                  Purposes**  |   | **To                  Be Well Capitalized****Under                  Prompt Corrective A****ction                  Provision**  |   |
|-----------------------------------------------------------|--------|---------------------------------------------|---------|--------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                 |   |  **Amount                  Is**        |    |  **Ratio                  Is**                                                  |   | **Amount****Must                  Be**                                                                                              |   | **Ratio****Must                  Be** |   | **Amount****Must                  Be** |   | **Ratio****Must                  Be** |   |
|                                                      |   | **(Dollars                  in thousands)** |    |
| **As                  of December 31, 2006:**             |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |
| Total                  Capital (to Risk Weighted Assets)  |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |
| EuroBancshares,                  Inc                      |   | $                                           | 216,673 |                                                                                 |   | 11.25                                                                                                                               | %      |   | ≥                  $                  154,038 |   |   | ≥                  8.00 | % |   | N/A |   |   |   |   |
| Eurobank                                                  |   |                                        | 198,179 |                                                                                 |   | 10.29                                                                                                                               |   |   | ≥                  154,045 |   |   | ≥                  8.00 |   |   | ≥                  192,556 |   |   | ≥                  10.00 | % |
| Tier                  1 Capital (to Risk Weighted Assets) |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EuroBancshares,                  Inc                      |   |                                        | 197,366 |                                                                                 |   | 10.25                                                                                                                               |   |   | ≥                  77,019 |   |   | ≥                  4.00 |   |   | N/A |   |   |   |   |
| Eurobank                                                  |   |                                        | 178,871 |                                                                                 |   | 9.29                                                                                                                                |   |   | ≥                  77,023 |   |   | ≥                  4.00 |   |   | ≥                  115,534 |   |   | ≥                  6.00 |   |
| Leverage                  (to average assets)             |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EuroBancshares,                  Inc                      |   |                                        | 197,366 |                                                                                 |   | 7.92                                                                                                                                |   |   | ≥                  99,679 |   |   | ≥                  4.00 |   |   | N/A |   |   |   |   |
| Eurobank                                                  |   |                                        | 178,871 |                                                                                 |   | 7.18                                                                                                                                |   |   | ≥                  99,637 |   |   | ≥                  4.00 |   |   | ≥                  124,546 |   |   | ≥                  5.00 |   |
| **As                  of December 31, 2005:**             |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Capital (to Risk Weighted Assets)  |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EuroBancshares,                  Inc                      |   | $                                           | 238,570 |                                                                                 |   | 13.49                                                                                                                               | %      |   | ≥ $                  141,479 |   |   | ≥                  8.00 | % |   | N/A |   |   |   |   |
| Eurobank                                                  |   |                                        | 190,070 |                                                                                 |   | 10.72                                                                                                                               |   |   | ≥                  141,836 |   |   | ≥                  8.00 |   |   | ≥                  177,295 |   |   | ≥                  10.00 | % |
| Tier                  1 Capital (to Risk Weighted Assets) |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EuroBancshares,                  Inc                      |   |                                        | 220,157 |                                                                                 |   | 12.45                                                                                                                               |   |   | ≥                  70,740 |   |   | ≥                  4.00 |   |   | N/A |   |   |   |   |
| Eurobank                                                  |   |                                        | 151,657 |                                                                                 |   | 8.55                                                                                                                                |   |   | ≥                  70,918 |   |   | ≥                  4.00 |   |   | ≥                  106,377 |   |   | ≥                  6.00 |   |
| Leverage                  (to average assets)             |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EuroBancshares,                  Inc                      |   |                                        | 220,157 |                                                                                 |   | 9.35                                                                                                                                |   |   | ≥                  94,199 |   |   | ≥                  4.00 |   |   | N/A |   |   |   |   |
| Eurobank                                                  |   |                                        | 151,657 |                                                                                 |   | 6.44                                                                                                                                |   |   | ≥                  94,172 |   |   | ≥                  4.00 |   |   | ≥                  117,714 |   |   | ≥                  5.00 |   |
| **As                  of December 31, 2004:**             |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Capital (to Risk Weighted Assets)  |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EuroBancshares,                  Inc                      |   | $                                           | 220,585 |                                                                                 |   | 13.94                                                                                                                               | %      |   | ≥                  $                  126,564 |   |   | ≥                  8.00 | % |   | N/A |   |   |   |   |
| Eurobank                                                  |   |                                        | 169,705 |                                                                                 |   | 10.67                                                                                                                               |   |   | ≥                  127,286 |   |   | ≥                  8.00 |   |   | ≥                  159,108 |   |   | ≥                  10.00 | % |
| Tier                  1 Capital (to Risk Weighted Assets) |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EuroBancshares,                  Inc                      |   |                                        | 201,342 |                                                                                 |   | 12.73                                                                                                                               |   |   | ≥                  63,282 |   |   | ≥                  4.00 |   |   | N/A |   |   |   |   |
| Eurobank                                                  |   |                                        | 130,461 |                                                                                 |   | 8.20                                                                                                                                |   |   | ≥                  63,643 |   |   | ≥                  4.00 |   |   | ≥                  95,465 |   |   | ≥                  6.00 |   |
| Leverage                  (to average assets)             |   |                                        |    |                                                                                 |   |                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EuroBancshares,                  Inc                      |   |                                        | 201,342 |                                                                                 |   | 9.91                                                                                                                                |   |   | ≥                  81,303 |   |   | ≥                  4.00 |   |   | N/A |   |   |   |   |
| Eurobank                                                  |   |                                        | 130,461 |                                                                                 |   | 6.42                                                                                                                                |   |   | ≥                  81,244 |   |   | ≥                  4.00 |   |   | ≥                  101,555 |   |   | ≥                  5.00 |   |

***Liquidity        Management***

----

----

**Impact        of Inflation and Changing Prices **

***Quantitative        and Qualitative Disclosure About Market Risk***

*“Note        16 - Derivative Financial Instruments”*

----

|                                            |   | **Change                  in Future****Net                  Interest Income Gradual****Raising                  Rate Scenario - Year 1** |   |
|-------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                            |   | **At                  December 31, 2006**                                                                                           |   |
| **Change                  in Interest Rates**   |   | **Dollar                  Change**                                                                                                       |   | **Percentage                  Change** |   |
|                                            |   | **(Dollars                  in thousands)**                                                                                              |   |
| +200                  basis points over year 1  |   | $                                                                                                                                        | 3,077  |   |   | 4.02 | % |
| +100                  basis points over year 1  |   |                                                                                                                                     | 1,426  |   |   | 1.86 |   |
| -                  100 basis points over year 1 |   |                                                                                                                                     | (1,866 | ) |   | (2.44 | ) |
| -                  200 basis points over year 1 |   |                                                                                                                                     | (4,103 | ) |   | (5.36 | ) |

|                                            |   | **Change                  in Future****Net                  Interest Income Rate****Shock                  Scenario - Year 2** |   |
|-------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|--------|
|                                            |   | **At                  December 31, 2006**                                                                                 |   |
| **Change                  in Interest Rates**   |   | **Dollar                  Change**                                                                                             |   | **PercentageChange** |   |
|                                            |   | **(Dollars                  in thousands)**                                                                                    |   |
| +200                  basis points over year 2  |   | $                                                                                                                              | 2,169  |   |   | 2.83 | % |
| +100                  basis points over year 2  |   |                                                                                                                           | 667    |   |   | 0.87 |   |
| -                  100 basis points over year 2 |   |                                                                                                                           | (3,931 | ) |   | (5.13 | ) |
| -                  200 basis points over year 2 |   |                                                                                                                           | (8,040 | ) |   | (10.50 | ) |

----

|                                                                                                            |   | **As                  of December 31, 2006****Volumes                  Subject to Repricing Within** |                                                  |
|-----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------|-------------------------------------------------------|
|                                                                                                       |   | **0-1****Days**                                                                                      |                                                  | **2-180****Days** |   | **181-365****Days** |   | **1-3****Years** |   | **Over****3                  Years** |   | **Non-Interest****Sensitive** |   |  **Total**  |   |
|                                                                                                            |   | **(Dollars                  in thousands)**                                                          |                                                  |
| **Assets:**                                                                                                     |   |                                                                                                 |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term                  investments and federal funds sold                                                  |   | $                                                                                                    | 51,191                                                |   | $ | 49,050 |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 100,241 |   |
| Investment                  securities and FHLB/ Federal Reserve Bank stock                                     |   |                                                                                                 | —                                               |   |   | 95,135 |   |   | 76,820 |   |   | 222,002 |   |   | 183,964 |   |   | — |   |   | 577,921 |   |
| Loans                                                                                                           |   |                                                                                                 | —                                               |   |   | 1,008,779 |   |   | 87,749 |   |   | 319,921 |   |   | 315,452 |   |   | — |   |   | 1,731,901 |   |
| Fixed                  and other assets                                                                         |   |                                                                                                 | —                                               |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 90,857 |   |   | 90,857 |   |
| Total                  assets                                                                                   |   | $                                                                                                    | 51,191                                                |   | $ | 1,152,964 |   | $ | 164,569 |   | $ | 541,923 |   | $ | 499,416 |   | $ | 90,857 |   | $ | 2,500,920 |   |
|                                                                                                            |   |                                                                                                 |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Stockholders’ Equity:**                                                |   |                                                                                                 |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  checking, savings and money market accounts                                   |   |                                                                                                 | —                                               |   |   | 18,902 |   |   | — |   |   | — |   |   | 340,161 |   |   | — |   |   | 359,063 |   |
| Certificates                  of deposit                                                                        |   |                                                                                                 | —                                               |   |   | 890,280 |   |   | 211,800 |   |   | 236,392 |   |   | 207,821 |   |   | — |   |   | 1,546,293 |   |
| Borrowed                  funds                                                                                 |   |                                                                                                 |                                                  |   |   | 268,372 |   |   | 10,500 |   |   | 45,500 |   |   | 70,000 |   |   | — |   |   | 394,372 |   |
| Other                  liabilities                                                                              |   |                                                                                                 | —                                               |   |   | — |   |   | — |   |   | — |   |   | — |   |   | 31,314 |   |   | 31,314 |   |
| Total                  swaps                                                                                    |   |                                                                                                 | —                                               |   |   | 30,800 |   |   | — |   |   | (10,800 | ) |   | (20,000 | ) |   | — |   |   | — |   |
| Stockholders’                  equity                                                                     |   |                                                                                                 | —                                               |   |   | 10,763 |   |   | — |   |   | — |   |   | — |   |   | 159,115 |   |   | 169,878 |   |
| Total                  liabilities and stockholders’ equity                                               |   | $                                                                                               |                      — |   | $ | 1,219,117 |   | $ | 222,300 |   | $ | 271,092 |   | $ | 597,982 |   | $ | 190,429 |   | $ | 2,500,920 |   |
| Period                  gap                                                                                     |   | $                                                                                                    | 51,191                                                |   |   | ($66,153 | ) |   | ($57,731 | ) | $ | 270,831 |   |   | ($98,566 | ) |   |   |   |   |   |   |
| Cumulative                  gap                                                                                 |   | $                                                                                                    | 51,191                                                |   |   | ($14,962 | ) |   | ($72,693 | ) | $ | 198,138 |   | $ | 99,572 |   |   |   |   |   |   |   |
| Period                  gap to total assets                                                                     |   |                                                                                                 | 2.05                                                  | % |   | -2.65 | % |   | -2.31 | % |   | 10.83 | % |   | -3.94 | % |   |   |   |   |   |   |
| Cumulative                  gap to total assets                                                                 |   |                                                                                                 | 2.05                                                  | % |   | -0.60 | % |   | -2.91 | % |   | 7.92 | % |   | 3.98 | % |   |   |   |   |   |   |
| Cumulative                  interest-earning assets to cumulative interest-bearing                  liabilities |   |                                                                                                 | N/A                                                   |   |   | 98.77 | % |   | 94.96 | % |   | 111.57 | % |   | 104.31 | % |   |   |   |   |   |   |

***Aggregate        Contractual Obligations***

|                                               |   | **As                  of December 31, 2006**           |    |
|----------------------------------------------------|--------|-------------------------------------------------------------|---------|
|                                               |   | **Less                  than****One                  Year** |    | **Over                  One Year to****Three                  Years** |   | **Over                  Three Years****to                  Five Years** |   |  **Over                  Five Years** |   |
|                                               |   | **(In                  thousands)**                         |    |
| FHLB                  advances                     |   | $                                                           | 8,200   |   | $ | — |   | $ | — |   | $ | 507 |   |
| Notes                  payable to statutory trusts |   |                                                        | — |   |   | — |   |   | — |   |   | 20,619 |   |
| Operating                  leases                  |   |                                                        | 1,956   |   |   | 2,643 |   |   | 2,312 |   |   | 11,353 |   |
| Total                                              |   | $                                                           | 10,156  |   | $ | 2,643 |   | $ | 2,312 |   | $ | 32,479 |   |

----

***Off-Balance        Sheet Arrangements***

*“Note        27 — Financial Instruments with Off-Balance-Sheet Risk” *

***Recent        Accounting Pronouncements***

*“Note        2(ab) - Recently Issued Accounting Standards”*

**ITEM        7A. Quantitative and Qualitative Disclosures About Market        Risk.**

*“Management’s        Discussion and Analysis of Financial Condition and Results of        Operations”*

**ITEM        8. **
**Financial        Statements and Supplementary Data.**

***Quarterly        Selected Financial Data (Unaudited)***

|                                                   |   | **Year                    ended December 31, 2006 (as reported)** |       |
|--------------------------------------------------------|--------|-------------------------------------------------------------------|------------|
|                                                   |   | **Fourth**                                                        |       | **Third** |   | **Second** |   | **First** |   |
|                                                   |   | **quarter**                                                       |       | **quarter** |   | **quarter** |   | **quarter** |   |
| Interest                    income                     |   | $                                                                 | 42,699,853 |   | $ | 41,849,057 |   | $ | 39,814,536 |   | $ | 37,782,974 |   |
| Interest                    expense                    |   |                                                              | 26,898,186 |   |   | 25,315,546 |   |   | 22,750,837 |   |   | 20,398,777 |   |
| Net                    interest income                 |   |                                                              | 15,801,667 |   |   | 16,533,511 |   |   | 17,063,699 |   |   | 17,384,197 |   |
| Provision                    for loan and lease losses |   |                                                              | 5,274,000  |   |   | 4,849,000 |   |   | 3,390,000 |   |   | 3,390,000 |   |
| Net                    interest income                 |   |                                                              |       |   |   |   |   |   |   |   |   |   |   |
| after                    provision                |   |                                                              |       |   |   |   |   |   |   |   |   |   |   |
| for                    loan and lease losses      |   |                                                              | 10,527,667 |   |   | 11,684,511 |   |   | 13,673,699 |   |   | 13,994,197 |   |
| Total                    other income                  |   |                                                              | 1,109,307  |   |   | 1,778,375 |   |   | 2,546,822 |   |   | 2,366,049 |   |
| Total                    other expenses                |   |                                                              | 10,280,554 |   |   | 11,520,753 |   |   | 10,525,851 |   |   | 11,058,573 |   |
| Income                    before                       |   |                                                              |       |   |   |   |   |   |   |   |   |   |   |
| income                    taxes                   |   |                                                              | 1,356,420  |   |   | 1,942,133 |   |   | 5,694,670 |   |   | 5,301,673 |   |
| Income                    tax                          |   |                                                              | 1,347,299  |   |   | 494,556 |   |   | 2,405,669 |   |   | 2,035,487 |   |
| Net                    income                          |   | $                                                                 | 9,121      |   | $ | 1,447,577 |   | $ | 3,289,001 |   | $ | 3,266,186 |   |
|                                                   |   |                                                              |       |   |   |   |   |   |   |   |   |   |   |
| Earnings                    per share:                 |   |                                                              |       |   |   |   |   |   |   |   |   |   |   |
| Basic                                                  |   | $                                                                 | (0.01      | ) | $ | 0.07 |   | $ | 0.16 |   | $ | 0.16 |   |
| Diluted                                                |   | $                                                                 | (0.01      | ) | $ | 0.06 |   | $ | 0.16 |   | $ | 0.15 |   |

