SAN JUAN, Puerto Rico, Aug. 10 /PRNewswire-FirstCall/ --
EuroBancshares, Inc. (NASDAQ:EUBK) ("EuroBancshares" or the
"Company") today reported its results for the second quarter ended
June 30, 2009. Net Income EuroBancshares reported a net loss of
$11.6 million, or $(0.60) per diluted share, for the quarter ended
June 30, 2009, compared with a net income of $3.0 million, or $0.15
per diluted share, and a net loss of $1.8 million, or $(0.10) per
diluted share, for the quarters ended March 31, 2009 and June 30,
2008, respectively. Rafael Arrillaga-Torrens, Jr., Chairman of the
Board, President and Chief Executive Officer said, "Our results for
the second quarter are a reflection of the prolonged recession in
which Puerto Rico has been for the past four years. In reaction to
this sustained downturn in the economic environment, we have
continued to focus on enhancing our credit risk assessment and
collection processes in an effort to improve credit quality and
contain credit losses." Financial results for the quarter ended
June 30, 2009, when compared to the quarter ended March 31, 2009,
were mainly driven by the following: (i) a $2.3 million decrease in
net interest income; (ii) a $7.0 million increase in our provision
for loan and lease losses; (iii) a $1.9 million increase in
other-than-temporary impairment adjustment in the investment
portfolio; and (iv) a $3.2 million increase in insurance expense
mainly related to the FDIC's new insurance premium assessments, as
discussed below. Net Interest Income The Company reported total
interest income of $33.3 million for the second quarter of 2009,
compared to $36.2 million for the previous quarter and $40.3
million for the quarter ended June 30, 2008. For the six months
ended June 30, 2009, total interest income was $69.5 million,
compared to $83.0 million for the same period in 2008. These
decreases in total interest income were mainly driven by the
combined effect of decreased loan yields resulting primarily from
interest rate cuts of 175 basis points during the fourth quarter of
2008 accompanied by decreased average net loans and investments,
and the effect caused by the increase in nonaccrual loans, as
further explained below. During the quarter and six months ended
June 30, 2009, the average interest yield on a fully taxable
equivalent basis earned on net loans was 5.47% and 5.59%,
respectively, compared to 5.71% for the previous quarter and 6.45%
and 6.83% for the same periods in 2008. Average net loans amounted
to $1.693 billion and $1.713 billion for the quarter and six months
ended June 30, 2009, compared to $1.734 billion for the previous
quarter, and $1.818 billion and $1.827 billion for the same periods
in 2008. Average interest yield on a fully taxable equivalent basis
earned on investments remained relatively stable at 7.15%, 7.16%
and 7.28% for the quarters ended June 30, 2009, March 31, 2009 and
June 30, 2008, respectively, while it remained at 7.16% for the
six-month periods ended June 30, 2009 and 2008. Average investments
amounted to $758.5 million and $810.5 million for the quarter and
six months ended June 30, 2009, compared to $863.1 million for the
previous quarter, and $826.9 million and $788.8 million for the
same periods in 2008. Nonaccrual loans amounted to $162.4 million,
$130.4 million and $86.3 million as of June 30, 2009, March 31,
2009 and June 30, 2008, respectively. If these loans had been
accruing interest during the quarter and six months ended June 30,
2009, the additional interest income realized would have been
approximately $2.4 million and $4.7 million, respectively, compared
to $2.3 million during the previous quarter, and $1.6 million and
$3.4 million during the same periods in 2008. For the quarter and
six months ended June 30, 2009, the Company reported total interest
expense of $21.6 million and $43.7 million, respectively, compared
to $22.2 million for the previous quarter, and $25.6 million and
$53.0 million for the same periods in 2008. These decreases
resulted mainly from the net effect of a re-pricing in all deposit
categories and other borrowings under a lower interest rate
environment; and a net increase in average interest-bearing
liabilities. For the quarter and six months ended June 30, 2009,
the average interest rate on a fully taxable equivalent basis paid
for interest-bearing liabilities decreased to 3.70% and 3.79%,
respectively, from 3.89% for the previous quarter, and 4.59% and
4.85% for the same periods in 2008. During the quarter and six
months ended June 30, 2009, average interest-bearing liabilities
amounted to $2.558 billion and $2.538 billion, respectively,
compared to $2.518 billion for the previous quarter, and $2.510
billion and $2.462 billion for the same periods in 2008. For the
second quarter of 2009, net interest margin and net interest spread
on a fully taxable equivalent basis was 1.97% and 1.76%,
respectively, compared to 2.37% and 2.14% for the previous quarter,
and 2.37% and 2.02% for the quarter ended June 30, 2008. Net
interest margin and net interest spread on a fully taxable
equivalent basis was 2.16% and 1.95% for the six-month period ended
June 30, 2009, respectively, compared to 2.37% and 1.99% for the
same period in 2008. The decrease in net interest margin and net
interest spread on a fully taxable equivalent basis during the
second quarter of 2009 when compared to the previous quarter and
the quarter ended June 30, 2008 was mainly caused by the reduction
in the interest yield on average earning assets, as previously
mentioned, which outpaced the reduction in the interest rate paid
on average interest-bearing liabilities, and, on a linked-quarter
basis, was also impacted by the reduction resulting from the
special income tax of 5% imposed by the Puerto Rico Act No. 7 on
the net income of international banking entities, as discussed
further in the Income Tax Expense section of this document.