----

|                                                   |   | **Year                    ended December 31, 2006 (SAB 108)** |       |
|--------------------------------------------------------|--------|---------------------------------------------------------------|------------|
|                                                   |   | **Fourth**                                                    |       | **Third** |   | **Second** |   | **First** |   |
|                                                   |   | **quarter**                                                   |       | **quarter** |   | **quarter** |   | **quarter** |   |
| Interest                    income                     |   | $                                                             | 42,700,454 |   | $ | 41,895,851 |   | $ | 39,785,574 |   | $ | 37,764,541 |   |
| Interest                    expense                    |   |                                                          | 26,898,186 |   |   | 25,315,546 |   |   | 22,750,837 |   |   | 20,398,777 |   |
| Net                    interest income                 |   |                                                          | 15,802,268 |   |   | 16,580,305 |   |   | 17,034,737 |   |   | 17,365,764 |   |
| Provision                    for loan and lease losses |   |                                                          | 5,274,000  |   |   | 4,849,000 |   |   | 3,390,000 |   |   | 3,390,000 |   |
| Net                    interest income                 |   |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| after                    provision                |   |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| for                    loan and lease losses      |   |                                                          | 10,528,268 |   |   | 11,731,305 |   |   | 13,644,737 |   |   | 13,975,764 |   |
| Total                    other income                  |   |                                                          | 1,109,307  |   |   | 1,778,375 |   |   | 2,546,822 |   |   | 2,366,049 |   |
| Total                    other expenses                |   |                                                          | 10,343,881 |   |   | 11,476,456 |   |   | 10,512,722 |   |   | 11,052,672 |   |
| Income                    before                       |   |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| income                    taxes                   |   |                                                          | 1,293,694  |   |   | 2,033,224 |   |   | 5,678,837 |   |   | 5,289,141 |   |
| Income                    tax                          |   |                                                          | 1,346,326  |   |   | 514,732 |   |   | 2,397,274 |   |   | 2,024,679 |   |
| Net                    income                          |   | $                                                             | (52,632    | ) | $ | 1,518,492 |   | $ | 3,281,563 |   | $ | 3,264,462 |   |
|                                                   |   |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Earnings                    per share:                 |   |                                                          |       |   |   |   |   |   |   |   |   |   |   |
| Basic                                                  |   | $                                                             | (0.01      | ) | $ | 0.07 |   | $ | 0.16 |   | $ | 0.16 |   |
| Diluted                                                |   | $                                                             | (0.01      | ) | $ | 0.07 |   | $ | 0.16 |   | $ | 0.15 |   |

|                                                   |   | **Year                    ended December 31, 2005** |       |
|--------------------------------------------------------|--------|-----------------------------------------------------|------------|
|                                                   |   | **Fourth**                                          |       | **Third** |   | **Second** |   | **First** |   |
|                                                   |   | **quarter**                                         |       | **quarter** |   | **quarter** |   | **quarter** |   |
| Interest                    income                     |   | $                                                   | 36,832,404 |   | $ | 34,713,785 |   | $ | 31,889,460 |   | $ | 29,796,832 |   |
| Interest                    expense                    |   |                                                | 19,143,116 |   |   | 17,622,676 |   |   | 14,684,896 |   |   | 13,485,061 |   |
| Net                    interest income                 |   |                                                | 17,689,288 |   |   | 17,091,109 |   |   | 17,204,564 |   |   | 16,311,771 |   |
| Provision                    for loan and lease losses |   |                                                | 6,435,000  |   |   | 3,015,000 |   |   | 2,075,000 |   |   | 1,250,000 |   |
| Net                    interest income                 |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| after                    provision                |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| for                    loan and lease losses      |   |                                                | 11,254,288 |   |   | 14,076,109 |   |   | 15,129,564 |   |   | 15,061,771 |   |
| Total                    other income                  |   |                                                | 1,794,212  |   |   | 2,467,971 |   |   | 2,566,147 |   |   | 900,802 |   |
| Total                    other expenses                |   |                                                | 10,174,718 |   |   | 9,329,967 |   |   | 9,274,042 |   |   | 8,864,546 |   |
| Income                    before                       |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| income                    taxes                   |   |                                                | 2,873,782  |   |   | 7,214,113 |   |   | 8,421,669 |   |   | 7,098,027 |   |
| Income                    tax                          |   |                                                | 1,200,410  |   |   | 2,417,003 |   |   | 3,127,004 |   |   | 2,332,811 |   |
| Net                    income                          |   | $                                                   | 1,673,372  |   | $ | 4,797,110 |   | $ | 5,294,665 |   | $ | 4,765,216 |   |
|                                                   |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Earnings                    per share:                 |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Basic                                                  |   | $                                                   | 0.08       |   | $ | 0.24 |   | $ | 0.26 |   | $ | 0.23 |   |
| Diluted                                                |   | $                                                   | 0.07       |   | $ | 0.23 |   | $ | 0.25 |   | $ | 0.23 |   |

----

|                                                   |   | **Year                    ended December 31, 2004** |       |
|--------------------------------------------------------|--------|-----------------------------------------------------|------------|
|                                                   |   | **Fourth**                                          |       | **Third** |   | **Second** |   | **First** |   |
|                                                   |   | **quarter**                                         |       | **quarter** |   | **quarter** |   | **quarter** |   |
| Interest                    income                     |   | $                                                   | 28,370,659 |   | $ | 26,430,103 |   | $ | 23,370,038 |   | $ | 17,222,838 |   |
| Interest                    expense                    |   |                                                | 12,171,282 |   |   | 11,064,900 |   |   | 9,897,769 |   |   | 8,347,321 |   |
| Net                    interest income                 |   |                                                | 16,199,377 |   |   | 15,365,203 |   |   | 13,472,269 |   |   | 8,875,517 |   |
| Provision                    for loan and lease losses |   |                                                | 1,250,000  |   |   | 1,875,000 |   |   | 2,475,000 |   |   | 1,500,000 |   |
| Net                    interest income                 |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| after                    provision                |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| for                    loan and lease losses      |   |                                                | 14,949,377 |   |   | 13,490,203 |   |   | 10,997,269 |   |   | 7,375,517 |   |
| Total                    other income                  |   |                                                | 3,365,466  |   |   | 2,341,494 |   |   | 1,779,771 |   |   | 1,593,122 |   |
| Total                    other expenses                |   |                                                | 8,872,401  |   |   | 7,650,581 |   |   | 6,825,829 |   |   | 5,580,033 |   |
| Income                    before                       |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| income                    taxes                   |   |                                                | 9,442,442  |   |   | 8,181,116 |   |   | 5,951,211 |   |   | 3,388,606 |   |
| Income                    tax                          |   |                                                | 3,319,084  |   |   | 2,804,423 |   |   | 1,475,145 |   |   | 1,063,981 |   |
| Extraordinary                    gain                  |   |                                                | 4,898      |   |   | - |   |   | 4,414,220 |   |   | - |   |
| Net                    income                          |   | $                                                   | 6,128,256  |   | $ | 5,376,693 |   | $ | 8,890,286 |   | $ | 2,324,625 |   |
|                                                   |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Earnings                    per share:                 |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Basic                    earnings per share:           |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Income                    before extraor-              |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| dinary                    item                    |   | $                                                   | 0.30       |   | $ | 0.30 |   | $ | 0.29 |   | $ | 0.17 |   |
| Extraordinary                    item                  |   |                                                | -          |   |   | - |   |   | 0.29 |   |   | - |   |
|  Net                    income                    |   | $                                                   | 0.30       |   | $ | 0.30 |   | $ | 0.58 |   | $ | 0.17 |   |
| Diluted                    earnings per share:         |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| Income                    before extraor-              |   |                                                |       |   |   |   |   |   |   |   |   |   |   |
| dinary                    item                    |   | $                                                   | 0.29       |   | $ | 0.28 |   | $ | 0.28 |   | $ | 0.16 |   |
| Extraordinary                    item                  |   |                                                | -          |   |   | - |   |   | 0.29 |   |   | - |   |
|  Net                    income                    |   | $                                                   | 0.29       |   | $ | 0.28 |   | $ | 0.57 |   | $ | 0.16 |   |

**ITEM        9. **
**Changes        in and Disagreements With Accountants on Accounting and Financial        Disclosure.**

|   | (i) | KPMG’s                  report on management’s assessment of the effectiveness of internal control                  over financial reporting and the effectiveness of internal control                  over                  financial reporting as of December 31, 2005 concluded that EuroBancshares                  had not maintained effective internal control over financial reporting                  as                  of that date due to the effect of a material weakness identified                  by                  management during its assessment of EuroBancshares’ internal controls over                  financial reporting, and contains an explanatory paragraph that                  states: |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                  Company did not maintain sufficient documentation to support the                  monitoring of the recent loss trends experienced in loan and lease                  portfolios; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | There                  was a lack of controls over the segregation of the commercial real                  estate/other commercial loan portfolios used for determining the                  general allowance for loan                  losses; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | EuroBancshares                  did not maintain adequate documentation to support the                  unallocated portion of the allowance for loan and lease                  losses. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | KPMG’s                  report on the consolidated financial statements as of December                  31, 2004                  contained a separate paragraph stating that “the Company adopted the                  provision of Financial Accounting Standards Board’s Interpretation                  No. 46R, *Consolidation                  of Variable Interest Entities*,                  as of December 31, 2003.” |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM        9A. Controls and Procedures.**
** **

*a)        Disclosure Controls and Procedures*

----

*(b)        Management’s Report on Internal Control Over Financial        Reporting*

|   | · | Pertain                  to the maintenance of records that, in reasonable detail, accurately                  and                  fairly reflect the transactions and dispositions of the assets                  of                  EuroBancshares; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Provide                  reasonable assurance that transactions are recorded as necessary                  to permit                  preparation of financial statements in accordance with generally                  accepted                  accounting principles, and that receipts and expenditures of                  EuroBancshares are being made only in accordance with authorizations                  of                  management and directors of EuroBancshares;                  and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Provide                  reasonable assurance regarding prevention or timely detection of                  unauthorized acquisition, use or disposition of EuroBancshares’ assets                  that could have a material effect on the financial                  statements. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*(c)        Changes in Internal Control Over Financial Reporting*

*(d)        Remediation of Material Weakness.*

|  | · | The                  Company did not maintain sufficient documentation to support the                  monitoring of the recent loss trends experienced in loan and lease                  portfolios; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | There                  was a lack of controls over the segregation of the commercial real                  estate/other commercial loan portfolios used for determining the                  general                  allowance for loan losses; and |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | The                  Company did not maintain adequate documentation to support the                  unallocated                  portion of the allowance for loan and lease                  losses. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Remediation        of Material Weaknesses that Existed as of December 31, 2005***

|   | · | *Monitoring                  of Trends*                  -                  A detailed quarterly review and monitoring of loan and lease loss                  ratios                  is documented in order to detect any trend which may require adjustment                  of                  loss percentages allocated in the general allowance for loan and                  lease                  losses. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Key                  Variances*                  -                  New reports are produced in order to compare portfolio balances                  with prior                  month to identify key variances. Analysis procedures are formalized                  and                  documented to ensure the accuracy of these                  reports. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Unallocated                  Portion -*The                  Company has incorporated a new component to the determination of                  the                  allowance for loan and lease losses, which serves as a management                  tool to                  measure the probable effect that current internal and external                  environmental factors could have on the historical loss factors                  in use.                  The implementation of this additional component resulted in a distribution                  of the unallocated portion into the loan categories used for determining                  the allowance for loan and lease losses based on management’s judgment of                  the implied risk over the current internal and external environmental                  factors. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*(e)        Report of Independent Registered Public Accounting Firm.*

**ITEM        9B. Other Information.**

----

**PART        III**

**ITEM        10. **
**Directors        and Executive Officers of the Registrant.**

**ITEM        11. **
**Executive        Compensation.**

**ITEM        12. **
**Security        Ownership of Certain Beneficial Owners and Management and Related Stockholder        Matters.**

**ITEM        13. **
**Certain        Relationships and Related Transactions.**

**ITEM        14. **
**Principal        Accounting Fees and Services.**

**PART        IV**

**ITEM        15. **
**Exhibits        and Financial Statement Schedules.**

**Financial        Statements**

----

**Financial        Statement Schedules**

**Exhibits**

| **Exhibit                    Number** |   | **Description                    of Exhibit**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|---------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                                   |   | Amended                    and Restated Certificate of Incorporation of EuroBancshares,                    Inc.                    (incorporated herein by reference to Exhibit 3.1 to the Registration                    Statement on Form S-1 (File No. 333-115510) previously filed                    by                    EuroBancshares, Inc. on May 5, 2004)                                                                                                                                                                                                                                                                                                                                             |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 3.2                                   |   | Amended                    and Restated Bylaws of EuroBancshares, Inc. (incorporated herein                    by                    reference to Exhibit 3.2 to the Registration Statement on Form                    S-1 (File                    No. 333-115510) previously filed by EuroBancshares, Inc. on May                    5,                    2004)                                                                                                                                                                                                                                                                                                                                                |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 3.3                                   |   | Certificate                    of Designation of EuroBancshares, Inc. Noncumulative Preferred                    Stock,                    Series A (incorporated herein by reference to Exhibit 3.3 to the                    Registration Statement on Form S-1 (File No. 333-115510) previously                    filed                    by EuroBancshares, Inc. on May 5, 2004)                                                                                                                                                                                                                                                                                                                       |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.1                                   |   | Specimen                    stock certificate representing EuroBancshares, Inc. Common Stock                    (incorporated herein by reference to Exhibit 4.1 to the Registration                    Statement on Form S-1 (File No. 333-115510) previously filed                    by                    EuroBancshares, Inc. on August 2, 2004)                                                                                                                                                                                                                                                                                                                                                             |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.2                                   |   | Specimen                    stock certificate representing EuroBancshares, Inc. Preferred                    Stock                    (incorporated herein by reference to Exhibit 4.2 to the Annual                    Report on                    Form 10-K (File No. 000-50872) previously filed by EuroBancshares,                    Inc. on March 31, 2005                                                                                                                                                                                                                                                                                                                                       |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.3                                   |   | 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) (incorporated herein by reference                    to                    Exhibit 4.5 to the Registration Statement on Form S-1 (File No.                    333-115510) previously filed by EuroBancshares, Inc. on May 5,                    2004)                                                                                                                                                                                    |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.4                                   |   | 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                    (incorporated                    herein by reference to Exhibit 4.6 to the Registration Statement                    on Form                    S-1 (File No. 333-115510) previously filed by EuroBancshares,                    Inc. on May                    5, 2004) |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.5                                   |   | 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) (incorporated herein                    by                    reference to Exhibit 4.7 to the Registration Statement on Form                    S-1 (File                    No. 333-115510) previously filed by EuroBancshares, Inc. on May                    5,                    2004)                                                                                                                                    |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.1†                           |   | EuroBancshares,                    Inc. 2002 Stock Option Plan (incorporated herein by reference                    to Exhibit                    10.1 to the Registration Statement on Form S-1 (File No. 333-115510)                    previously filed by EuroBancshares, Inc. on May 5,                    2004)                                                                                                                                                                                                                                                                                                                                                                                             |
|                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.2†                           |   | Form                    of EuroBancshares, Inc. Incentive Stock Option Award Agreement                    (incorporated herein by reference to Exhibit 10.2 to the Registration                    Statement on Form S-1 (File No. 333-115510) previously filed                    by                    EuroBancshares, Inc. on May 5,                    2004)                                                                                                                                                                                                                                                                                                                                                  |

----

| **Exhibit                        Number** |   | **Description                        of Exhibit** |
|-------------------------------------------|--------|---------------------------------------------------|

| 10.3† |   | Form                    of EuroBancshares, Inc. Non-Qualified Stock Option Award Agreement                    (incorporated herein by reference to Exhibit 10.3 to the Registration                    Statement on Form S-1 (File No. 333-115510) previously filed                    by                    EuroBancshares, Inc. on May 5, 2004)                                                                                                                                                  |
|-------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.4† |   | 2005                    Stock Option Plan for EuroBancshares, Inc., dated May 12, 2005                    (incorporated herein by reference to Exhibit 10.1 to the Current                    Report on Form 8-K (File No. 000-50872) previously filed by                    EuroBancshares, Inc. on June 2, 2005)                                                                                                                                                             |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.5† |   | Change                    in Control Agreement, dated as of March 14, 2007, between EuroBancshares,                    Inc., Eurobank and Mr. Rafael Arrillaga-Torréns, Jr. (incorporated herein                    by reference to Exhibit 10.3 to the Current Report on Form 8-K                    (File No.                    000-50872) previously filed by EuroBancshares, Inc. on March                    16,                    2007)                                               |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.6† |   | Change                    in Control Agreement, dated as of March 14, 2007, between EuroBancshares,                    Inc., Eurobank and Ms. Yadira R. Mercado (incorporated herein                    by reference                    to Exhibit 10.4 to the Current Report on Form 8-K (File No. 000-50872)                    previously filed by EuroBancshares, Inc. on March 16,                    2007)                                                                                   |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.7† |   | Eurobank                    Master Trust Retirement Plan Program (incorporated herein by                    reference to                    Exhibit 10.5 to the Registration Statement on Form S-1 (File                    No.                    333-115510) previously filed by EuroBancshares, Inc. on May 5,                    2004)                                                                                                                                                         |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.8† |   | Form                    of EuroBancshares, Inc. Restricted Stock Purchase Agreement (incorporated                    herein by reference to Exhibit 10.6 to the Registration Statement                    on Form                    S-1 (File No. 333-115510) previously filed by EuroBancshares,                    Inc. on May                    5, 2004)                                                                                                                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.9† |   | Agreement                    and Plan of Merger, dated as of September 6, 2002, by and among                    EuroBancshares, Inc. and Banco Financiero de Puerto Rico (incorporated                    herein by reference to Exhibit 10.7 to the Registration Statement                    on Form                    S-1 (File No. 333-115510) previously filed by EuroBancshares,                    Inc. on May                    5, 2004)                                                 |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.10       |   | Agreement                    and Plan of Merger, dated as of February 24, 2004, by and among                    EuroBancshares, Inc., Eurobank, and The Bank & Trust of Puerto Rico                    (incorporated herein by reference to Exhibit 2 to the Registration                    Statement on Form S-1 (File No. 333-115510) previously filed                    by                    EuroBancshares, Inc. on May 5, 2004)                                                        |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.11       |   | Stipulation                    and Consent to the Issuance of a Cease and Desist Order dated                    as of March                    13, 2007, Eurobank, the Board of Directors of Eurobank and the                    FDIC                    (incorporated by reference to Exhibit 10.1 to the Current Report                    on Form                    8-K (File No. 000-50872) previously filed by EuroBancshares,                    Inc. on March                    16, 2007) |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.12       |   | Order                    to Cease and Desist Order dated as of March 15, 2007 (incorporated                    by                    reference to Exhibit 10.2 to the Current Report on Form 8-K (File                    No.                    000-50872) previously filed by EuroBancshares, Inc. on March                    16,                    2007)                                                                                                                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 21          |   | List                    of Subsidiaries of EuroBancshares, Inc. (incorporated herein                    by reference                    to Exhibit 21 to the Registration Statement on Form S-1 (File                    No.                    333-115510) previously filed by EuroBancshares, Inc. on May 5,                    2004)                                                                                                                                                            |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 23.1*       |   | Consent                    of Crowe Chizek and Company LLP, independent registered public                    accounting                    firm                                                                                                                                                                                                                                                                                                                                                    |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 23.2*       |   | Consent                    of KPMG LLP, independent registered public accounting                    firm                                                                                                                                                                                                                                                                                                                                                                                           |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.1*       |   | Rule                    13a-14(a) Certification of Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.2*       |   | Rule                    13a-14(a) Certification of Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 32.1*       |   | Certification                    of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,                    as adopted                    pursuant to Section 906 of the Sarbanes-Oxley Act of                    2002.                                                                                                                                                                                                                                                                     |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 32.2*       |   | Certification                    of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,                    as adopted                    pursuant to Section 906 of the Sarbanes-Oxley Act of                    2002.                                                                                                                                                                                                                                                                     |