Provision for Loan and Lease Losses The provision for loan and
lease losses for the quarter and six months ended June 30, 2009 was
$12.7 million and $18.4 million, respectively, or 136.28% and
106.30% of net charge-offs, compared to $10.0 million and $17.8
million, or 159.56% and 112.78% of net charge-offs, for the same
periods in 2008. For the quarter ended March 31, 2009, the
provision for loan and lease losses amounted to $5.7 million,
representing 71.27% of net charge-offs. The increase in the
provision for loan and lease losses during the quarter ended June
30, 2009 when compared to the previous quarter was mainly
concentrated in the commercial and industrial loans portfolio,
primarily in those unsecured or with loan-to-values in excess of
80%. General reserves were increased to anticipate possible future
losses as a result of the continued distress of the economic
environment, increased non-performing loans, level of
delinquencies, and credit losses. The evaluation of the provision
for loan losses also takes into consideration non-performing loan
levels. Non-performing loans amounted to $196.1 million as of June
30, 2009, compared to $154.3 million as of March 31, 2009. This
increase was mainly concentrated in the construction loan portfolio
primarily as a result of a $19.3 million loan placed in nonaccrual
status in the second quarter of 2009. This loan was analyzed under
SFAS No. 114 and required a specific allowance of $3.0 million. The
provision for loan and lease losses is part of the continuous
evaluation of the allowance for loans and lease losses. The
periodic evaluation of the allowance for loan and lease losses
considers the level of net charge-offs, nonperforming loans,
delinquencies, related loss experience and overall economic
conditions. More details are discussed further in the Loans and
Asset Quality and Delinquency sections of this document.
Non-Interest Income During the second quarter of 2009, non-interest
income decreased to $2.8 million at June 30, 2009, from $5.9
million in the previous quarter. This decrease was mainly due to
the net effect of: (i) a $3.5 million gain on sale of securities
resulting from the sale of $88.6 million in investment securities
sold during the second quarter of 2009, compared to a $4.0 million
gain on sale of securities resulting from the sale of $107.3
million in investment securities sold during the previous quarter;
(ii) a $2.7 million other-than-temporary impairment adjustment in
the investment portfolio during the quarter ended June 30, 2009,
compared to a $808,000 other-than-temporary impairment adjustment
in the investment portfolio during the previous quarter. Of these
adjustments, $2.6 million and $400,000 were related to a single
non-rated Trust Preferred Stock ("TPS"), respectively. As of June
30, 2009, we did not have any other TPS in our investment
portfolio; and (iii) a $757,000 gain on sale of $19.6 million of
lease financing contracts recorded during the previous quarter, as
previously mentioned. No lease financing contracts were sold during
the second quarter of 2009. Non-interest income for the quarter and
six months ended June 30, 2009 was $2.8 million and $8.8 million,
respectively, compared to $3.2 million and $6.9 million for the
same periods in 2008. These changes were mainly due to the net
effect of: (i) a $7.6 million year-to-date gain on sale of
securities resulting from the sale of $195.9 million in investment
securities, of which, $88.6 million were sold during the second
quarter of 2009 resulting in a $3.5 million gain on sale of
securities; (ii) a $2.7 million and $3.5 million
other-than-temporary impairment adjustments in the investment
portfolio for the quarter and six months ended June 30, 2009,
respectively; (iii) a $538,000 decrease in gain on sale of loans
for the six months ended June 30, 2009, mainly resulting from a
$757,000 gain on sale of $19.6 million of lease financing contracts
in March 2009, compared to a $1.2 million gain on sale of $37.7
million of lease financing contracts in March 2008; (iv) a $1.2
million and $1.5 million decrease in service charges for the
quarter and six months ended June 30, 2009, respectively, mainly
due to a $259,000 and $556,000 net reduction in non-sufficient and
overdraft charges, respectively, primarily resulting from a
decrease in the average balance of overdrawn accounts, and a
$638,000 and $669,000 reduction in miscellaneous income,
respectively, mainly related to the one-time $596,000 in income
from the partial redemption of Visa, Inc. shares of stock recorded
during the second quarter of 2008; and (v) a $108,000 and $322,000
net loss on sale of repossessed assets for the quarter and six
months ended June 30, 2009, respectively, compared to a net loss of
$86,000 and $119,000 for the same periods in 2008. These changes
were concentrated in an increase of $128,000 and $155,000 in the
loss on sale of repossessed boats, primarily attributable to our
strategy of being more aggressive in the sale of repossessed boats
to expedite their disposition and avoid build-up of inventory.
Repossessed assets activity during the six months ended June 30,
2009 when compared to the same period in 2008 was as follows: a.