----

----

|                                      |                                                                                                             |                                                  |
|-------------------------------------------|------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------|
|                                      | EUROBANCSHARES,                  INC.                                                                            |
|                                 |                                                                                                        |                                             |
| Date:                March 16, 2007  | By:                                                                                                    | /s/                Rafael Arrillaga-Torréns, Jr. |
|                                      | Rafael                Arrillaga Torréns, Jr.                                                                |
|                                      | Chairman                  of the                  Board, President and ChiefExecutive                    Officer |

|                                |                                                                                                                            |                                                  |
|-------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------|
| Date:                March 16, 2007 | By:                                                                                                                   | /s/                Rafael Arrillaga-Torréns, Jr. |
|                                | Rafael                  Arrillaga Torréns, Jr.Chairman                  of the Board, President and                  Chief |
|                                | Executive                  Officer (principal executive                  officer)                                               |

|                                  |                                                                                                                                                                         |                  |
|---------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|
| Date:                  March 16, 2007 | By:                                                                                                                                                                | /s/ Yadira R. Mercado |
|                                  | Yadira                  R. Mercado                                                                                                                                           |
|                                  | Executive                    Vice                    President and Chief Financial Officer(principal                      financial officer and principal accountingofficer) |

|                                    |                                            |                             |
|-----------------------------------------|-------------------------------------------------|----------------------------------|
| Date:                    March 16, 2007 | By:                                   | /s/ Pedro Feliciano Benítez |
|                                    | Pedro                    Feliciano Benítez |
|                                    | Director                                        |

|                                        |                                                                   |                                                |
|---------------------------------------------|------------------------------------------------------------------------|-----------------------------------------------------|
| Date:                        March 16, 2007 | By:                                                          | /s/ Juan Ramón Gómez-Cuétara Aguilar |
|                                        | Juan                        Ramón Gómez-Cuétara Aguilar |
|                                        | Director                                                               |

|                                              |                                                        |                               |
|---------------------------------------------------|-------------------------------------------------------------|------------------------------------|
| Date:                              March 16, 2007 | By:                                               | /s/ Antonio R. Pavía Bibiloni |
|                                              | Antonio                              R. Pavía Bibiloni |
|                                              | Director                                                    |

|                                                    |                                                                       |                                        |
|---------------------------------------------------------|----------------------------------------------------------------------------|---------------------------------------------|
| Date:                                    March 16, 2007 | By:                                                              | /s/ Plácido González Córdova |
|                                                    | Plácido                                    González Córdova |
|                                                    | Director                                                                   |

|                                                          |                                                                    |                               |
|---------------------------------------------------------------|-------------------------------------------------------------------------|------------------------------------|
| Date:                                          March 16, 2007 | By:                                                           | /s/ Luis F. Hernández Santana |
|                                                          | Luis                                          F. Hernández Santana |
|                                                          | Director                                                                |

|                                                                |                                                                       |                                                                                      |
|---------------------------------------------------------------------|----------------------------------------------------------------------------|--------------------------------------------------------------------------------------|
| Date:                                                March 16, 2007 | By:                                                              |  /s/ Ricardo Levy                                                Echeandía |
|                                                                | Ricardo                                                Levy Echeandía |
|                                                                | Director                                                                   |

|                                                                      |                                                                            |                                                                                |
|---------------------------------------------------------------------------|---------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|
| Date:                                                      March 16, 2007 | By:                                                                   | /s/ Diana                                                      López-Feliciano |
|                                                                      | Diana                                                      López-Feliciano |
|                                                                      | Director                                                                        |

|                                                                            |                                                                             |                                                                                 |
|---------------------------------------------------------------------------------|----------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|
| Date:                                                            March 16, 2007 | By:                                                                    | /s/                                                            William Torres Torres |
|                                                                            | William                                                            Torres Torres |
|                                                                            | Director                                                                         |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

----

**EUROBANCSHARES,      INC. AND SUBSIDIARIES**

**CONSOLIDATED      FINANCIAL STATEMENTS**

|                                             |                                                                                  | PAGE   |
|--------------------------------------------------|---------------------------------------------------------------------------------------|--------|
| CONSOLIDATED                FINANCIAL STATEMENTS |                                                                                  |
|                                             | REPORTS                  OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS            | F-1    |
|                                             | CONSOLIDATED                  BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005         | F-4    |
|                                             | CONSOLIDATED                  STATEMENTS OF INCOME FOR EACH OF THE YEARS IN           |   |
|                                             | THE                  THREE-YEAR PERIOD ENDED DECEMBER 31, 2006                        | F-5    |
|                                             | CONSOLIDATED                  STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND |   |
|                                             | COMPREHENSIVE                  INCOME FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD  |   |
|                                             | ENDED                  DECEMBER 31, 2006                                              | F-6    |
|                                             | CONSOLIDATED                  STATEMENTS OF CASH FLOWS FOR EACH OF THE YEARS IN THE   |   |
|                                             | THREE-YEAR                  PERIOD ENDED DECEMBER 31, 2006                            | F-7    |
|                                             | NOTES                  TO CONSOLIDATED FINANCIAL STATEMENTS                           | F-8    |

----

**Report      of Independent Registered Public Accounting Firm**

----

----

**Report      of Independent Registered Public Accounting Firm**

----

**EUROBANCSHARES,      INC. AND SUBSIDIARIES**

|                                                                                                  |   | **2006** |          | **2005** |   |
|-------------------------------------------------------------------------------------------------------|--------|----------|---------------|----------|--------|
| **Assets**                                                                                       |   |     |          |     |   |
| Cash                  and due from banks                                                              |   | $        | 25,527,489    |     | $      | 20,993,485 |   |
| Interest                  bearing deposits                                                            |   |     | 49,050,368    |     |   | 20,773,171 |   |
| Securities                  purchased under agreements to resell                                      |   |     | 51,191,323    |     |   | 54,132,673 |   |
| Investment                  securities available for sale                                             |   |     | 535,159,009   |     |   | 627,080,276 |   |
| Investment                  securities held to maturity                                               |   |     | 38,432,820    |     |   | 42,470,784 |   |
| Other                  investments                                                                    |   |     | 4,329,200     |     |   | 10,652,000 |   |
| Loans                  held for sale                                                                  |   |     | 879,000       |     |   | 936,281 |   |
| Loans,                  net of allowance for loan and lease losses                                    |   |     |          |     |   |   |   |
| of                  $18,936,841 in 2006 and $18,188,130 in 2005                                       |   |     | 1,731,022,290 |     |   | 1,558,071,526 |   |
| Accrued                  interest receivable                                                          |   |     | 15,760,852    |     |   | 14,979,784 |   |
| Customers’                  liability on acceptances                                            |   |     | 1,561,736     |     |   | 501,195 |   |
| Premises                  and equipment, net                                                          |   |     | 14,889,456    |     |   | 11,167,981 |   |
| Other                  assets                                                                         |   |     | 33,116,690    |     |   | 29,523,653 |   |
| Total                  assets                                                                         |   | $        | 2,500,920,233 |     | $      | 2,391,282,809 |   |
| **Liabilities                  and Stockholders’ Equity**                                       |   |     |          |     |   |   |   |
| Deposits:                                                                                             |   |     |          |     |   |   |   |
| Noninterest                  bearing                                                                  |   | $        | 140,321,373   |     | $      | 146,637,966 |   |
| Interest                  bearing                                                                     |   |     | 1,765,034,834 |     |   | 1,587,490,180 |   |
| Total                  deposits                                                                       |   |     | 1,905,356,207 |     |   | 1,734,128,146 |   |
| Securities                  sold under agreements to repurchase                                       |   |     | 365,664,250   |     |   | 419,859,750 |   |
| Acceptances                  outstanding                                                              |   |     | 1,561,736     |     |   | 501,195 |   |
| Advances                  from Federal Home Loan Bank                                                 |   |     | 8,707,420     |     |   | 8,758,626 |   |
| Notes                  payable to Statutory Trusts                                                    |   |     | 20,619,000    |     |   | 46,393,000 |   |
| Other                  borrowings                                                                     |   |     | —       |     |   | 700,175 |   |
| Accrued                  interest payable                                                             |   |     | 18,047,074    |     |   | 9,263,493 |   |
| Accrued                  expenses and other liabilities                                               |   |     | 11,086,705    |     |   | 6,711,389 |   |
|                                                                                                  |   |     | 2,331,042,392 |     |   | 2,226,315,774 |   |
| Stockholders’                  equity:                                                          |   |     |          |     |   |   |   |
| Preferred                  stock:                                                                     |   |     |          |     |   |   |   |
| Preferred                  stock Series A, $0.01 par value. Authorized 20,000,000                     |   |     |          |     |   |   |   |
| shares;                  issued and outstanding 430,537 in 2006 and 2005                              |   |     | 4,305         |     |   | 4,305 |   |
| Capital                  paid in excess of par value                                                  |   |     | 10,759,120    |     |   | 10,759,120 |   |
| Common                  stock:                                                                        |   |     |          |     |   |   |   |
| Common                  stock, $0.01 par value. Authorized 150,000,000                                |   |     |          |     |   |   |   |
| shares;                  issued: 19,777,536 shares in 2006 and 19,564,086 shares in                   |   |     |          |     |   |   |   |
| 2005;                  outstanding: 19,123,821 shares in 2006 and 19,398,848 in                  2005 |   |     | 197,775       |     |   | 195,641 |   |
| Capital                  paid in excess of par value                                                  |   |     | 106,539,383   |     |   | 105,508,402 |   |
| Retained                  earnings:                                                                   |   |     |          |     |   |   |   |
| Reserve                  fund                                                                         |   |     | 7,553,381     |     |   | 6,528,519 |   |
| Undivided                  profits                                                                    |   |     | 59,800,495    |     |   | 54,348,750 |   |
| Treasury                  stock, 653,715 shares at cost in 2006                                       |   |     |          |     |   |   |   |
| and                  165,238 shares at cost in 2005                                                   |   |     | (7,410,711    | )        |   | (1,946,052 | ) |
| Accumulated                  other comprehensive loss                                                 |   |     | (7,565,907    | )        |   | (10,431,650 | ) |
| Total                  stockholders’ equity                                                     |   |     | 169,877,841   |     |   | 164,967,035 |   |
| Total                  liabilities and stockholders’ equity                                     |   | $        | 2,500,920,233 |     | $      | 2,391,282,809 |   |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                                                              |   | **2006**     |        | **2005**     |   | **2004**     |   |
|---------------------------------------------------------------------------------------------------|--------|--------------|-------------|--------------|--------|--------------|--------|
| Interest                  income:                                                                 |   |    |        |    |   |    |   |
| Loans,                  including fees                                                            |   | $            | 130,003,150 |         | $      | 107,970,892  |   | $ | 82,790,251 |   |
| Investment                  securities:                                                           |   |         |        |         |   |         |   |   |   |   |
| Taxable                                                                                           |   |         | 371,546     |         |   | 133,798      |   |   | 740,353 |   |
| Exempt                                                                                            |   |         | 29,474,276  |         |   | 23,738,059   |   |   | 11,348,432 |   |
| Interest-bearing                  deposits, securities purchased                                  |   |         |        |         |   |         |   |   |   |   |
| under                  agreements to resell, and other                                            |   |         | 2,297,448   |         |   | 1,389,732    |   |   | 514,602 |   |
|  Total                  interest income                                                      |   |         | 162,146,420 |         |   | 133,232,481  |   |   | 95,393,638 |   |
| Interest                  expense:                                                                |   |         |        |         |   |         |   |   |   |   |
| Deposits                                                                                          |   |         | 68,545,152  |         |   | 44,933,645   |   |   | 33,309,033 |   |
| Securities                  sold under agreements to repurchase,                                  |   |         |        |         |   |         |   |   |   |   |
| notes                  payable, and other                                                         |   |         | 26,818,196  |         |   | 20,002,104   |   |   | 8,172,239 |   |
|  Total                  interest expense                                                     |   |         | 95,363,348  |         |   | 64,935,749   |   |   | 41,481,272 |   |
|  Net                  interest income                                                        |   |         | 66,783,072  |         |   | 68,296,732   |   |   | 53,912,366 |   |
| Provision                  for loan and lease losses                                              |   |         | 16,903,000  |         |   | 12,775,000   |   |   | 7,100,000 |   |
|  Net                  interest income after provision for loan                               |   |         |        |         |   |         |   |   |   |   |
| and                  lease losses                                                                 |   |         | 49,880,072  |         |   | 55,521,732   |   |   | 46,812,366 |   |
| Noninterest                  income:                                                              |   |         |        |         |   |         |   |   |   |   |
| Service                  charges - fees and other                                                 |   |         | 8,475,600   |         |   | 9,068,560    |   |   | 8,056,482 |   |
| Net                  loss on non-hedge derivatives                                                |   |         | —     |         |   | (943,782     | )      |   | — |   |
| Net                  loss on sale of securities                                                   |   |         | (1,091,627  | )            |   | (301,053     | )      |   | — |   |
| Net                  gain (loss) on sale of other real estate owned,                  repossessed |   |         |        |         |   |         |   |   |   |   |
| assets,                  and on disposition of other assets                                       |   |         | 16,092      |         |   | (1,040,206   | )      |   | (358,890 | ) |
| Gain                  on sale of loans                                                            |   |         | 400,489     |         |   | 945,613      |   |   | 1,395,105 |   |
|  Total                  noninterest income                                                   |   |         | 7,800,554   |         |   | 7,729,132    |   |   | 9,092,697 |   |
| Noninterest                  expense:                                                             |   |         |        |         |   |         |   |   |   |   |
| Salaries                  and employee benefits                                                   |   |         | 17,506,822  |         |   | 14,727,209   |   |   | 11,110,819 |   |
| Occupancy                                                                                         |   |         | 6,999,087   |         |   | 6,297,388    |   |   | 4,921,631 |   |
| Furniture                  fixture and equipment                                                  |   |         | 2,565,949   |         |   | 2,257,136    |   |   | 2,020,972 |   |
| Professional                  services                                                            |   |         | 4,104,442   |         |   | 3,911,659    |   |   | 2,196,101 |   |
| Municipal                  and other taxes                                                        |   |         | 1,657,111   |         |   | 1,674,393    |   |   | 1,253,950 |   |
| Commissions                  and service fees                                                     |   |         | 1,324,487   |         |   | 1,364,187    |   |   | 1,206,119 |   |
| Office                  supplies                                                                  |   |         | 1,393,948   |         |   | 1,163,206    |   |   | 1,032,576 |   |
| Insurance                                                                                         |   |         | 1,052,922   |         |   | 1,095,193    |   |   | 803,727 |   |
| Promotional                                                                                       |   |         | 1,199,574   |         |   | 686,080      |   |   | 545,128 |   |
| Other                                                                                             |   |         | 5,581,389   |         |   | 4,466,822    |   |   | 3,850,665 |   |
|  Total                  noninterest expense                                                  |   |         | 43,385,731  |         |   | 37,643,273   |   |   | 28,941,688 |   |
|  Income                  before income taxes and extraordinary item                          |   |         | 14,294,895  |         |   | 25,607,591   |   |   | 26,963,375 |   |
| Provision                  for income taxes                                                       |   |         | 6,283,010   |         |   | 9,077,228    |   |   | 8,662,633 |   |
|  Income                  before extraordinary item                                           |   |         | 8,011,885   |         |   | 16,530,363   |   |   | 18,300,742 |   |
| Extraordinary                  gain on acquisition of BankTrust                                   |   |         | —     |         |   | —      |   |   | 4,419,118 |   |
|  Net                  income                                                                 |   | $            | 8,011,885   |         | $      | 16,530,363   |   | $ | 22,719,860 |   |
|                                                                                              |   |         |        |         |   |         |   |   |   |   |
| Earnings                  per share:                                                              |   |         |        |         |   |         |   |   |   |   |
| Basic:                                                                                            |   |         |        |         |   |         |   |   |   |   |
| Income                  before extraordinary item                                                 |   | $            | 0.38        |         | $      | 0.81         |   | $ | 1.08 |   |
| Extraordinary                  item                                                               |   |         | —     |         |   | —      |   |   | 0.27 |   |
|  Net                  income                                                                 |   | $            | 0.38        |         | $      | 0.81         |   | $ | 1.35 |   |
| Diluted:                                                                                          |   |         |        |         |   |         |   |   |   |   |
| Income                  before extraordinary item                                                 |   | $            | 0.37        |         | $      | 0.78         |   | $ | 1.04 |   |
| Extraordinary                  item                                                               |   |         | —     |         |   | —      |   |   | 0.26 |   |
|  Net                  income                                                                 |   | $            | 0.37        |         | $      | 0.78         |   | $ | 1.30 |   |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                                                                             |   | **2006**     |        | **2005**     |   | **2004**     |   |
|------------------------------------------------------------------------------------------------------------------|--------|--------------|-------------|--------------|--------|--------------|--------|
| Preferred                  stock:                                                                                |   |    |        |    |   |    |   |
| Balance                  at beginning of period                                                                  |   | $            | 4,305       |         | $      | 4,305        |   | $ | — |   |
| Issuance                  of preferred stock                                                                     |   |         | —     |         |   | —      |   |   | 4,305 |   |
| Balance                  at end of period                                                                        |   |         | 4,305       |         |   | 4,305        |   |   | 4,305 |   |
| Capital                  paid in excess of par value - preferred stock:                                          |   |         |        |         |   |         |   |   |   |   |
| Balance                  at beginning of period                                                                  |   |         | 10,759,120  |         |   | 10,759,120   |   |   | — |   |
| Issuance                  of preferred stock                                                                     |   |         | —     |         |   | —      |   |   | 10,759,120 |   |
| Balance                  at end of period                                                                        |   |         | 10,759,120  |         |   | 10,759,120   |   |   | 10,759,120 |   |
| Common                  stock:                                                                                   |   |         |        |         |   |         |   |   |   |   |
| Balance                  at beginning of period                                                                  |   |         | 195,641     |         |   | 195,641      |   |   | 69,737 |   |
| Purchase                  and retirement of common stock                                                         |   |         | —     |         |   | —      |   |   | (10 | ) |
| Issuance                  of common stock and exercised stock options before stock split                         |   |         | —     |         |   | —      |   |   | 7,928 |   |
| Stock                  split                                                                                     |   |         | —     |         |   | —      |   |   | 77,655 |   |
| Issuance                  of common stock and exercised stock options after stock split                          |   |         | 2,134       |         |   | —      |   |   | 40,331 |   |
| Balance                  at end of period                                                                        |   |         | 197,775     |         |   | 195,641      |   |   | 195,641 |   |
| Capital                  paid in excess of par value - common stock:                                             |   |         |        |         |   |         |   |   |   |   |
| Balance                  at beginning of period                                                                  |   |         | 105,508,402 |         |   | 105,408,402  |   |   | 42,943,014 |   |
| Purchase                  and retirement of common stock                                                         |   |         | —     |         |   | —      |   |   | (8,684 | ) |
| Issuance                  of common stock and exercised stock options before stock split                         |   |         | —     |         |   | —      |   |   | 12,290,548 |   |
| Stock                  split                                                                                     |   |         | —     |         |   | —      |   |   | (77,655 | ) |
| Issuance                  of common stock and exercised stock options after stock split                          |   |         | 877,630     |         |   | —      |   |   | 50,261,179 |   |
| Stock                  based compensation                                                                        |   |         | 153,351     |         |   | —      |   |   | — |   |
| Reversal                  of initial public offering expenses                                                    |   |         | —     |         |   | 100,000      |   |   | — |   |
| Balance                  at end of period                                                                        |   |         | 106,539,383 |         |   | 105,508,402  |   |   | 105,408,402 |   |
| Reserve                  fund:                                                                                   |   |         |        |         |   |         |   |   |   |   |
| Balance                  at beginning of period                                                                  |   |         | 6,528,519   |         |   | 4,721,756    |   |   | 2,348,598 |   |
| Transfer                  from undivided profits                                                                 |   |         | 1,024,862   |         |   | 1,806,763    |   |   | 2,373,158 |   |
| Balance                  at end of period                                                                        |   |         | 7,553,381   |         |   | 6,528,519    |   |   | 4,721,756 |   |
| Undivided                  profits:                                                                              |   |         |        |         |   |         |   |   |   |   |
| Balance                  at beginning of period                                                                  |   |         | 54,348,750  |         |   | 40,369,955   |   |   | 20,521,151 |   |
| Cumulative                  effect on initial adoption of SAB 108                                                |   |         | (790,473    | )            |   | —      |   |   | — |   |
| Net                  income                                                                                      |   |         | 8,011,885   |         |   | 16,530,363   |   |   | 22,719,860 |   |
| Preferred                  stock dividends ($1.73 in 2006 and 2005 and $1.16 in 2004 per                  share) |   |         | (744,805    | )            |   | (744,805     | )      |   | (497,898 | ) |
| Transfer                  to reserve fund                                                                        |   |         | (1,024,862  | )            |   | (1,806,763   | )      |   | (2,373,158 | ) |
| Balance                  at end of period                                                                        |   |         | 59,800,495  |         |   | 54,348,750   |   |   | 40,369,955 |   |
| Treasury                  stock                                                                                  |   |         |        |         |   |         |   |   |   |   |
| Balance                  at beginning of period                                                                  |   |         | (1,946,052  | )            |   | —      |   |   | — |   |
| Purchase                  of common stock                                                                        |   |         | (5,464,659  | )            |   | (1,924,192   | )      |   | — |   |
| Common                  stock received as payment in lieu of a debt obligation                                   |   |         | —     |         |   | (21,860      | )      |   | — |   |
| Balance                  at end of period                                                                        |   |         | (7,410,711  | )            |   | (1,946,052   | )      |   | — |   |
| Accumulated                  other comprehensive loss, net of taxes:                                             |   |         |        |         |   |         |   |   |   |   |
| Balance                  at beginning of period                                                                  |   |         | (10,431,650 | )            |   | (3,157,491   | )      |   | (807,244 | ) |
| Unrealized                  net gain (loss) on investment securities available for sale                          |   |         |        |         |   |         |   |   |   |   |
| and                  cash flow hedges                                                                            |   |         | 2,865,743   |         |   | (7,274,159   | )      |   | (2,350,247 | ) |
| Balance                  at end of period                                                                        |   |         | (7,565,907  | )            |   | (10,431,650  | )      |   | (3,157,491 | ) |
| Total                  stockholders’ equity                                                                |   | $            | 169,877,841 |         | $      | 164,967,035  |   | $ | 158,301,688 |   |
|                                                                                                             |   |         |        |         |   |         |   |   |   |   |
| Comprehensive                  income:                                                                           |   |         |             |         |   |              |   |   |   |   |
| Net                  income                                                                                      |   | $            | 8,011,885   |         | $      | 16,530,363   |   | $ | 22,719,860 |   |
| Other                  comprehensive income (loss), net of tax:                                                  |   |         |        |         |   |         |   |   |   |   |
| Unrealized                  net gain (loss) on investment securities available for sale                          |   |         |        |         |   |         |   |   |   |   |
| and                  cash flow hedges                                                                            |   |         | 1,774,116   |         |   | (7,575,212   | )      |   | (2,350,247 | ) |
| Reclassification                  adjustment for realized loss (gains) included in net                  income   |   |         | 1,091,627   |         |   | 301,053      |   |   | — |   |
| Unrealized                  net gain (losses) on investments securities                                          |   |         |        |         |   |         |   |   |   |   |
| available                  for sale and cash flow hedges                                                         |   |         | 2,865,743   |         |   | (7,274,159   | )      |   | (2,350,247 | ) |
| Comprehensive                  income                                                                            |   | $            | 10,877,628  |         | $      | 9,256,204    |   | $ | 20,369,613 |   |