During the six months ended June 30, 2009, we sold a total of 11
boats and repossessed 3 boats, compared to 10 boats sold and 8
boats repossessed during the same period in 2008. As of June 30,
2009, the amount of repossessed boats in inventory amounted to
$589,000, compared to $1.8 million as of June 30, 2008. b. During
the same periods, we sold 3 OREO properties and foreclosed 18 OREO
properties, compared to 24 OREO properties sold and 8 foreclosed
OREO properties, respectively. As of June 30, 2009, the amount of
OREO properties in inventory amounted to $10.3 million, compared to
$7.6 million as of June 30, 2008. c. During the same periods, we
sold 668 vehicles and repossessed 526 vehicles, compared to 673
vehicles sold and 708 vehicles repossessed, respectively. As of
June 30, 2009, the amount of repossessed vehicles in inventory
amounted to $1.8 million, compared to $4.7 million as of June 30,
2008. More details on repossessed assets are discussed in the Loan
and Asset Quality section below. Non-Interest Expense During the
second quarter of 2009, non-interest expense amounted to $16.1
million, compared to $12.5 million for the quarter ended March 31,
2009. Such increase was mainly due to the combined effect of: (i) a
$3.2 million increase in insurance expense, mainly concentrated in
a $1.9 million new FDIC quarterly assessment, and a $1.3 million
one-time FDIC special assessment recorded during the second quarter
of 2009; and (ii) a $385,000 increase in other expenses related to
an increased valuation expense to account for the decline in value
of our OREO inventory due to the continued economic distress, which
has impacted the residential and commercial real estate market. The
Company's non-interest expense for the quarter and six months ended
June 30, 2009 amounted to $16.1 million and $28.5 million,
respectively, compared to $12.6 million and $25.9 million for the
same periods in 2008. This increase in non-interest expense was
mainly due to the net effect of: (i) a $632,000 and $1.4 million
decrease in salaries for the quarter and six months ended June 30,
2009, respectively, resulting from a $1.3 million and $2.5 million
decrease in salaries and employee benefits, respectively, primarily
related to a reduction in personnel, a reduction strategy in an
effort to control expenses, and decreased bonus expenses, partially
off-set by a $618,000 and $1.1 million decrease in deferred loan
origination costs, respectively, because of a reduction in loan
originations; (ii) a $3.7 million and $4.3 million increase in
insurance expense for the quarter and six months ended June 30,
2009, respectively, mainly concentrated in a $1.9 million new FDIC
quarterly assessment, and a $1.3 million one-time FDIC special
assessment recorded during the second quarter of 2009, as
previously mentioned; (iii) a decrease of $267,000 and $662,000 in
occupancy and equipment expenses for the quarter and six months
ended June 30, 2009, respectively, mainly related to a $206,000 and
$396,000 decrease in repairs, maintenance, utilities and security
expenses, respectively, and a $46,000 and $86,000 decrease in
mileage and car expenses, respectively, mainly attributable to
operational efficiencies and a cost reduction strategy, as
previously mentioned; (iv) a $462,000 and $777,000 increase in
professional services, respectively, mainly due to the combined
effect of: a $495,000 and $714,000 increase in professional fees,
respectively, primarily related to a BSA regulatory compliance
consulting services and other management consulting services; and a
$122,000 and $267,000 increase in legal fees, respectively, mainly
related to legal collection proceedings; (v) a decrease of $78,000
and $327,000 in promotional expenses for the quarter and six months
ended June 30, 2008, respectively, mainly because of a cost
reduction strategy, as previously mentioned; and Income Tax Expense
Puerto Rico income tax law does not provide for the filing of a
consolidated tax return; therefore, the income tax expense
reflected in our consolidated income statement is the sum of our
income tax expense and the income tax expenses of our individual
subsidiaries. Our revenues are generally not subject to U.S.
federal income tax; with the exception of interest income from
interest earning deposits in the United States that are not
considered portfolio interest. On March 9, 2009, the governor of
Puerto Rico signed into law Act No. 7 (the "Act No. 7"), also known
as Special Act Declaring a Fiscal Emergency Status to Save the
Credit of Puerto Rico, which amended several sections of Puerto
Rico's Internal Revenue Code (the "Code"). Act No. 7 amended
various income, property, excise, and sales and use tax provisions
of the Code. Under the provisions of Act No. 7, corporations, among
other taxpayers, with adjusted gross income of $100,000 or more,
will be subject to surtax of 5% on the total tax determined (not on
the taxable income). In addition, Act No. 7 imposes a special
income tax of 5% on the net income of International Banking
Entities ("IBE"), among a group of exempt taxpayers. Both, the 5%
surtax and the special income tax rate of 5% are applicable for
taxable years commencing after December 31, 2008 and prior January
1, 2012. Act No. 7 also revamps the alternative basic tax
provisions of the Code. Under the revised version, our dividends,
generally subject to a maximum 10% preferential rate tax, may now
be subject to an effective tax of 20% in the case of individuals
with income (computed with certain addition of exempt income and
income subject to preferential rates) in excess of $175,000, or 15%
if such income is over $125,000. Act No. 7 provides for several
additional changes to the Code, which the Company believes will
have an inconsequential financial impact or are not applicable
since they are related to individuals taxpayers. For the quarter
and six months ended June 30, 2009, we recorded an income tax
benefit of $2.6 million and $3.8 million, respectively, compared to
an income tax benefit of $2.9 million and $4.1 million for the same
periods in 2008. Our income tax benefit for the quarter and six
months ended June 30, 2009 resulted mainly from the net effect of:
(i) a deferred tax benefit of $2.4 million and $4.2 million for
those same periods, respectively; (ii) a current tax expense of
$506,000 and $1.1 million, respectively; and (iii) a $657,000
year-to-date effective tax rate adjustment recorded during the
quarter in accordance with FASB Interpretation No. 18, "Accounting
for Income Taxes in Interim Periods," which requires that an
estimated annual effective tax rate be used to determine the
interim period income tax provision or benefit. Our current income
tax expense for the quarter and six months ended June 30, 2009
increased to $506,000 and $1.1 million, respectively, from $1,000
and $10,000 for the same periods in 2008, respectively. Increases
in our current income tax expense during the quarter and six months
ended June 30, 2009 were mainly due to the new special tax of 5% on
IBE net income which amounted to approximately $461,000 and $1.0
million, respectively. Other current income tax expense is related
to nonbanking subsidiaries or federal income tax related to
interest income on interest earning deposits in the United States.
There is no current tax expense related the bank subsidiary
operations in Puerto Rico during the quarters and six months
periods ended June 30, 2009 and 2008, since the results of
operations reported on this activity included a taxable loss net of
exempt income. Our deferred tax benefit for the quarter ended June
30, 2009 decreased to $2.4 million, from $2.7 million for the
second quarter of 2008. Deferred tax benefit for the six months
period ended June 30, 2009 increased to $4.2 million, from $4.0
million for the same period in 2008. These changes in our deferred
tax benefit were mainly due to the net effect of: (i) a $8.2
million year-to-date increase in the net deferred tax asset related
to the net operating loss ("NOL") carryforward from the taxable
loss in our banking subsidiary; (ii) a year-to-date increase of
$653,000 in the other net deferred tax assets primarily from an
increase in our allowance for loan and lease losses net of an
increase in the deferred tax liability related to servicing asset
from leases sold; and (iii) a $4.5 million valuation allowance
recorded during the second quarter of 2009 to account for the net
deferred tax assets' portion for which it was more likely than not
that a tax benefit would not be realized in accordance with FAS
109, "Accounting for Income Taxes." As of June 30, 2009, we had net
deferred tax assets of $29.3 million, compared to $23.8 million as
of December 31, 2008. This increase in our net deferred tax assets
was mainly attributable to the net effect of: (i) an increase in
the NOL carryforward of our banking subsidiary; (ii) an increase in
our allowance for loan and lease losses; (iii) a decrease in other
net deferred tax assets, primarily from an increase in the deferred
tax liability related to servicing assets on leases sold; (iv) an
increase in deferred tax assets related to the net unrealized loss
recognized in other comprehensive income; and (v) a valuation
allowance on the net deferred tax assets' portion for which it was
more likely than not that a tax benefit would not be realized, as
previously mentioned. In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax assets;
projected future taxable income; our compliance with the Financial
Accounting Standards Board Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes"; and tax planning strategies in making
this assessment. We believe it is more likely than not that the
benefits of the carrying net amount of these deductible differences
as of June 30, 2009 will be realized. Balance Sheet Summary and
Asset Quality Data Assets Total assets decreased to $2.738 billion
as of June 30, 2009, from $2.860 billion as of December 31, 2008.
This decrease was mainly due to the net effect of: (i) a net
increase of $133.9 million in cash and cash equivalents, mainly
resulting from the sale of securities and prepayments of principal
in our investment and loans portfolios; (ii) a $200.0 million
decrease in our investment securities portfolio, including the sale
of $195.9 million in securities during the six months ended June
30, 2009, as previously mentioned; (iii) a decrease of $75.4
million in net loans, including the $19.6 million sale of lease
financing contracts in March 2009, as previously mentioned; and
(iv) A $21.4 million increase in other assets, mainly due to a
$16.5 million increase in other receivables in connection to the
proceeds on some of the securities sold. Investments During the
first six months of 2009, the investment portfolio decreased by
approximately $200.0 million to $698.8 million from $898.7 million
as of December 31, 2008. This decrease was primarily due to the net
effect of: (i) the sale of $195.9 million in FHLMCs, FNMAs, and
GNMA mortgage-backed securities, which were replaced with the
purchase of $109.0 million in GNMA mortgage-backed securities,
$50.0 million in FFCB obligations; and $5.2 million in a private
label mortgage-backed security; (ii) prepayments of approximately
$133.0 million on mortgage-backed securities and FHLB obligations;
(iii) $5.9 million in FHLB obligations, $12.2 million in private
label mortgage-backed securities and $5.0 million in a corporate
note that were called-back or matured during the period; (iv) the
decrease of $9.0 million in the market valuation of securities
available for sale; (v) the increase of $4.2 million in the premium
of purchases of securities and the net amortization of
discount/premiums; (vi) the reduction of $3.8 million in FHLB
stocks; and (vii) a $3.5 million other than temporary impairment
adjustment in the investment portfolio, as previously mentioned.