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**Consolidated        Statements of Cash Flows**

**Years        ended December 31, 2006, 2005 and 2004 **

|                                                                                                                                           |   | **2006** |         | **2005** |   | **2004**     |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------------|----------|--------|--------------|--------|
| Cash                  flows from operating activities:                                                                                         |   |     |         |     |   |         |   |
| Net                  income                                                                                                                    |   | $        | 8,011,885    |     | $      | 16,530,363   |   | $ | 22,719,860 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities:                            |   |     |         |     |   |         |   |   |   |   |
| Depreciation                  and amortization                                                                                                 |   |     | 3,762,194    |     |   | 4,707,270    |   |   | 3,706,507 |   |
| Provision                  for loan and lease losses                                                                                           |   |     | 16,903,000   |     |   | 12,775,000   |   |   | 7,100,000 |   |
| Stock-based                  employee compensation                                                                                             |   |     | 153,351      |     |   | —      |   |   | — |   |
| Deferred                  tax and purchase of tax credits (benefit) provision                                                                  |   |     | (1,059,470   | )        |   | 7,326,026    |   |   | 4,715,347 |   |
| Extraordinary                  gain on the acquisition of BankTrust                                                                            |   |     | —      |     |   | —      |   |   | (4,419,118 | ) |
| Net                  loss on non-hedging derivatives                                                                                           |   |     | —      |     |   | 943,782      |   |   | — |   |
| Net                  loss on sale of securities                                                                                                |   |     | 1,091,627    |     |   | 301,053      |   |   | — |   |
| Net                  gain on sale of loans                                                                                                     |   |     | (400,489     | )        |   | (945,613     | )      |   | (1,395,105 | ) |
| Net                  (gain) loss on sale of repossessed assets and on disposition of                  other                  assets            |   |     | (16,092      | )        |   | 1,040,206    |   |   | 358,890 |   |
| Net                  amortization of premiums and accretion of discount on investment                  securities                              |   |     | 2,556,010    |     |   | 4,550,939    |   |   | 6,784,807 |   |
| Valuation                  expense of repossesed assets                                                                                        |   |     | 1,295,771    |     |   | 649,840      |   |   | 884,593 |   |
| Net                  effect of adjustment by SAB 108                                                                                           |   |     | (790,473     | )        |   | —      |   |   | — |   |
| Write-off                  notes payable to statutory trust placement costs                                                                    |   |     | 625,842      |     |   | —      |   |   | — |   |
| (Decrease)                  increase in deferred loan costs                                                                                    |   |     | 2,561,702    |     |   | (961,742     | )      |   | (1,773,009 | ) |
| Origination                  of loans held for sale                                                                                            |   |     | (13,836,775  | )        |   | (21,510,695  | )      |   | (28,941,128 | ) |
| Proceeds                  from sale of loans held for sale                                                                                     |   |     | 14,237,263   |     |   | 21,744,371   |   |   | 29,250,216 |   |
| Increase                  in accrued interest receivable                                                                                       |   |     | (781,068     | )        |   | (3,811,811   | )      |   | (2,262,588 | ) |
| Net                  decrease (increase) in other assets                                                                                       |   |     | 8,354,522    |     |   | (455,007     | )      |   | (2,795,093 | ) |
| Increase                  in accrued interest payable, accrued expenses, and other                  liabilities                                |   |     | 13,584,441   |     |   | 1,240,556    |   |   | 7,423,628 |   |
|  Net                  cash provided by operating activities                                                                               |   |     | 56,253,241   |     |   | 44,124,539   |   |   | 41,357,807 |   |
|                                                                                                                                           |   |     |         |     |   |         |   |   |   |   |
| Cash                  flows from investing actitivies:                                                                                         |   |     |         |     |   |         |   |   |   |   |
| Net                  decrease (increase) in securities purchased under agreements to                  resell                                   |   |     | 2,941,350    |     |   | (11,322,194  | )      |   | 785,044 |   |
| Net                  (increase) decrease in interest-bearing deposits                                                                          |   |     | (28,277,197  | )        |   | (17,501,794  | )      |   | 19,324,216 |   |
| Proceeds                  from sale of investment securities available for sale                                                                |   |     | 48,992,897   |     |   | 84,976,055   |   |   | — |   |
| Purchases                  of investment securities available for sale                                                                         |   |     | (89,194,907  | )        |   | (301,826,010 | )      |   | (316,639,752 | ) |
| Proceeds                  from principal payments and maturities of investment securities                  available                  for sale |   |     | 131,490,329  |     |   | 133,137,712  |   |   | 134,869,775 |   |
| Purchases                  of investment securities held to maturity                                                                           |   |     | —      |     |   | —      |   |   | (50,370,830 | ) |
| Proceeds                  from principal payments, maturities, and calls of investment securities                  held to maturity            |   |     | 3,887,363    |     |   | 6,747,256    |   |   | 833,230 |   |
| Purchase                  of Federal Home Loan Bank Stocks                                                                                     |   |     | (1,175,200   | )        |   | (8,324,100   | )      |   | (8,715,500 | ) |
| Procceds                  from principal payments and maturities                                                                               |   |     |         |     |   |         |   |   |   |   |
| of                  Federal Home Loan Bank Stocks                                                                                              |   |     | 6,727,000    |     |   | 6,384,700    |   |   | 3,339,000 |   |
| Net                  increase in loans                                                                                                         |   |     | (207,802,256 | )        |   | (241,504,835 | )      |   | (186,308,350 | ) |
| Proceeds                  from sale of lease financing contracts                                                                               |   |     | —      |     |   | 29,962,303   |   |   | 35,555,732 |   |
| Proceeds                  from sale of other assets                                                                                            |   |     | 761,740      |     |   | 1,575,043    |   |   | 830,425 |   |
| Capital                  expenditures                                                                                                          |   |     | (6,020,879   | )        |   | (1,923,269   | )      |   | (2,465,055 | ) |
| Cash                  and due from banks received from the acquisition of BankTrust,                  net                                      |   |     | —      |     |   | —      |   |   | 71,134,806 |   |
|  Net                  cash used in investing activities                                                                                   |   |     | (137,669,760 | )        |   | (319,619,133 | )      |   | (297,827,259 | ) |
|                                                                                                                                           |   |     |         |     |   |         |   |   |   |   |
| Cash                  flows from financing activities:                                                                                         |   |     |         |     |   |         |   |   |   |   |
| Net                  increase in deposits                                                                                                      |   |     | 171,228,061  |     |   | 325,091,710  |   |   | 25,931,840 |   |
| (Decrease)                  increase in securities sold under agreements to repurchase and                  other                  borrowings  |   |     | (54,895,675  | )        |   | (42,849,131  | )      |   | 235,886,056 |   |
| Net                  decrease in Federal Home Loan Bank Advances                                                                               |   |     | (51,206      | )        |   | (1,645,012   | )      |   | (66,034,362 | ) |
| Repayment                  of Notes payable to trusts                                                                                          |   |     | (25,000,000  | )        |   | —      |   |   | — |   |
| Dividends                  paid to preferred stockholders                                                                                      |   |     | (745,762     | )        |   | (760,552     | )      |   | (480,879 | ) |
| Net                  proceeds from issuance of common stock                                                                                    |   |     | 879,764      |     |   | —      |   |   | 57,241,571 |   |
| Purchase                  of common stock                                                                                                      |   |     | (5,464,659   | )        |   | (1,946,052   | )      |   | — |   |
|  Net                  cash provided by financing activities                                                                               |   |     | 85,950,523   |     |   | 277,890,963  |   |   | 252,544,226 |   |
|                                                                                                                                           |   |     |         |     |   |         |   |   |   |   |
| Net                  increase (decrease) in cash and cash equivalents                                                                          |   |     | 4,534,004    |     |   | 2,396,369    |   |   | (3,925,226 | ) |
| Cash                  and cash equivalents beginning balance                                                                                   |   |     | 20,993,485   |     |   | 18,597,116   |   |   | 22,522,342 |   |
| Cash                  and cash equivalents ending balance                                                                                      |   | $        | 25,527,489   |     | $      | 20,993,485   |   | $ | 18,597,116 |   |

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(1)              Organization**

**(2)**
**Summary      of Significant Accounting Policies**

***(a)***
***Principles          of Consolidation***

***(b)***
***Cash      Equivalents and Cash Flow***

***(c)***
***Securities      Purchased under Agreements to Resell***

***(d)***
***Investment      Securities Available for Sale***

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

***(e)***
***Investment      Securities Held to Maturity***

***(f)***
***Other      Investments***

***(g)***
***Loans      Held for Sale***

***(h)***
***Loans      and Allowance for Loan and Lease Losses***

*Accounting      for Contingencies*
*Accounting      by Creditors for Impairment of a Loan*
*Accounting      by Creditors for Impairment of a Loan - Income Recognition and      Disclosures*