During the six months ended June 30, 2009, we restructured our
investment portfolio by selling approximately $150.3 million in
FNMA MBS and $36.9 million in FHLMC MBS with an aggregate estimated
average life of 3.44 years and an aggregate estimated average yield
of approximately 5.25%; and $8.8 million in GNMA MBS with an
average estimated average life of 4.07 years and an estimated
average yield of 5.55%. These sales of securities resulted in a
$3.5 million and $7.6 million gain for the quarter and six months
ended June 30, 2009, respectively. The proceeds of these sales were
used to purchase approximately $109.0 million in GNMA MBS with an
estimated average life of 2.88 years and an average estimated yield
of approximately 4.32%; $50.0 million in Federal Farm Credit Bond
with an estimated average life of approximately 2.76 years and an
estimated average yield of 1.95%; and $5.2 million in a private
label mortgage-backed security with an estimated average life of
approximately 1.83 years and an estimated average yield of 9.64%.
This private label is a mortgage-backed security with a "Credit
Enhancement Plus" structure, which purpose is to mitigate some of
the regulatory risk associated with possible rating downgrades.
These transactions did not only increase our capital through the
gain, but also served to stabilize our regulatory risk-based
capital levels as the GNMA MBS acquired have a 0% risk-based
capital weight when compared to 20% on the MBS sold. For the first
six month ended June 30, 2009, after the above-mentioned
transactions, the estimated average maturity of our investment
portfolio was approximately 3.43 years and the estimated average
yield was approximately 4.94%, compared to an estimated average
maturity of 5.7 years and an average yield of 5.2% for the year
ended December 31, 2008. In April 2009, the FASB issued Staff
Position ("FSP") No. 115-2, Recognition and Presentation of
Other-Than-Temporary Impairments, which amends existing guidance
for determining whether impairment is other-than-temporary for debt
securities, and FSP No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset and Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly. The FSP No. 115-2 requires an entity to assess whether it
intends to sell, or it is more likely than not that it will be
required to sell a security in an unrealized loss position before
recovery of its amortized cost basis. If either of these criteria
is met, the entire difference between amortized cost and fair value
is recognized in earnings. For securities that do not meet the
aforementioned criteria, the amount of impairment recognized in
earnings is limited to the amount related to credit losses, as
defined in paragraph 8 of FSP No. 115-2, while impairment related
to other factors is recognized in other comprehensive income.
Additionally, this FSP expands and increases the frequency of
existing disclosures about other-than-temporary impairments
("OTTI") for debt and equity securities. The FSP No. 157-4
emphasizes that even if there has been a significant decrease in
the volume and level of activity, the objective of a fair value
measurement remains the same. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction (that is, not a forced liquidation or
distressed sale) between market participants. This FSP provides a
number of factors to consider when evaluating whether there has
been a significant decrease in the volume and level of activity for
an asset or liability in relation to normal market activity. In
addition, when transactions or quoted prices are not considered
orderly, adjustments to those prices based on the weight of
available information may be needed to determine the appropriate
fair value. This FSP also requires increased disclosures. These
FSPs are effective for interim and annual reporting periods ending
after June 15, 2009, with early adoption permitted for periods
ending after March 15, 2009. We elected to adopt the FSP No. 115-2
and FSP No. 157-4 for the quarter ended March 31, 2009. Adoption of
FSP No. 115-2 resulted in $2.7 million and $3.5 million in OTTI
recognized in earnings for the quarter and six months ended June
30, 2009, respectively, as discussed further below. Adoption of FSP
No. 157-4 did not have a financial impact, other than additional
disclosures. With the assistance of a third party provider, we
reviewed the investment portfolio as of June 30, 2009 using cash
flow and valuation models and considering the provisions of FSP
115-2, for applicable securities. During the review, we identified
securities with characteristics that warranted a more detailed
analysis, as follows: (i) One security for $3.0 million of original
par value and a current market value of $30,000 is a non-rated
Trust Preferred Stock ("TPS"). Considering the issuer's current
financial position as of June 30, 2009, we estimated a $2.6 million
OTTI on this security due to the deterioration of the credit
quality. At March 31, 2009, we had already recognized a $400,000
OTTI on this security due to the apparent deterioration of its
credit quality. (ii) Fifteen private label MBS amounting to $54.2
million that have mixed credit ratings or other special
characteristics. For each one of the private label MBS, we reviewed
the collateral performance and considered the impact of current
economic trends. These analyses were performed taking into
consideration current U.S. market conditions and trends, forward
projected cash flows and the present value of the forward projected
cash flows. Some of the analysis performed to the downgraded
mortgage-backed securities included: a. the calculation of their
coverage ratios; b. current credit support; c. total delinquency
over sixty days; d. average loan-to-values; e. projected defaults
considering a conservative additional downside scenario of (5)% in
Housing Price Index values for each of the following three years;
f. a mortgage loan Conditional Prepayment Rate ("CPR") speed equal
to 8 or 15 depending on the approximately last six months average
for each security; g. projected total future deal loss based on the
previous conservative assumptions; h. excess credit support
protection; i. projected tranche dollar loss; and j. projected
tranche percentage loss, if any, and economic value. Based on this
assessment, as of June 30, 2009, we estimated a $106,000 OTTI due
to the apparent deterioration of the credit quality over three
private label MBS. Loans Total loans, net of unearned interest,
amounted to $1.709 billion as of June 30, 2009, after decreasing by
$75.1 million, or 8.42% on an annualized basis, from $1.784 billion
as of December 31, 2008. This decrease was mainly due to the net
effect of: (i) a $51.6 million, or 38.59% annualized decrease in
lease financing contracts from $267.3 million as of December 31,
2008 to $215.7 million as of June 30, 2009; (ii) a $36.1 million,
or 6.48% annualized decrease in commercial loans, from $1.115
billion as of December 31, 2008 to $1.079 billion as of June 30,
2009; and (iii) a $13.8 million, or 12.48% annualized increase in
construction loans, from $220.6 million as of December 31, 2008 to
$234.3 million as of June 30, 2009. The decrease of $51.6 million
in our leasing portfolio includes $19.6 million in lease financing
contracts we sold in March 2009, as previously mentioned.