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

***(i)***
***Lease      Financing***

*Accounting      for Leases*

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

***(j)***
***Transfer      of Financial Assets***

***(k)***
***Servicing      Assets***

***(l)***
***Premises      and Equipment***

***(m)***
***Other      Real Estate and Repossessed Assets***

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

***(n)***
***Trust      Services***

***(o)***
***Securities      Sold under Agreements to Repurchase***

***(p)***
***Income      Taxes***

***(q)***
***Reserve      Fund***

***(r)***
***Interest      Income***

***(s)***
***Loan      Origination and Commitment Fees***

***(t)***
***Earnings      Per Share***

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

***(u)***
***Supplementary      Cash Flow Information***

|                                             |   | **2006**     |       | **2005**     |   | **2004**     |   |
|--------------------------------------------------|--------|--------------|------------|--------------|--------|--------------|--------|
| Cash                  paid during the years for: |   |    |       |    |   |    |   |
| Interest                                         |   | $            | 86,580,000 |         | $      | 62,392,000   |   | $ | 37,630,000 |   |
| Income                  taxes                    |   |         | 4,067,000  |         |   | 2,419,000    |   |   | 2,533,000 |   |
| Noncash                  transactions:           |   |         |       |         |   |         |   |   |   |   |
| Repossessed                  assets acquired     |   |         |       |         |   |         |   |   |   |   |
| through                  foreclosure of loans    |   | $            | 48,650,000 |         | $      | 30,755,000   |   | $ | 20,282,000 |   |
| Financing                  of repossessed assets |   |         | 29,460,000 |         |   | 24,393,000   |   |   | 17,157,000 |   |
| Capital                  contribution through    |   |         |       |         |   |         |   |   |   |   |
| issuance                  of EuroBancshares'     |   |         |       |         |   |         |   |   |   |   |
| stocks                  on acquisition of        |   |         |       |         |   |         |   |   |   |   |
| BankTrust                  (note 3):             |   |         |       |         |   |         |   |   |   |   |
| Common                  stock                    |   |         | -          |         |   | -            |   |   | 5,552,000 |   |
| Preferred                  stock                 |   |         | -          |         |   | -            |   |   | 10,763,000 |   |

***(v)***
***Stock      Option Plan***

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                |   | **2005** |       | **2004** |   |
|-----------------------------------------------------|--------|----------|------------|----------|--------|
| Net                  income, as reported            |   | $        | 16,530,363 |     | $      | 22,719,860 |   |
| Employees                  stock based compensation |   |     | -          |     |   | 37,518 | (1) |
| Deduct                  total stock-based employee  |   |     |       |     |   |   |   |
| compensation                  expense               |   |     |       |     |   |   |   |
| determined                  under fair value        |   |     |       |     |   |   |   |
| based                  method for all awards        |   |     | (904,368   | )        |   | (263,047 | ) |
| Pro                  forma net income               |   | $        | 15,625,995 |     | $      | 22,494,331 |   |
| Earnings                  per share:                |   |     |       |     |   |   |   |
| Basic                  - as reported                |   | $        | 0.81       |     | $      | 1.35 |   |
| Basic                  - pro forma                  |   |     | 0.76       |     |   | 1.33 |   |
| Diluted                  - as reported              |   |     | 0.78       |     |   | 1.30 |   |
| Diluted                  - pro forma                |   |     | 0.73       |     |   | 1.28 |   |

| (1) | Refer                  to note 21 - Stock Transactions, for details of employees stock                  awards. |   |
|-----|-----------------------------------------------------------------------------------------------------------------|--------|

***(w)***
***Comprehensive      Income***

***(x)***
***Impairment      of Long-Lived Assets***

***(y)***
***Derivative      Instruments and Hedging Activities***

*Accounting      for Derivative Instruments and Certain Hedging Activities*

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

***(z)***
***Reclassifications***

***(aa)***
***Business      Segments***

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

***(ab)***
***Recently      Issued Accounting Standards***

*Accounting      for Certain Hybrid Financial Instruments*
*Accounting      for Derivative Instruments and Hedging Activities.*
*Accounting      for Transfers and Servicing of Financial Assets and Extinguishments of      Liabilities *

*Accounting      for Servicing of Financial Assets*
*Accounting      for Transfers and Servicing of Financial Assets and Extinguishments of      Liabilities*

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

      Final      FASB Staff Position (FSP) No. 46(R)-6, *Determining      the Variability to Be Considered in Applying FASB Interpretation No. 46(R),*to      stipulate that when applying FASB Interpretation (FIN) No. 46(R),      *Consolidation      of Variable Interest Entities,*to      an      entity, an analysis of the entity's design should determine the variability      to      be considered.  The requirements in this FSP distinguish between contracts      or arrangements that create variability in an entity and those that are exposed      to or reduce that variability.  Specifically, a reporting enterprise should      determine the entity's variability by analyzing the nature of the risks in      the      entity, determining the purposes for which the entity was created, and      determining the variability created by the risks in the entity, which the entity      is designed to create and pass along to its interest holders.  Once the      variability to be considered is determined, the reporting enterprise can measure      the amount of variability, as well as determine which interests are designed      to      absorb that variability.  FSP No. FIN 46(R)-6 applies prospectively to all      entities with which an enterprise first becomes involved, and to all entities      previously required to be analyzed under FIN      No.      46(R),      beginning the first day of the first reporting period beginning after June      15,      2006.  The Company believes that the impact would not be material to the      financial statements.

*“Accounting      for Uncertainty in Income Taxes - an interpretation of FASB Statement No.      109”*
*Accounting      for Income Taxes.*

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(3)**
**Acquisitions**

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

| Cash                  and due from banks              |   | $      | 78,476   |   |
|-------------------------------------------------------|--------|--------|----------|--------|
| Interest-bearing                  deposits with banks |   |   | 3,271    |   |
| Investments                  securities               |   |   | 80,140   |   |
| Loans,                  net                           |   |   | 336,275  |   |
| Other                  assets                         |   |   | 23,828   |   |
| Total                  assets acquired                |   |   | 521,990  |   |
| Deposits                                              |   |   | (398,555 | )      |
| Borrowings                                            |   |   | (85,738  | )      |
| Other                  liabilities                    |   |   | (8,632   | )      |
| Total                  liabilities assumed            |   |   | (492,925 | )      |
| Net                  assets acquired                  |   | $      | 29,065   |   |

**(4)**
**Securities      Purchased Under Agreements to Resell**

|                                                         |   | **2006** |       | **2005** |   |
|--------------------------------------------------------------|--------|----------|------------|----------|--------|
| Amount                  outstanding at year-end              |   | $        | 51,191,323 |     | $      | 54,132,673 |   |
| Maximum                  aggregate balance outstanding       |   |     |       |     |   |   |   |
| at                  any month-end                            |   |     | 51,191,323 |     |   | 58,552,186 |   |
| Average                  monthly aggregate balance           |   |     |       |     |   |   |   |
| outstanding                  during the year                 |   |     | 30,904,690 |     |   | 30,147,950 |   |
| Weighted                  average interest rate for the year |   |     | 5.29       | %        |   | 3.63 | % |
| Weighted                  average interest rate at year-end  |   |     | 5.58       | %        |   | 4.65 | % |

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(5)**
**Investment      Securities Available for Sale**

|                                           |   | **2006**      |        |
|------------------------------------------------|--------|---------------|-------------|
|                                           |   | **Amortized** |        | **Gross                  unrealized** |   | **Gross                  unrealized** |   | **Fair** |   |
|                                           |   | **cost**      |        | **gains** |   | **losses** |   | **value** |   |
| Commonwealth                  of Puerto        |   |     |        |    |   |    |   |    |   |
| Rico                  obligations:             |   |     |        |    |   |    |   |    |   |
| Less                  than one year            |   | $             | 4,116,192   |   | $ | 14,056 |   | $ | (39,760 | ) | $ | 4,090,488 |   |
| One                  through five years        |   |          | 5,401,713   |   |   | 71,851 |   |   | (1,110 | ) |   | 5,472,454 |   |
| FED                  Farm Credit Bonds:        |   |          |        |   |   |   |   |   |   |   |   |   |   |
| Less                  than one year            |   |          | 30,319,617  |   |   | - |   |   | (383,179 | ) |   | 29,936,438 |   |
| One                  through five years        |   |          | 19,994,263  |   |   | - |   |   | (311,883 | ) |   | 19,682,380 |   |
| Federal                  Home Loan Bank notes: |   |          |        |   |   |   |   |   |   |   |   |   |   |
| Less                  than one year            |   |          | 20,885,000  |   |   | - |   |   | (218,738 | ) |   | 20,666,262 |   |
| One                  through five years        |   |          | 79,419,623  |   |   | - |   |   | (1,375,610 | ) |   | 78,044,013 |   |
| Five                  to ten years             |   |          | 7,922,971   |   |   | - |   |   | (71,985 | ) |   | 7,850,986 |   |
| Federal                  National Mortgage     |   |          |        |   |   |   |   |   |   |   |   |   |   |
| Association                  notes:            |   |          |        |   |   |   |   |   |   |   |   |   |   |
| One                  through five years        |   |          | 19,991,659  |   |   | 83,491 |   |   | - |   |   | 20,075,150 |   |
| Mortgage-backed                  securities    |   |          | 354,672,013 |   |   | 412,557 |   |   | (5,743,732 | ) |   | 349,340,838 |   |
| Total                                          |   | $             | 542,723,052 |   | $ | 581,955 |   | $ | (8,145,997 | ) | $ | 535,159,009 |   |

|                                             |   | **2005**      |        |
|--------------------------------------------------|--------|---------------|-------------|
|                                             |   | **Amortized** |        | **Gross                    unrealized** |   | **Gross                    unrealized** |   | **Fair** |   |
|                                             |   | **cost**      |        | **gains** |   | **losses** |   | **value** |   |
| Commonwealth                    of Puerto        |   |     |        |    |   |    |   |    |   |
| Rico                    obligations:             |   |     |        |    |   |    |   |    |   |
| Less                    than one year            |   | $             | 3,115,000   |   | $ | - |   | $ | (15,238 | ) | $ | 3,099,762 |   |
| One                    through five years        |   |          | 3,131,244   |   |   | 2,786 |   |   | (63,239 | ) |   | 3,070,791 |   |
| Five                    to ten years             |   |          | 631,112     |   |   | 5,912 |   |   | (340 | ) |   | 636,684 |   |
| More                    than ten years           |   |          | 1,025,000   |   |   | 5,742 |   |   | (16,957 | ) |   | 1,013,785 |   |
| FED                    Farm Credit Bonds:        |   |          |        |   |   |   |   |   |   |   |   |   |   |
| One                    through five years        |   |          | 50,299,967  |   |   | - |   |   | (614,219 | ) |   | 49,685,748 |   |
| Federal                    Home Loan Bank notes: |   |          |        |   |   |   |   |   |   |   |   |   |   |
| Less                    than one year            |   |          | 22,141,963  |   |   | - |   |   | (247,259 | ) |   | 21,894,704 |   |
| One                    through five years        |   |          | 147,974,882 |   |   | - |   |   | (2,866,421 | ) |   | 145,108,461 |   |
| Federal                    National Mortgage     |   |          |        |   |   |   |   |   |   |   |   |   |   |
| Association                    notes:            |   |          |        |   |   |   |   |   |   |   |   |   |   |
| Less                    than one year            |   |          | 4,999,830   |   |   | - |   |   | (3,590 | ) |   | 4,996,240 |   |
| One                    through five years        |   |          | 2,474,558   |   |   | - |   |   | (60,980 | ) |   | 2,413,578 |   |
| Federal                    Home Loan Mortgage    |   |          |        |   |   |   |   |   |   |   |   |   |   |
| Corporation                    notes:            |   |          |        |   |   |   |   |   |   |   |   |   |   |
| Less                    than one year            |   |          | 3,001,070   |   |   | - |   |   | (18,344 | ) |   | 2,982,726 |   |
| Mortgage-backed                    securities    |   |          | 398,713,782 |   |   | 391,108 |   |   | (6,927,093 | ) |   | 392,177,797 |   |
| Total                                            |   | $             | 637,508,408 |   | $ | 405,548 |   | $ | (10,833,680 | ) | $ | 627,080,276 |   |

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                             |   | **2006**                                 |     |
|--------------------------------------------------|--------|------------------------------------------|----------|
|                                             |   | **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     |   | $                                        | (71,985  | ) | $ | 7,850,986 |   | $ | (2,289,410 | ) | $ | 148,329,093 |   | $ | (2,361,395 | ) | $ | 156,180,079 |   |
| State                  and municipal obligations |   |                                     | (10,563  | ) |   | 770,325 |   |   | (30,307 | ) |   | 2,480,885 |   |   | (40,870 | ) |   | 3,251,210 |   |
| Mortgage-backed                  securities      |   |                                     | (243,756 | ) |   | 50,655,419 |   |   | (5,499,976 | ) |   | 250,971,704 |   |   | (5,743,732 | ) |   | 301,627,123 |   |
|                                             |   | $                                        | (326,304 | ) | $ | 59,276,730 |   | $ | (7,819,693 | ) | $ | 401,781,682 |   | $ | (8,145,997 | ) | $ | 461,058,412 |   |

|                                             |   | **2005**                                 |       |
|--------------------------------------------------|--------|------------------------------------------|------------|
|                                             |   | **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     |   | $                                        | (2,226,348 | ) | $ | 150,751,724 |   | $ | (1,584,466 | ) | $ | 76,329,733 |   | $ | (3,810,814 | ) | $ | 227,081,457 |   |
| State                  and municipal obligations |   |                                     | (45,969    | ) |   | 4,499,031 |   |   | (49,804 | ) |   | 2,055,028 |   |   | (95,773 | ) |   | 6,554,059 |   |
| Mortgage-backed                  securities      |   |                                     | (3,250,072 | ) |   | 207,136,215 |   |   | (3,677,021 | ) |   | 135,185,463 |   |   | (6,927,093 | ) |   | 342,321,678 |   |
|                                             |   | $                                        | (5,522,389 | ) | $ | 362,386,970 |   | $ | (5,311,291 | ) | $ | 213,570,224 |   | $ | (10,833,680 | ) | $ | 575,957,194 |   |

|   | · | ***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 par value 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 a U.S. government sponsored enterprise.                It is                expected that the securities would not be settled at a price less                than the                par value 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. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(6)**
**Investment      Securities Held to Maturity**

|                                            |   |  **2006** |       |
|-------------------------------------------------|--------|----------------|------------|
|                                            |   | **Amortized**  |       | **Gross                    unrealized** |   | **Gross                    unrealized** |   | **Fair** |   |
|                                            |   | **cost**       |       | **gains** |   | **losses** |   | **value** |   |
| Federal                    Home Loan Bank Notes |   | $              | 3,164,937  |   | $ | - |   | $ | (93,402 | ) | $ | 3,071,535 |   |
| Mortgage-backed                    securities   |   |           | 35,267,883 |   |   | - |   |   | (865,645 | ) |   | 34,402,238 |   |
| Total                                           |   | $              | 38,432,820 |   | $ | - |   | $ | (959,047 | ) | $ | 37,473,773 |   |

|                                          |   |  **2005** |       |
|-----------------------------------------------|--------|----------------|------------|
|                                          |   | **Amortized**  |       | **Gross                  unrealized** |   | **Gross                  unrealized** |   | **Fair** |   |
|                                          |   | **cost**       |       | **gains** |   | **losses** |   | **value** |   |
| Federal                  Home Loan Bank Notes |   | $              | 3,762,677  |   | $ | - |   | $ | (99,441 | ) | $ | 3,663,236 |   |
| Mortgage-backed                  securities   |   |           | 38,708,107 |   |   | - |   |   | (959,804 | ) |   | 37,748,303 |   |
| Total                                         |   | $              | 42,470,784 |   | $ | - |   | $ | (1,059,245 | ) | $ | 41,411,539 |   |

|                                         |   | **2006**                                 |   |
|----------------------------------------------|--------|------------------------------------------|--------|
|                                         |   | **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 |   | $                                        | -      |   | $ | - |   | $ | (93,402 | ) | $ | 3,071,535 |   | $ | (93,402 | ) | $ | 3,071,535 |   |
| Mortgage-backed                  securities  |   |                                     | -      |   |   | - |   |   | (865,645 | ) |   | 34,402,238 |   |   | (865,645 | ) |   | 34,402,238 |   |
|                                         |   | $                                        | -      |   | $ | - |   | $ | (959,047 | ) | $ | 37,473,773 |   | $ | (959,047 | ) | $ | 37,473,773 |   |

|                                           |   | **2005**                                   |     |
|------------------------------------------------|--------|--------------------------------------------|----------|
|                                           |   | **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 |   | $                                          | -        |   | $ | - |   | $ | (99,441 | ) | $ | 3,663,236 |   | $ | (99,441 | ) | $ | 3,663,236 |   |
| Mortgage-backed                    securities  |   |                                       | (250,139 | ) |   | 10,016,734 |   |   | (709,665 | ) |   | 27,731,569 |   |   | (959,804 | ) |   | 37,748,303 |   |
|                                           |   | $                                          | (250,139 | ) | $ | 10,016,734 |   | $ | (809,106 | ) | $ | 31,394,805 |   | $ | (1,059,245 | ) | $ | 41,411,539 |   |

|   | · | ***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 par value 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 a U.S. government sponsored enterprise. It is expected                that the securities would not be settled at a price less than the                par                value 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. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(7)      **
**Other      Investments**

|                                                       |   | **2006** |      | **2005** |   |
|------------------------------------------------------------|--------|----------|-----------|----------|--------|
| FHLB                  stock, at cost                       |   | $        | 3,717,700 |     | $      | 9,269,500 |   |
| Investment                  in statutory trusts (notes 17) |   |     | 611,500   |     |   | 1,382,500 |   |
| Other                  investments                         |   | $        | 4,329,200 |     | $      | 10,652,000 |   |

**(8)**
**Pledged      Assets**

|                                            |   | **Carrying** |          |                                                  |
|-------------------------------------------------|--------|--------------|---------------|-------------------------------------------------------|
| **Asset                      pledged**          |   | **value**    |          | **Items                      secured/collateralized** |
| Securities                                      |   | $            | 35,558,515    |                                                  | Deposits                      of public funds |
| Commercial                      loans           |   |         |          |                                                  |   |
| guaranteed                      by the Small    |   |         |          |                                                  |   |
| Business                      Administration    |   |         | 733,188  |                                                  | Deposits                      of public funds |
| Residential                      mortgage loans |   |         | 25,715,094    |                                                  | Advances                      from Federal Home Loan Bank |
| Securities                                      |   |         | 98,023        |                                                  | Assets                      pledged with Commissioner of |
|                                            |   |         |          |                                                  | Financial                      Institutions of the Commonwealth of |
|                                            |   |         |          |                                                  | Puerto                      Rico for IRA Trust |
| Securities                                      |   |         | 945,835       |                                                  | Assets                      pledged with Commissioner of |
|                                            |   |         |          |                                                  | Financial                      Institutions of the Commonwealth of |
|                                            |   |         |          |                                                  | Puerto                      Rico for the Trust and the International |
|                                            |   |         |          |                                                  | Banking                      Entity operations |
| Securities                                      |   |         | 316,494       |                                                  | Assets                      pledged with the Federal Reserve Bank |
|                                            |   |         |          |                                                  | for                      Treasury, tax, and loan account |
| Securities                                      |   |         | 12,031,696    |                                                  | Assets                      pledged with the Federal Reserve Bank |
|                                            |   |         |          |                                                  | for                      Discount Window |
| Securities                                      |   |         | 4,820,240     |                                                  | Assets                      pledged for derivatives contracts |
| Securities                                      |   |         | 469,958,492   |                                                  | Securities                      sold under agreements to                      repurchase |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(9)      Loans, Net**

|                                                  |   | **2006**     |          | **2005**     |   |
|-------------------------------------------------------|--------|--------------|---------------|--------------|--------|
| Loans                  secured by real estate:        |   |    |          |    |   |
| Commercial                  and industrial            |   | $            | 736,555,175   |         | $      | 612,375,600 |   |
| Construction                                          |   |         | 126,241,190   |         |   | 82,468,171 |   |
| Residential                  mortgage                 |   |         | 76,277,339    |         |   | 44,841,330 |   |
| Consumer                                              |   |         | 782,456       |         |   | 905,774 |   |
|                                                  |   |         | 939,856,160   |         |   | 740,590,875 |   |
|                                                  |   |         |          |         |   |   |   |
| Commercial                  and industrial            |   |         | 297,511,599   |         |   | 272,205,403 |   |
| Consumer                                              |   |         | 60,682,410    |         |   | 63,979,725 |   |
| Lease                  financing contracts            |   |         | 443,310,627   |         |   | 487,863,247 |   |
| Overdrafts                                            |   |         | 5,015,183     |         |   | 5,336,117 |   |
|                                                  |   |         | 1,746,375,979 |         |   | 1,569,975,367 |   |
|                                                  |   |         |          |         |   |   |   |
| Deferred                  loan origination costs, net |   |         | 4,879,823     |         |   | 7,441,524 |   |
| Unearned                  finance charges             |   |         | (1,296,671    | )            |   | (1,157,235 | ) |
| Allowance                  for loan and lease losses  |   |         | (18,936,841   | )            |   | (18,188,130 | ) |
| Loans,                  net                           |   | $            | 1,731,022,290 |         | $      | 1,558,071,526 |   |

|                                                     |   | **2006** |        | **2005** |   |
|----------------------------------------------------------|--------|----------|-------------|----------|--------|
| Installments                  lease payments             |   | $        | 374,415,877 |     | $      | 418,567,261 |   |
| Contractual                  residual payments           |   |     | 68,894,750  |     |   | 69,295,986 |   |
| Minimum                  lease payments                  |   |     | 443,310,627 |     |   | 487,863,247 |   |
| Deferred                  origination costs, net         |   |     | 5,609,852   |     |   | 7,694,020 |   |
| Less                  unearned income (equipment leases) |   |     | (1,296,671  | )        |   | (1,157,106 | ) |
|                                                     |   | $        | 447,623,808 |     | $      | 494,400,161 |   |

| Years                  ending December 31: |   |   |        |
|--------------------------------------------|--------|--------|-------------|
| 2007                                       |   | $      | 106,022,506 |   |
| 2008                                       |   |   | 108,905,870 |   |
| 2009                                       |   |   | 103,532,061 |   |
| 2010                                       |   |   | 80,863,375  |   |
| 2011                                       |   |   | 39,575,390  |   |
| Thereafter                                 |   |   | 4,411,425   |   |
|                                       |   | $      | 443,310,627 |   |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                           |   | **2006** |       | **2005** |   |
|----------------------------------------------------------------|--------|----------|------------|----------|--------|
| Impaired                  loans with related allowance         |   | $        | 11,878,000 |     | $      | 7,071,000 |   |
| Impaired                  loans that did not require allowance |   |     | 27,319,000 |     |   | 12,493,000 |   |
| Total                  impaired loans                          |   | $        | 39,197,000 |     | $      | 19,564,000 |   |
| Allowance                  for impaired loans                  |   | $        | 2,219,000  |     | $      | 590,000 |   |

|                                                    |   | **2006** |       | **2005** |   | **2004**   |   |
|---------------------------------------------------------|--------|----------|------------|----------|--------|------------|--------|
| Average                    investment in impaired loans |   | $        | 27,640,000 |     | $      | 22,439,000 |   | $ | 21,317,000 |   |
| Interest                    income recognized on        |   |     |       |     |   |       |   |   |   |   |
| impaired                    loans                       |   |     | 1,041,000  |     |   | 1,095,000  |   |   | 560,000 |   |
| Interest                    income recognized on a cash |   |     |       |     |   |       |   |   |   |   |
| basis                    on impaired loans              |   |     | 1,041,000  |     |   | 1,095,000  |   |   | 560,000 |   |

**(10)**
**Allowance      for Loan and Lease Losses**

|                                                 |   | **2006** |        | **2005** |   | **2004**    |   |
|------------------------------------------------------|--------|----------|-------------|----------|--------|-------------|--------|
| Balance                  at beginning of year        |   | $        | 18,188,130  |     | $      | 19,038,836  |   | $ | 9,393,943 |   |
| Provision                  for loan and lease losses |   |     | 16,903,000  |     |   | 12,775,000  |   |   | 7,100,000 |   |
| Loans                  and leases charged-off        |   |     | (18,789,323 | )        |   | (16,589,457 | )      |   | (10,499,850 | ) |
| Recoveries                                           |   |     | 2,635,034   |     |   | 2,963,751   |   |   | 2,143,197 |   |
| Allowance                  from the acquisition of   |   |     |        |     |   |        |   |   |   |   |
| BankTrust                                            |   |     | -           |     |   | -           |   |   | 10,901,546 |   |
| Balance                  at end of year              |   | $        | 18,936,841  |     | $      | 18,188,130  |   | $ | 19,038,836 |   |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(11)**
**Premises      and Equipment, Net**

|                                                       |   | **Estimated**                     |                     |     |   |        |   |
|------------------------------------------------------------|--------|-----------------------------------|--------------------------|----------|--------|-------------|--------|
|                                                       |   | **useful                  lives** |                     |     |   |        |   |
|                                                       |   | **(years)**                       |                     | **2006** |   | **2005**    |   |
| Land                                                       |   |                              |                     |     | $      | 850,738     |   | $ | — |   |
| Building                                                   |   |                              | 40                       |     |   | 6,498,507   |   |   | 5,749,435 |   |
| Leasehold                  improvements                    |   |                              | 5                  to 20 |     |   | 7,646,256   |   |   | 6,720,279 |   |
| Furniture,                  fixtures, and equipment        |   |                              | 2                  to 5  |     |   | 11,074,966  |   |   | 11,336,950 |   |
| Construction                  in progress                  |   |                              |                     |     |   | 616,131     |   |   | 23,106 |   |
|                                                       |   |                              |                     |     |   | 26,686,598  |   |   | 23,829,770 |   |
| Accumulated                  depreciation and amortization |   |                              |                     |     |   | (11,797,142 | )      |   | (12,661,789 | ) |
|                                                       |   |                              |                     |     | $      | 14,889,456  |   | $ | 11,167,981 |   |

**(12)**
**Other      Assets**

|                                                                          |   | **2006** |       | **2005** |   |
|-------------------------------------------------------------------------------|--------|----------|------------|----------|--------|
| Deferred                  tax assets, net (note 20)                           |   | $        | 6,260,855  |     | $      | 5,070,074 |   |
| Merchant                  credit card items in process of collection          |   |     | 1,854,919  |     |   | 2,716,699 |   |
| Auto                  insurance claims receivable on repossessed vehicles     |   |     | 1,864,326  |     |   | 1,074,175 |   |
| Accounts                  receivable                                          |   |     | 1,146,465  |     |   | 1,361,958 |   |
| Other                  real estate, net of valuation allowance of $41,894 and |   |     |       |     |   |   |   |
| $12,297                  in 2006 and 2005, respectively                       |   |     | 3,628,971  |     |   | 1,542,369 |   |
| Other                  repossessed assets, net of valuation allowance of      |   |     |       |     |   |   |   |
| $799,104                  and $1,216,087 in 2006 and 2005, respectively       |   |     | 9,418,811  |     |   | 7,974,665 |   |
| Net                  servicing assets                                         |   |     | 781,720    |     |   | 2,414,348 |   |
| Prepaid                  expenses and deposits                                |   |     | 7,772,760  |     |   | 6,362,476 |   |
| Other                                                                         |   |     | 387,863    |     |   | 1,006,889 |   |
|                                                                          |   | $        | 33,116,690 |     | $      | 29,523,653 |   |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                     |   | **2006** |       | **2005** |   | **2004**  |   |
|----------------------------------------------------------|--------|----------|------------|----------|--------|-----------|--------|
| Balance,                  beginning of year              |   | $        | 1,216,087  |     | $      | 1,493,305 |   | $ | 885,135 |   |
| Provision                  for losses                    |   |     | 1,262,726  |     |   | 649,840   |   |   | 884,593 |   |
| Allowance                  from acquisition of BankTrust |   |     | —    |     |   | —   |   |   | 601,078 |   |
| Net                  charge-offs                         |   |     | (1,679,709 | )        |   | (927,058  | )      |   | (877,501 | ) |
| Balance,                  end of year                    |   | $        | 799,104    |     | $      | 1,216,087 |   | $ | 1,493,305 |   |

**(13)**
**Deposits**

|                                          |   | **2006** |          | **2005** |   |
|-----------------------------------------------|--------|----------|---------------|----------|--------|
|                                          |   |     |          |     |   |
| Noninterest                  bearing deposits |   | $        | 140,321,373   |     | $      | 146,637,966 |   |
|                                          |   |     |          |     |   |   |   |
| Interest-bearing                  deposits:   |   |     |          |     |   |   |   |
| NOW                  & Money Market       |   |     | 62,672,648    |     |   | 70,961,689 |   |
| Savings                                       |   |     | 156,069,357   |     |   | 223,664,685 |   |
| Regular                  CD's & IRAS      |   |     | 95,396,084    |     |   | 121,950,012 |   |
| Jumbo                  CD's                   |   |     | 224,741,161   |     |   | 203,707,607 |   |
| Brokered                  deposits            |   |     | 1,226,155,584 |     |   | 967,206,187 |   |
|                                          |   |     | 1,765,034,834 |     |   | 1,587,490,180 |   |
| Total                  Deposits               |   | $        | 1,905,356,207 |     | $      | 1,734,128,146 |   |

|                                    |   | Under                  $100,000 |       | Over                  $100,000 |   | Total         |   |
|-----------------------------------------|--------|---------------------------------|------------|--------------------------------|--------|---------------|--------|
|                                    |   |                            |       |                           |   |          |   |
| 2007                                    |   | $                               | 70,693,657 |                           | $      | 1,031,476,743 |   | $ | 1,102,170,400 |   |
| 2008                                    |   |                            | 14,216,972 |                           |   | 106,176,585   |   |   | 120,393,557 |   |
| 2009                                    |   |                            | 5,071,441  |                           |   | 110,827,884   |   |   | 115,899,325 |   |
| 2010                                    |   |                            | 2,939,732  |                           |   | 111,367,690   |   |   | 114,307,422 |   |
| 2011                                    |   |                            | 1,287,444  |                           |   | 55,272,000    |   |   | 56,559,444 |   |
| Thereafter                              |   |                            | 1,439,018  |                           |   | 35,928,000    |   |   | 37,367,018 |   |
|                                    |   |                            | 95,648,264 |                           |   | 1,451,048,902 |   |   | 1,546,697,166 |   |
| Net                  premium (discount) |   |                            | 299,052    |                           |   | (703,389      | )      |   | (404,337 | ) |
|                                    |   | $                               | 95,947,316 |                           | $      | 1,450,345,513 |   | $ | 1,546,292,829 |   |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(14)**
**Securities      Sold Under Agreements to Repurchase**

|                                                         |   | **2006** |        | **2005** |   | **2004**    |   |
|--------------------------------------------------------------|--------|----------|-------------|----------|--------|-------------|--------|
| Amount                  outstanding at year-end              |   | $        | 365,664,250 |     | $      | 419,859,750 |   | $ | 463,409,056 |   |
| Maximum                  aggregate balance outstanding       |   |     |        |     |   |        |   |   |   |   |
| at                  any month-end                            |   |     | 501,182,250 |     |   | 614,650,042 |   |   | 465,302,056 |   |
| Average                  aggregate balance outstanding       |   |     |        |     |   |        |   |   |   |   |
| during                  the year                             |   |     | 432,458,830 |     |   | 489,109,622 |   |   | 312,169,363 |   |
| Weighted                  average interest rate for the year |   |     | 4.94        | %        |   | 3.33        | %      |   | 1.70 | % |
| Weighted                  average interest rate at year-end  |   |     | 5.27        | %        |   | 4.25        | %      |   | 2.47 | % |

|                                                  |   | **2006**      |        |
|-------------------------------------------------------|--------|---------------|-------------|
|                                                  |   |          |        | **Amortized** |   |   |   | **Weighted** |   |
|                                                  |   | **Borrowing** |        | **cost                  of** |   | **Fair                  value** |   | **average** |   |
|                                                  |   | **balance**   |        | **collateral** |   | **of                  collateral** |   | **interest                  rate** |   |
| Obligation                  of U.S. government        |   |     |        |    |   |    |   |    |   |
| agencies                  and corporations:           |   |     |        |    |   |    |   |    |   |
|  Within                  30 days                 |   | $             | 62,538,705  |   | $ | 67,514,240 |   | $ | 66,521,653 |   |   | 5.33 | % |
|  After                  30 to 90 days            |   |          | 68,506,987  |   |   | 69,989,635 |   |   | 69,196,170 |   |   | 5.33 | % |
|  After                  90 days                  |   |          | 12,875,612  |   |   | 15,242,634 |   |   | 15,146,484 |   |   | 5.12 | % |
|                                                  |   |          | 143,921,304 |   |   | 152,746,509 |   |   | 150,864,307 |   |   |   |   |
| Mortgage-backed                  securities:          |   |          |        |   |   |   |   |   |   |   |   |   |   |
|  After                  30 to 90 days            |   |          | 525,565     |   |   | 593,748 |   |   | 591,138 |   |   | 5.44 | % |
|  After                  90 days                  |   |          | 28,440,074  |   |   | 37,579,646 |   |   | 37,190,244 |   |   | 4.91 | % |
|                                                  |   |          | 28,965,639  |   |   | 38,173,395 |   |   | 37,781,383 |   |   |   |   |
| Collateralized                  mortgage obligations: |   |          |        |   |   |   |   |   |   |   |   |   |   |
|  Within                  30 days                 |   |          | 35,930,545  |   |   | 68,512,290 |   |   | 67,425,239 |   |   | 5.33 | % |
|  After                  30 to 90 days            |   |          | 28,362,448  |   |   | 40,259,058 |   |   | 39,784,285 |   |   | 5.41 | % |
|  After                  90 days                  |   |          | 128,484,314 |   |   | 176,606,918 |   |   | 173,219,241 |   |   | 4.79 | % |
|                                                  |   |          | 192,777,307 |   |   | 285,378,266 |   |   | 280,428,764 |   |   |   |   |
|                                                  |   | $             | 365,664,250 |   | $ | 476,298,169 |   | $ | 469,074,454 |   |   | 5.11 | % |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                  |   | **2005**      |        |
|-------------------------------------------------------|--------|---------------|-------------|
|                                                  |   |          |        | **Amortized** |   |   |   | **Weighted** |   |
|                                                  |   | **Borrowing** |        | **cost                  of** |   | **Fair                  value** |   | **average** |   |
|                                                  |   | **balance**   |        | **collateral** |   | **of                  collateral** |   | **interest                  rate** |   |
| Obligation                  of U.S. government        |   |     |        |    |   |    |   |    |   |
| agencies                  and corporations:           |   |     |        |    |   |    |   |    |   |
|  Within                  30 days                 |   | $             | 115,598,409 |   | $ | 117,744,746 |   | $ | 115,783,098 |   |   | 4.31 | % |
|  After                  90 days                  |   |          | 13,895,674  |   |   | 18,655,380 |   |   | 18,195,752 |   |   | 3.81 | % |
|                                                  |   |          | 129,494,083 |   |   | 136,400,126 |   |   | 133,978,850 |   |   |   |   |
| Mortgage-backed                  securities:          |   |          |        |   |   |   |   |   |   |   |   |   |   |
|  Within                  30 days                 |   |          | 1,102,440   |   |   | 1,126,117 |   |   | 1,130,150 |   |   | 4.32 | % |
|  After                  90 days                  |   |          | 20,164,275  |   |   | 21,777,228 |   |   | 21,666,293 |   |   | 4.39 | % |
|                                                  |   |          | 21,266,715  |   |   | 22,903,345 |   |   | 22,796,443 |   |   |   |   |
| Collateralized                  mortgage obligations: |   |          |        |   |   |   |   |   |   |   |   |   |   |
|  Within                  30 days                 |   |          | 113,739,900 |   |   | 116,747,419 |   |   | 114,830,990 |   |   | 4.26 | % |
|  After                  30 to 90 days            |   |          | 8,000,000   |   |   | 7,595,123 |   |   | 7,595,123 |   |   | 4.48 | % |
|  After                  90 days                  |   |          | 147,359,052 |   |   | 165,175,332 |   |   | 161,882,432 |   |   | 3.98 | % |
|                                                  |   |          | 269,098,952 |   |   | 289,517,874 |   |   | 284,308,545 |   |   |   |   |
|                                                  |   | $             | 419,859,750 |   | $ | 448,821,345 |   | $ | 441,083,838 |   |   | 4.17 | % |