Occasionally, we sell lease financing contracts on a limited
recourse basis to other financial institutions and, typically, we
retain the right to service the leases we sold. The rest of the
decrease was primarily because of repayments and a reflection of
decreased originations resulting from tightened underwriting
standards and our decision to strategically pare back our
automobile leasing business because of the distressed economic
conditions. In our commercial loans portfolio, the $36.1 million
decrease resulted from a $41.7 million decrease in other commercial
loans, net of a $5.6 million increase in commercial loans secured
by real estate. During the second quarter of 2009, we continued to
focus on enhancing our credit risk assessment and collection
processes by working closely with our customers to maintain our
customers' base at terms favorable to the Bank, while protecting
and preserving shareholders' interests. Commercial loans secured by
real estate amounted to $857.1 million as of June 30, 2009, or
79.45% of total commercial loans. The $13.8 million increase in ADC
loans resulted from disbursements on projects mostly committed
before year 2008. These projects are primarily related to loans for
the construction of residential multi-family projects that,
although private, are moderately priced or of the affordable type
supported by government assisted programs, and other loans for land
development and the construction of commercial real estate
property. Asset Quality and Delinquency Non-performing assets
consist of loans and leases in nonaccrual status, loans 90 days or
more past due and still accruing interest, OREO, and other
repossessed assets. As of June 30, 2009, non-performing assets
amounted to $208.8 million, compared to $167.8 million and $177.4
million as of March 31, 2009 and December 31, 2008, respectively.
Nonperforming Loans and Leases Non-performing loans and leases,
which are comprised of loans 90 days or more past due and still
accruing interest, and loans and leases on nonaccrual status,
amounted to $196.1 million as of June 30, 2009, compared to $154.3
million and $163.9 million as of March 31, 2009 and December 31,
2008, respectively. The increase in nonperforming loans and leases
during the quarter ended June 30, 2009 when compared to the
previous quarter included: (i) a $32.0 million increase in loans in
nonaccrual status, mainly related to two construction business
relationships amounting to $26.1 million; and (ii) a $9.8 million
increase in loans over 90 days still accruing, mainly related to
commercial loans secured by real estate. The increase in
nonperforming loans and leases during the quarter ended June 30,
2009 is mainly a reflection of the continued distressed economic
conditions, as previously mentioned. Loans primarily responsible
for these increases were analyzed under SFAS No. 114 and
corresponding specific allowances established. Repossessed Assets
As of June 30, 2009, repossessed assets amounted to $12.7 million,
compared to $13.5 million as of March 31, 2009 and December 31,
2008. The decrease in repossessed assets during the second quarter
of 2009 when compared to the previous quarter was mainly
attributable to the net effect of: (i) a decrease of $1.3 million
in other repossessed assets, mostly comprised of a $679,000
decrease in the inventory of repossessed vehicles and a $561,000
decrease in the inventory of repossessed boats. During the quarter
ended June 30, 2009, we sold 276 vehicles and repossessed 231
vehicles, decreasing our inventory of repossessed vehicles to 155
units, or $1.8 million, as of June 30, 2009, from 200 units, or
$2.5 million, as of March 31, 2009. During the same period, we did
not repossess any boats but sold 3 boats, decreasing our inventory
of repossessed boats to 7 units, or $589,000, as of June 30, 2009,
from 10 units, or $1.2 million, as of March 31, 2009. (ii) a
$560,000 increase in OREO resulting from the net effect of the sale
of 2 properties, the foreclosure of 11 properties, and an increase
in the valuation allowance to account for the decline in value of
our OREO inventory, as previously mentioned. Our OREO inventory
amounted to $10.3 million and $9.7 million as of June 30, 2009 and
March 31, 2009, respectively. Net Charge-Offs Annualized net
charge-offs as a percentage of average loans amounted to 2.15% and
1.97% for the quarter and six months ended June 30, 2009,
respectively, compared to 1.80% for the previous quarter, and 1.89%
and 1.57% for the quarter and year ended December 31, 2008. Net
charge-offs for the quarter ended June 30, 2009 were $9.3 million,
compared to $8.0 million and $8.5 million for the quarters ended
March 31, 2009 and December 31, 2008, respectively. Net charge-offs
for the quarter ended June 30, 2009, compared to the quarters ended
March 31, 2009 and December 31, 2008 were as follows: (i) $4.7
million in net charge-offs on loans partially secured by real
estate for the second quarter of 2009, of which $3.4 million were
commercial loans with loan-to-values in excess of 80% and $1.2
million were construction loans; compared to $3.6 million for the
previous quarter, including $3.0 million in construction loans and
$656,000 in commercial loans with loan-to-values in excess of 80%;