**(15)**
**Advances      from FHLB**

| **Maturity** |   |  **Interest                  rate range** |                            | **2006** |   | **2005**  |   |
|--------------|--------|------------------------------------------------|---------------------------------|----------|--------|-----------|--------|
|         |   |                                      |                            |     |   |      |   |
| 2006         |   |                                           | 4.81%                  to 5.72% |     | $      | —   |   | $ | 7,000,000 |   |
| 2007         |   |                                           | 5.20%                  to 5.45% |     |   | 8,200,000 |   |   | 1,200,000 |   |
| 2014         |   |                                           | 4.38%                           |     |   | 507,420   |   |   | 558,626 |   |
|         |   |                                           |                            |     | $      | 8,707,420 |   | $ | 8,758,626 |   |

**(16)**
**Derivative      Financial Instruments **

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                 |   | **2006**     |       | **2005**                        |   |
|--------------------------------------|--------|--------------|------------|---------------------------------|--------|
|                                 |   | **Notional** |       |                            |   | **Notional** |   |   |   |
|                                 |   | **amount**   |       | **Fair                  value** |   | **amount** |   | **Fair                  value** |   |
| Fair-value                  hedges:  |   |    |       |                       |   |    |   |    |   |
| Interest                  rate swaps |   | $            | 30,800,000 |                            | $      | (1,236,093 | ) | $ | 30,800,000 |   | $ | (1,385,708 | ) |
|                                 |   | $            | 30,800,000 |                            | $      | (1,236,093 | ) | $ | 30,800,000 |   | $ | (1,385,708 | ) |

*“Accounting      for Derivative Instruments and Hedging Activities”*

**(17)**
**Notes      Payable to Statutory Trusts**

----

**EUROBANCSHARES,          INC. AND SUBSIDIARIES**

**(18)**
**Commitments      and Contingencies**

|                                      |   | **Minimum**  |       | **Estimated** |   |      |   |
|-------------------------------------------|--------|--------------|------------|---------------|--------|-----------|--------|
|                                      |   | **lease**    |       | **lease**     |   |      |   |
|                                      |   | **payments** |       | **income**    |   | **Net**   |   |
| Year                  ending December 31: |   |         |       |          |   |      |   |
| 2007                                      |   | $            | 1,956,000  |          | $      | 235,000   |   | $ | 1,721,000 |   |
| 2008                                      |   |         | 1,412,000  |          |   | 235,000   |   |   | 1,177,000 |   |
| 2009                                      |   |         | 1,232,000  |          |   | 255,000   |   |   | 977,000 |   |
| 2010                                      |   |         | 1,200,000  |          |   | 255,000   |   |   | 945,000 |   |
| 2011                                      |   |         | 1,112,000  |          |   | 255,000   |   |   | 857,000 |   |
| Thereafter                                |   |         | 11,353,000 |          |   | 276,000   |   |   | 11,077,000 |   |
|                                      |   | $            | 18,265,000 |          | $      | 1,511,000 |   | $ | 16,754,000 |   |

**(19)**
**Sale      of Receivables **

*Accounting      for Transfers and Servicing of Financial Assets and Extinguishment of      Liabilities*

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(20)**
**Income      Taxes**

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                          |   | **2006** |      | **2005** |   | **2004**  |   |
|---------------------------------------------------------------|--------|----------|-----------|----------|--------|-----------|--------|
| Income                  tax from operations                   |   | $        | 6,283,010 |     | $      | 9,077,228 |   | $ | 8,662,633 |   |
| Stockholders'                  equity for unrealized (losses) |   |     |      |     |   |      |   |   |   |   |
| and                  gain on investment securities and        |   |     |      |     |   |      |   |   |   |   |
| cash-flow                  hedges                             |   |     | 1,654     |     |   | 80,446    |   |   | 185,118 |   |
|                                                          |   | $        | 6,284,664 |     | $      | 9,157,674 |   | $ | 8,847,751 |   |

|                                               |   | **2006** |      | **2005** |   | **2004**  |   |
|----------------------------------------------------|--------|----------|-----------|----------|--------|-----------|--------|
| Current                  tax provision             |   | $        | 7,342,480 |     | $      | 1,751,202 |   | $ | 3,947,286 |   |
| Deferred                  tax provision            |   |     | (683,744  | )        |   | 7,326,026 |   |   | 4,715,347 |   |
| Benefit                  from purchased tax credit |   |     | (375,726  | )        |   | —   |   |   | — |   |
| Total                  income tax provision        |   | $        | 6,283,010 |     | $      | 9,077,228 |   | $ | 8,662,633 |   |

|                                             |   | **2006**   |      | **2005** |   | **2004**   |   |
|--------------------------------------------------|--------|------------|-----------|----------|--------|------------|--------|
|                                             |   | **Amount** |      | **Rate** |   | **Amount** |   | **Rate** |   | **Amount** |   | **Rate** |   |
| Income                  tax at statutory rate    |   | $          | 6,218,279 |     |   | 43.50      | %      | $ | 10,627,150 |   |   | 41.50 | % | $ | 10,515,716 |   |   | 39.00 | % |
| Benefits                  of tax-exempt interest |   |       |      |     |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| income,                  net                     |   |       | (448,850  | )        |   | (3.14      | )      |   | (149,802 | ) |   | (0.58 | ) |   | (191,492 | ) |   | (0.71 | ) |
| International                  banking entities  |   |       | 605,563   |     |   | 4.24       |   |   | (1,278,924 | ) |   | (4.99 | ) |   | (1,410,672 | ) |   | (5.25 | ) |
| Puerto                  Rico Treasury Department |   |       |      |     |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| examination                                      |   |       | —   |     |   | —    |   |   | — |   |   | — |   |   | 495,005 |   |   | 1.84 |   |
| Benefits                  from purchase of tax   |   |       |      |     |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| credits                  at discount             |   |       | (375,726  | )        |   | (2.63      | )      |   | — |   |   | — |   |   | — |   |   | — |   |
| Non                  deductible Stock based      |   |       |      |     |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| compensation                                     |   |       | 66,708    |     |   | 0.47       |   |   | — |   |   | — |   |   | — |   |   | — |   |
| (Allowance)                  disallowance of     |   |       |      |     |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| certain                  expenses for tax        |   |       |      |     |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| purposes                  and other items        |   |       | 217,036   |     |   | 1.51       |   |   | (121,196 | ) |   | (0.48 | ) |   | (745,924 | ) |   | (2.78 | ) |
|                                             |   | $          | 6,283,010 |     |   | 43.95      | %      | $ | 9,077,228 |   |   | 35.45 | % | $ | 8,662,633 |   |   | 32.10 | % |

----

**EUROBANCSHARES,          INC. AND SUBSIDIARIES**

|                                                              |   | **2006**     |       | **2005**     |   |
|-------------------------------------------------------------------|--------|--------------|------------|--------------|--------|
| Deferred                  tax assets:                             |   |    |       |    |   |
| Allowance                  for loan and lease losses              |   | $            | 7,385,368  |         | $      | 7,114,646 |   |
| Net                  operating loss carryforward                  |   |         | -          |         |   | 1,021,485 |   |
| Unrealized                  loss on securities available-for-sale |   |         | 1,864      |         |   | 3,518 |   |
| Other                  temporary differences                      |   |         | 1,283,014  |         |   | 1,473,608 |   |
| Deferred                  tax assets                              |   |         | 8,670,246  |         |   | 9,613,257 |   |
| Deferred                  tax liabilities:                        |   |         |       |         |   |   |   |
| Deferred                  loan origination costs, net             |   |         | (1,903,131 | )            |   | (2,913,232 | ) |
| Servicing                  assets                                 |   |         | (196,711   | )            |   | (734,152 | ) |
| Fair                  value adjustments on loans                  |   |         | (309,549   | )            |   | (895,799 | ) |
| Deferred                  tax liabilities                         |   |         | (2,409,391 | )            |   | (4,543,183 | ) |
| Net                  deferred tax asset                           |   | $            | 6,260,855  |         | $      | 5,070,074 |   |

*“Summary      of significant accounting policies”*

|                                              |   | **2006** |      |
|---------------------------------------------------|--------|----------|-----------|
| Balance                  at the beginning of year |   | $        | 5,070,074 |   |
| Deferred                  tax benefit             |   |     | 683,744   |   |
| Amount                  charged to retained       |   |     |           |   |
| earnings                  - SAB 108               |   |     | 505,383   |   |
| Effect                  of FAS 115 in other       |   |     |           |   |
| comprehensive                  income             |   |     | 1,654     |   |
| Balance                  at the end of year       |   | $        | 6,260,855 |   |

**(21)**
**Stock      Transactions**

----

**EUROBANCSHARES,          INC. AND SUBSIDIARIES**

|         |   | **Number                  of** |    |      |   |      |   |
|--------------|--------|--------------------------------|---------|-----------|--------|-----------|--------|
| **Date**     |   | **shares**                     |    | **Price** |   | **Total** |   |
|         |   |                           |    |      |   |      |   |
| February-06  |   |                           | 150,000 |      | $      | 3.33      |   | $ | 498,750 |   |
| June-06      |   |                           | 16,450  |      |   | 4.50      |   |   | 74,024 |   |
| June-06      |   |                           | 20,000  |      |   | 5.00      |   |   | 100,000 |   |
| June-06      |   |                           | 20,000  |      |   | 8.13      |   |   | 162,600 |   |
| September-06 |   |                           | 4,000   |      |   | 5.00      |   |   | 20,000 |   |
| September-06 |   |                           | 3,000   |      |   | 8.13      |   |   | 24,390 |   |
|         |   |                           | 213,450 |      |   |      |   | $ | 879,764 |   |

**(22)**
**Preferred      Stock**

**(23)**
**Stock      Option Plan**

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                 |   | **2006** |   | **2005** |   | **2004** |   |
|------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Expected                  life of options (in years) |   |     | 6.26   |     |   | 5.00     |   |   | 5.00 |   |
| Expected                  volatility                 |   |     | 39.28  | %        |   | 40.09    | %      |   | 0.00 | % |
| Expected                  dividends                  |   |     | 0.00   | %        |   | 0.00     | %      |   | 0.00 | % |
| Risk-                  free rate                     |   |     | 4.60   | %        |   | 4.00     | %      |   | 3.03 | % |

|                                           |   |       |      |         |   | **Weighthed**   |   |          |   |
|------------------------------------------------|--------|------------|-----------|--------------|--------|-----------------|--------|---------------|--------|
|                                           |   |       |      | **Weighted** |   | **average**     |   |          |   |
|                                           |   |       |      | **average**  |   | **remaining**   |   | **Aggregate** |   |
|                                           |   |       |      | **exercise** |   | **contractual** |   | **intrinsic** |   |
|                                           |   | **Shares** |      | **price**    |   | **term**        |   | **value**     |   |
| Options                  outstanding January 1 |   |       | 1,216,312 |         | $      | 6.84            |   |          |   |   |   |   |   |
| Granted                                        |   |       | 98,700    |         |   | 14.17           |   |          |   |   |   |   |   |
| Exercised                                      |   |       | (213,450  | )            |   | 4.12            |   |          |   |   |   |   |   |
| Forfeited                                      |   |       | (38,400   | )            |   | 16.46           |   |          |   |   |   |   |   |
| Outstanding                  at end of year    |   |       | 1,063,162 |         | $      | 7.72            |   |          | 1.90   |   | $ | 2,987,485 |   |
| Exercisable                  at end of year    |   |       | 996,362   |         | $      | 7.29            |   |          | 1.41   |   | $ | 2,979,122 |   |

|                                                            |   | **2006** |      | **2005** |   | **2004** |   |
|-----------------------------------------------------------------|--------|----------|-----------|----------|--------|----------|--------|
|                                                            |   |     |      |     |   |     |   |
| Intrinsic                  value of options exercised           |   | $        | 1,579,530 |     | $      | -        |   | $ | 1,712,551 |   |
| Cash                  received from option exercises            |   |     | 879,764   |     |   | -        |   |   | 976,335 |   |
| Tax                  benefit realized from option exercises     |   |     | -         |     |   | -        |   |   | - |   |
| Weighted                  average fair value of options granted |   |     | 5.65      |     |   | 7.23     |   |   | 1.85 |   |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(24)**
**Earnings        Per Share**

|                                                        |   | **2006** |       | **2005** |   | **2004**   |   |
|-------------------------------------------------------------|--------|----------|------------|----------|--------|------------|--------|
|                                                        |   |     |       |     |   |       |   |
| Net                  income before extraordinary item       |   |     |       |     |   |       |   |   |   |   |
| and                  preferred stock dividends              |   | $        | 8,011,885  |     | $      | 16,530,363 |   | $ | 18,300,742 |   |
| Dividend                  declare to preferred shareholders |   |     | (744,805   | )        |   | (744,805   | )      |   | (497,898 | ) |
| Extraordinary                  gain on the acquisition      |   |     |       |     |   |       |   |   |   |   |
| of                  BankTrust                               |   |     | —    |     |   | —    |   |   | 4,419,118 |   |
| Net                  income available to                    |   |     |       |     |   |       |   |   |   |   |
| common                  shareholders                        |   | $        | 7,267,080  |     | $      | 15,785,558 |   | $ | 22,221,962 |   |
| Weighted                  average number of common          |   |     |       |     |   |       |   |   |   |   |
| shares                  outstanding applicable to           |   |     |       |     |   |       |   |   |   |   |
| basic                  earnings per share                   |   |     | 19,217,178 |     |   | 19,541,544 |   |   | 16,523,373 |   |
| Effect                  of dilutive securities              |   |     | 440,381    |     |   | 736,255    |   |   | 628,888 |   |
| Adjusted                  weighted average                  |   |     |       |     |   |       |   |   |   |   |
| number                  of common shares                    |   |     |       |     |   |       |   |   |   |   |
| outstanding                  applicable to                  |   |     |       |     |   |       |   |   |   |   |
| diluted                  earnings per share                 |   |     | 19,657,559 |     |   | 20,277,799 |   |   | 17,152,261 |   |
|                                                        |   |     |       |     |   |       |   |   |   |   |
| Basic                  earnings per share:                  |   |     |       |     |   |       |   |   |   |   |
| Income                  before extraordinary item           |   | $        | 0.38       |     | $      | 0.81       |   | $ | 1.08 |   |
| Extraordinary                  item                         |   |     | —    |     |   | —    |   |   | 0.27 |   |
| Net                  income                                 |   | $        | 0.38       |     | $      | 0.81       |   | $ | 1.35 |   |
|                                                        |   |     |       |     |   |       |   |   |   |   |
| Diluted                  earnings per share:                |   |     |       |     |   |       |   |   |   |   |
| Income                  before extraordinary item           |   | $        | 0.37       |     | $      | 0.78       |   | $ | 1.04 |   |
| Extraordinary                  item                         |   |     | —    |     |   | —    |   |   | 0.26 |   |
| Net                  income                                 |   | $        | 0.37       |     | $      | 0.78       |   | $ | 1.30 |   |

**(25)**
**Employees’      Benefit Plan**

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(26)**
**Related-Party        Transactions**

|                                          |   | **Executive**                    |     |                                 |   |          |   | **Principal**                    |      |      |   |
|-----------------------------------------------|--------|----------------------------------|----------|--------------------------------------|--------|---------------|--------|----------------------------------|-----------|-----------|--------|
|                                          |   | **officers**                     |     |                                 |   |          |   | **shareholders**                 |      |      |   |
|                                          |   | **and                  related** |     | **Directors                  and**   |   |          |   | **and                  related** |      |      |   |
|                                          |   | **parties**                      |     | **related                  parties** |   | **Employees** |   | **parties**                      |      | **Total** |   |
| Balance                  at December 31, 2004 |   | $                                | 418,147  |                                 | $      | 3,055,582     |   | $                                | 333,495   |      | $      | — |   | $ | 3,807,224 |   |
| Additions                                     |   |                             | 138,212  |                                 |   | 1,693,178     |   |                             | 1,739,006 |      |   |   |   |   | 3,570,396 |   |
| Reductions                                    |   |                             | (157,873 | )                                    |   | (1,670,674    | )      |                             | (409,965  | )         |   |   |   |   | (2,238,512 | ) |
| Balance                  at December 31, 2005 |   |                             | 398,486  |                                 |   | 3,078,086     |   |                             | 1,662,536 |      |   | — |   |   | 5,139,108 |   |
| Additions                                     |   |                             | 115,626  |                                 |   | 3,103,758     |   |                             | 2,262,566 |      |   |   |   |   | 5,481,950 |   |
| Reductions                                    |   |                             | (334,397 | )                                    |   | (920,636      | )      |                             | (979,568  | )         |   |   |   |   | (2,234,601 | ) |
| Balance                  at December 31, 2006 |   | $                                | 179,715  |                                 | $      | 5,261,208     |   | $                                | 2,945,534 |      | $      | — |   | $ | 8,386,457 |   |

**(27)**
**Financial      Instruments with Off-Balance-Sheet Risk**

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                                     |   | **2006**     |        | **2005**     |   |
|--------------------------------------------------------------------------|--------|--------------|-------------|--------------|--------|
| Financial                  instruments whose contract amounts represent  |   |    |        |    |   |
| credit                  risk - stand-by and commercial letters of credit |   | $            | 9,351,000   |         | $      | 8,283,000 |   |
| Commitments                  to extend credit, approved loans not yet    |   |         |        |         |   |   |   |
| disbursed,                  and unused lines of credit:                  |   |         |        |         |   |   |   |
| Variable                  rate                                           |   |         | 276,203,765 |         |   | 211,339,000 |   |
| Fixed                  rate                                              |   |         | 23,155,684  |         |   | 45,897,000 |   |

**(28)**
**Fair      Value of Financial Instruments**

*Disclosure      about Derivative Financial Instruments and Fair Value of Financial      Instruments*

***(a)***
***Cash      and Due from Banks, Interest-Bearing Deposits, and Securities Purchased under      Agreements to Resell***

***(b)***
***Investment      Securities***

***(c)***
***Other      Investments***

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

***(d)***
***Loans      and Loans Held for Sale***

***(e)***
***Accrued      Interest Receivable***

***(f)***
***Deposits***

***(g)***
***Security      Sold under Agreements to Repurchase***

***(h)***
***Advances      from Federal Home Loan Bank***

***(i)***
***Notes      Payable to Statutory Trusts***

***(j)***
***Other      Borrowings***

***(k)***
***Accrued      Interest Payable***

***(l)***
***Derivatives***

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

***(m)***
***Commitments      to Extend Credit and Letters of Credit***

***(o)***
***Limitations***

|                                               |   | **2006**     |          | **2005**                        |   |
|----------------------------------------------------|--------|--------------|---------------|---------------------------------|--------|
|                                               |   | **Carrying** |          |                            |   | **Carrying** |   |   |   |
|                                               |   | **amount**   |          | **Fair                  value** |   | **amount** |   | **Fair                  value** |   |
| Financial                  assets:                 |   |    |          |                       |   |    |   |    |   |
| Cash                  and due from banks           |   | $            | 25,527,489    |                            | $      | 25,527,489 |   | $ | 20,993,485 |   | $ | 20,993,485 |   |
| Interest-bearing                  deposits         |   |         | 49,050,368    |                            |   | 49,050,368 |   |   | 20,773,171 |   |   | 20,773,171 |   |
| Securities                  purchased under        |   |         |          |                            |   |   |   |   |   |   |   |   |   |
| agreements                  to resell              |   |         | 51,191,323    |                            |   | 51,191,323 |   |   | 54,132,673 |   |   | 54,132,673 |   |
| Investment                  securities             |   |         |          |                            |   |   |   |   |   |   |   |   |   |
| available                  for sale                |   |         | 535,159,009   |                            |   | 535,159,009 |   |   | 627,080,276 |   |   | 627,080,276 |   |
| Investment                  securities             |   |         |          |                            |   |   |   |   |   |   |   |   |   |
| held                  to maturity                  |   |         | 38,432,820    |                            |   | 37,473,773 |   |   | 42,470,784 |   |   | 41,411,539 |   |
| Other                  investments                 |   |         | 4,329,200     |                            |   | 4,329,200 |   |   | 10,652,000 |   |   | 10,652,000 |   |
| Loans                  held for sale               |   |         | 879,000       |                            |   | 879,000 |   |   | 936,281 |   |   | 936,281 |   |
| Loans,                  net                        |   |         | 1,731,022,290 |                            |   | 1,717,238,967 |   |   | 1,558,071,526 |   |   | 1,544,023,250 |   |
| Accrued                  interest receivable       |   |         | 15,760,852    |                            |   | 15,760,852 |   |   | 14,979,784 |   |   | 14,979,784 |   |
| Financial                  liabilities:            |   |         |          |                            |   |   |   |   |   |   |   |   |   |
| Deposits                                           |   |         | 1,905,356,207 |                            |   | 1,900,249,949 |   |   | 1,734,128,146 |   |   | 1,634,839,873 |   |
| Securities                  sold under             |   |         |          |                            |   |   |   |   |   |   |   |   |   |
| agreements                  to repurchase          |   |         | 365,664,250   |                            |   | 363,509,336 |   |   | 419,859,750 |   |   | 413,823,330 |   |
| Advances                  from FHLB                |   |         | 8,707,420     |                            |   | 8,663,848 |   |   | 8,758,626 |   |   | 8,728,094 |   |
| Notes                  payable to statutory trusts |   |         | 20,619,000    |                            |   | 20,619,000 |   |   | 46,393,000 |   |   | 46,393,000 |   |
| Other                  borrowings                  |   |         | —       |                            |   | — |   |   | 700,175 |   |   | 700,175 |   |
| Accrued                  interest payable          |   |         | 18,047,074    |                            |   | 18,047,074 |   |   | 9,263,493 |   |   | 9,263,493 |   |
| Derivatives                                        |   |         | 1,236,093     |                            |   | 1,236,093 |   |   | 1,385,708 |   |   | 1,385,708 |   |

----

**EUROBANCSHARES,          INC. AND SUBSIDIARIES**

**(29)**
**Significant      Group Concentrations of Credit Risk**

**(30)**
**Regulatory      Matters**

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**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

|                                                 |   | **2006**     |    |
|------------------------------------------------------|--------|--------------|---------|
|                                                 |   |         |    |   |   |   |   |   |   | **Well** |   |
|                                                 |   | **Required** |    |   |   | **Actual** |   |   |   | **capitalized** |   |
|                                                 |   | **amount**   |    | **Ratio** |   | **amount** |   | **Ratio** |   | **ratio** |   |
| Total                  Capital (to risk-weighted     |   |    |    |    |   |    |   |    |   |    |   |
| assets):                                             |   |    |    |    |   |    |   |    |   |    |   |
| Consolidated                                         |   | $            | 154,038 |   |   | 8.00 | % | $ | 216,673 |   |   | 11.25 | % |   | N/A |   |
| Eurobank                                             |   |         | 154,045 |   |   | 8.00 | % |   | 198,179 |   |   | 10.29 | % |   | >10.00 | % |
| Tier                  I Capital (to risk-weighted    |   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets):                                             |   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                         |   |         | 77,019  |   |   | 4.00 | % |   | 197,366 |   |   | 10.25 | % |   | N/A |   |
| Eurobank                                             |   |         | 77,023  |   |   | 4.00 | % |   | 178,871 |   |   | 9.29 | % |   | >6.00 | % |
| Tier                  I Capital (to average assets): |   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                         |   |         | 99,679  |   |   | 4.00 | % |   | 197,366 |   |   | 7.92 | % |   | N/A |   |
| Eurobank                                             |   |         | 99,637  |   |   | 4.00 | % |   | 178,871 |   |   | 7.18 | % |   | >5.00 | % |

|                                                   |   | **2005**     |    |
|--------------------------------------------------------|--------|--------------|---------|
|                                                   |   |         |    |   |   |   |   |   |   | **Well** |   |
|                                                   |   | **Required** |    |   |   | **Actual** |   |   |   | **capitalized** |   |
|                                                   |   | **amount**   |    | **Ratio** |   | **amount** |   | **Ratio** |   | **ratio** |   |
| Total                    Capital (to risk-weighted     |   |    |    |    |   |    |   |    |   |    |   |
| assets):                                               |   |    |    |    |   |    |   |    |   |    |   |
| Consolidated                                           |   | $            | 141,479 |   |   | 8.00 | % | $ | 238,570 |   |   | 13.49 | % |   | N/A |   |
| Eurobank                                               |   |         | 141,836 |   |   | 8.00 | % |   | 190,070 |   |   | 10.72 | % |   | >10.00 | % |
| Tier                    I Capital (to risk-weighted    |   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets):                                               |   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                           |   |         | 70,740  |   |   | 4.00 | % |   | 220,157 |   |   | 12.45 | % |   | N/A |   |
| Eurobank                                               |   |         | 70,918  |   |   | 4.00 | % |   | 151,657 |   |   | 8.55 | % |   | >6.00 | % |
| Tier                    I Capital (to average assets): |   |         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated                                           |   |         | 94,199  |   |   | 4.00 | % |   | 220,157 |   |   | 9.35 | % |   | N/A |   |
| Eurobank                                               |   |         | 94,172  |   |   | 4.00 | % |   | 151,657 |   |   | 6.44 | % |   | >5.00 | % |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

**(31)**
**Parent      Company Financial Information**

| **Condensed                  Balance Sheets:**                  |   |                            |    |     |   |
|-----------------------------------------------------------------|--------|---------------------------------|---------|----------|--------|
|                                                            |   |                            |    |     |   |
|                                                            |   | **2006**                        |    | **2005** |   |
|                                                            |   | (In                  thousands) |    |
| **Assets**                                                      |   |                            |    |     |   |
| Notes                  receivable from Eurobank                 |   | $                               | -       |     | $      | 20,000 |   |
| Interest                  receivable from Eurobank              |   |                            | -       |     |   | 22 |   |
| Dividend                  receivable from other subsidiaries    |   |                            | 1       |     |   | 3 |   |
| Due                  from Eurobank                              |   |                            | 17,998  |     |   | 50,205 |   |
| Investment                  in Eurobank                         |   |                            | 171,384 |     |   | 141,467 |   |
| Investment                  in other subsidiaries               |   |                            | 1,141   |     |   | 1,725 |   |
| Prepaid                  expenses                               |   |                            | 8       |     |   | 5 |   |
| Total                  assets                                   |   | $                               | 190,532 |     | $      | 213,427 |   |
|                                                            |   |                            |    |     |   |   |   |
| **Liabilities                  and Stockholders' Equity**       |   |                            |    |     |   |   |   |
| Due                  to Eurobank                                |   | $                               | -       |     | $      | 1,952 |   |
| Due                  to other subsidiary                        |   |                            | 10      |     |   | 10 |   |
| Dividends                  payable                              |   |                            | -       |     |   | 1 |   |
| Notes                  payable to subsidiaries                  |   |                            | 20,619  |     |   | 46,393 |   |
| Accrued                  interest payable to other subsidiaries |   |                            | 25      |     |   | 104 |   |
| Total                  liabilities                              |   |                            | 20,654  |     |   | 48,460 |   |
|                                                            |   |                            |    |     |   |   |   |
| Stockholders'                  equity                           |   |                            | 169,878 |     |   | 164,967 |   |
| Total                  liabilities and stockholders' equity     |   | $                               | 190,532 |     | $      | 213,427 |   |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

| **Condensed                  Statement of Income:**               |   |                                        |   |         |   |         |   |
|-------------------------------------------------------------------|--------|---------------------------------------------|--------|--------------|--------|--------------|--------|
|                                                              |   | **Year                  ended December 31** |   |
|                                                              |   | **2006**                                    |   | **2005**     |   | **2004**     |   |
|                                                              |   | (In                  thousands)             |   |
| Income:                                                           |   |                                   |   |    |   |    |   |
| Interest                  on note receivable from Eurobank        |   | $                                           | 1,399  |         | $      | 1,327        |   | $ | 1,160 |   |
| Dividend                  from preferred stocks of                |   |                                        |   |         |   |         |   |   |   |   |
|  Eurobank                                                    |   |                                        | 2,407  |         |   | 1,748        |   |   | 1,089 |   |
| Dividend                  income from other subsidiaries          |   |                                        | 118    |         |   | 95           |   |   | 70 |   |
|  Total                  interest income                      |   |                                        | 3,924  |         |   | 3,170        |   |   | 2,319 |   |
| Interest                  on note payable to                      |   |                                        |   |         |   |         |   |   |   |   |
| subsidiaries                                                      |   |                                        | 3,924  |         |   | 3,170        |   |   | 2,319 |   |
|  Net                  interest income                        |   |                                        | -      |         |   | -            |   |   | - |   |
| Equity                  in undistributed earnings of subsidiaries |   |                                        | 8,026  |         |   | 16,541       |   |   | 22,734 |   |
| Noninterest                  expense                              |   |                                        | 14     |         |   | 11           |   |   | 14 |   |
|  Earnings                  before income taxes               |   |                                        | 8,012  |         |   | 16,530       |   |   | 22,720 |   |
| Provision                  for income taxes                       |   |                                        | -      |         |   | -            |   |   | - |   |
|  Net                  income                                 |   | $                                           | 8,012  |         | $      | 16,530       |   | $ | 22,720 |   |

----

**EUROBANCSHARES,        INC. AND SUBSIDIARIES**

| **Condensed                    Statements of Cash Flows:**             |   |                                          |    |         |   |         |   |
|------------------------------------------------------------------------|--------|-----------------------------------------------|---------|--------------|--------|--------------|--------|
|                                                                   |   | **Year                    ended December 31** |    |
|                                                                   |   | **2006**                                      |    | **2005**     |   | **2004**     |   |
|                                                                   |   | (In                    thousands)             |    |
| Cash                    flows from operating activities:               |   |                                     |    |    |   |    |   |
| Net                    income                                          |   | $                                             | 8,012   |         | $      | 16,530       |   | $ | 22,720 |   |
| Adjustments                    to reconcile net income to net          |   |                                          |    |         |   |         |   |   |   |   |
| cash                    provided by (used in) operating activities:    |   |                                          |    |         |   |         |   |   |   |   |
| Equity                    in net earnings of subsidiaries              |   |                                          | (8,026  | )            |   | (16,542      | )      |   | (22,734 | ) |
| Decrease                    (increase) in accrued interest             |   |                                          |    |         |   |         |   |   |   |   |
| receivable                    from subsidiaries                        |   |                                          | 79      |         |   | (26          | )      |   | (15 | ) |
| Increase                    in prepaid expenses                        |   |                                          | (3      | )            |   | —      |   |   | (2 | ) |
| Decrease                    (increase) in accrued interest             |   |                                          |    |         |   |         |   |   |   |   |
| payable                    to subsidiaries                             |   |                                          | (79     | )            |   | 126          |   |   | 15 |   |
| Net                    cash (used in) provided by operating activities |   |                                          | (17     | )            |   | 88           |   |   | (16 | ) |
|                                                                   |   |                                          |    |         |   |         |   |   |   |   |
| Cash                    flows from investing activities:               |   |                                          |    |         |   |         |   |   |   |   |
| Advance                    to Subsidiary                               |   |                                          | (880    | )            |   | —      |   |   | (57,242 | ) |
| Decrease                    in due from Eurobank                       |   |                                          | 31,228  |         |   | 672          |   |   | 491 |   |
| Net                    cash provided by (used in) investing activities |   |                                          | 30,348  |         |   | 672          |   |   | (56,751 | ) |
|                                                                   |   |                                          |    |         |   |         |   |   |   |   |
| Cash                    flows from financing activities:               |   |                                          |    |         |   |         |   |   |   |   |
| Increase                    in due to Eurobank                         |   |                                          | — |         |   | 1,925        |   |   | 6 |   |
| Dividends                    on preferred stocks                       |   |                                          | (746    | )            |   | (761         | )      |   | (481 | ) |
| Repayment                    of Trust Preferred Securities             |   |                                          | (25,000 | )            |   |         |   |   |   |   |
| Proceeds                    from issuance of common stock              |   |                                          | 880     |         |   | —      |   |   | 57,242 |   |
| Purchase                    and retirement of common stock             |   |                                          | (5,465  | )            |   | (1,924       | )      |   | - |   |
| Net                    cash (used in) provided by financing activities |   |                                          | (30,331 | )            |   | (760         | )      |   | 56,767 |   |
|                                                                   |   |                                          |    |         |   |         |   |   |   |   |
| Net                    increase (decrease) in cash and                 |   |                                          |    |         |   |         |   |   |   |   |
|  cash                    equivalents                              |   |                                          | — |         |   | —      |   |   | — |   |
| Cash                    and cash equivalents, beginning of year        |   |                                          | — |         |   | —      |   |   | — |   |
| Cash                    and cash equivalents, end of year              |   | $                                             | — |         | $      | —      |   | $ | — |   |

----