and $2.1 million for the fourth quarter of 2008, which included
$1.5 million in commercial loans with loan-to-values in excess of
80% and $582,000 in construction loans; (ii) $2.0 million in net
charge-offs on other commercial and industrial loans for the second
quarter of 2009, compared to $662,000 and $3.3 million for the
quarters ended March 31, 2009 and December 31, 2008, respectively;
(iii) $655,000 in net charge-offs on consumer loans for the second
quarter of 2009, compared to $905,000 and $397,000 for the quarters
ended March 31, 2009 and December 31, 2008, respectively; (iv) $1.9
million in net charge-offs on lease financing contracts for the
second quarter of 2009, compared to $2.7 million for the previous
quarter and the quarter ended December 31, 2008; and (v) $49,000 in
net charge-offs on other loans for the second quarter of 2009,
compared to $38,000 and $13,000 in net charge-offs for the quarters
ended March 31, 2009 and December 31, 2008, respectively. The
increase in commercial and construction net charge-offs was mainly
attributable to various commercial and industrial loans which were
allocated with specific allowance for loan and lease losses during
previous quarters. Decreases in net charge-offs in our leasing
portfolio were mainly attributable to the decrease in the volume of
repossessed vehicles. Other Asset Qualitative Information As of
June 30, 2009, March 31, 2009 and December 31, 2008, we had
troubled debt restructured loans, as defined in Statement of
Financial Standards No. 15, "Accounting by Debtors and Creditors
for Troubled Debt Restructurings," amounting to $62.8 million,
$53.0 million and $30.1 million, respectively, that were not
included as non-performing loans in the table above since they are
performing under renegotiated contractual terms. As of June 30,
2009, loans between 30 and 89 days past due and still accruing
interest amounted to $76.9 million, compared to $74.5 million and
$126.1 million as of March 31, 2009 and December 31, 2008,
respectively. Although 30 to 89 days delinquency still accruing
remained relatively stable when comparing the second quarter of
2009 with the previous quarter, changes included a $2.5 million
increase in commercial loans; a $3.4 million increase in
construction loans; and a $3.2 million decrease in our leasing
portfolio. Allowance for Loan and Lease Losses The allowance for
loan and lease losses was $42.7 million as of June 30, 2009,
compared to $39.3 million and $41.6 million as of March 31, 2009
and December 31, 2008, respectively. The allowance for loan and
lease losses was affected by net charge-offs, non-performing loans,
loan portfolio balance, and also by the provision for loan and
lease losses. The increase in the allowance for loan and lease
losses during the quarter ended June 30, 2009 when compared to the
previous quarter was primarily attributable to the impact of the
overall economy on current internal and external environmental
factors affecting the commercial and industrial loans portfolio, as
previously mentioned. For the general portion of our allowance, we
follow a consistent procedural discipline and account for loan and
lease loss contingencies in accordance with Statement of Financial
Accounting Standards (SFAS) No. 5, Accounting for Contingencies.
Also, another component is used in the evaluation of the adequacy
of our general allowance to measure the probable effect that
current internal and external environmental factors could have on
the historical loss factors currently in use. In addition to our
general portfolio allowances, specific allowances are established
in cases where management has identified significant conditions or
circumstances related to a credit that management believes indicate
a high probability that a loss has been incurred. These specific
allowances are determined following a consistent procedural
discipline in accordance with Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by Creditors for Impairment of
a Loan ("SFAS No. 114"), as amended by SFAS No. 118, Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures. For impaired commercial and construction business
relationships with aggregate balances exceeding $250,000, we
measure the impairment following the guidance of SFAS No. 114. We
believe that the allowance for loan and lease losses is adequate
and it represents 2.50% of total loans as of June 30, 2009.
Deposits and Borrowings Total deposits amounted to $2.079 billion
as of June 30, 2009, compared to $2.084 billion as of December 31,
2008. This $5.6 million decrease was mainly attributable to a net
effect of a decrease in broker deposits and an increase in jumbo
and regular time deposits. The fierce competition for local
deposits continues. In an effort to control increases in our
funding cost, we continued focused on other funding alternatives,
including attracting other time deposits from the US national
markets at lower competitive rates. As of June 30, 2009, other
borrowings amounted to $492.7 million, compared to $592.5 million
as of December 31, 2008. This decrease in other borrowings was
mainly attributable to our strategy of focusing on other funding
alternatives to lower our cost of funds, as mentioned above.
Stockholders' Equity Our stockholders' equity decreased to $140.0
million as of June 30, 2009, from $156.6 million as of December 31,
2008, representing an annualized decrease of 21.19%. Besides
earnings and losses from operations, which amounted to a net loss
of $8.6 million and $11.3 million for the six months ended June 30,
2009 and the year ended December 31, 2008, respectively, the
stockholders' equity was impacted by accumulated other
comprehensive losses of $20.2 million as of June 30, 2009, compared
to $12.4 million as of December 31, 2008. As of June 30, 2009, our
total risk-based capital ratio was 9.71%, which is less than the
10% required to be considered well capitalized under the regulatory
framework for prompt corrective action, compared to 10.20% as of
March 31, 2009. However, in July 2009, we sold approximately $163.4
million in securities with a $6.0 million gain, which we estimate
will place us above the 10% risk-based capital requirement as of
July 31, 2009. Our leverage and Tier 1 capital ratios were 5.66%
and 8.45% as of June 30, 2009, respectively, compared to 6.52% and
8.94% as of March 31, 2009. We continue evaluating opportunities to
increase our capital position. About EuroBancshares, Inc.
EuroBancshares, Inc. is a diversified bank holding company
headquartered in San Juan, Puerto Rico, offering a broad array of
financial services through its wholly-owned banking subsidiary,
Eurobank; EBS Overseas, Inc., an international banking entity
subsidiary of Eurobank; and EuroSeguros, a wholly-owned insurance
agency subsidiary of Eurobank. Forward-Looking Statements
Statements concerning future performance, events, expectations for
growth and market forecasts, and any other guidance on future
periods, constitute forward-looking statements that are subject to
a number of risks and uncertainties that might cause actual results
to differ materially from stated expectations. Specific factors
include, but are not limited to, loan volumes, the ability to
expand net interest margin, loan portfolio performance, the ability
to continue to attract low-cost deposits, success of expansion
efforts, competition in the marketplace and general economic
conditions. The financial information contained in this release
should be read in conjunction with the consolidated financial
statements and notes included in EuroBancshares' most recent
reports on Form 10-K and Form 10-Q, as filed with the Securities
and Exchange Commission as they may be amended from time to time.
Results of operations for the most recent quarter are not
necessarily indicative of operating results for any future periods.
Any projections in this release are based on limited information
currently available to management, which is subject to change.
Although any such projections and the factors influencing them will
likely change, the bank will not necessarily update the
information, since management will only provide guidance at certain
points during the year. Such information speaks only as of the date
of this release. Additional information on these and other factors
that could affect our financial results are included in filings by
EuroBancshares with the Securities and Exchange Commission.
EUROBANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated
Balance Sheets (Unaudited) June 30, 2009 and December 31, 2008
Assets 2009 2008 ---- ---- Cash and cash equivalents Cash and due
from banks $221,655,244 $43,275,239 Interest bearing deposits
400,000 400,000 Federal funds sold - 44,470,925 --- ----------
Total cash and cash equivalents 222,055,244 88,146,164 Securities
purchased under agreements to resell 24,179,698 24,486,774
Investment securities available for sale 577,458,823 751,016,565
Investment securities held to maturity 110,201,991 132,798,181
Other investments 11,131,700 14,932,400 Loans held for sale
1,019,702 1,873,445 Loans, net of allowance for loan and lease
losses of $42,729,222 in 2009 and $41,639,051 in 2008 1,665,163,485
1,740,539,113 Accrued interest receivable 13,683,245 14,614,445
Customers' liability on acceptances 365,299 405,341 Premises and
equipment, net 34,273,013 34,466,471 Deferred tax assets, net
29,300,777 23,825,896 Other assets 49,266,566 33,324,128 ----------
---------- Total assets $2,738,099,543 $2,860,428,923
============== ============== Liabilities and Stockholders' Equity
Deposits: Noninterest bearing $100,730,850 $108,645,242 Interest
bearing 1,977,975,978 1,975,662,802 ------------- -------------
Total deposits 2,078,706,828 2,084,308,044 Securities sold under
agreements to repurchase 471,675,000 556,475,000 Acceptances
outstanding 365,299 405,341 Advances from Federal Home Loan Bank
369,169 15,398,041 Note payable to Statutory Trust 20,619,000
20,619,000 Accrued interest payable 12,574,585 16,073,737 Accrued
expenses and other liabilities 13,806,345 10,579,960 ----------
---------- 2,598,116,226 2,703,859,123 ------------- -------------
Stockholders' equity: Preferred stock: Preferred stock Series A,
$0.01 par value. Authorized 20,000,000 shares; issued and
outstanding 430,537 in 2009 and 2008 (aggregate liquidation
preference value of $10,763,425) 4,305 4,305 Capital paid in excess
of par value 10,759,120 10,759,120 Common stock: Common stock,
$0.01 par value. Authorized 150,000,000 shares; issued: 20,439,398
shares in 2009 and 2008; outstanding: 19,499,515 shares in 2009 and
2008 204,394 204,394 Capital paid in excess of par value
110,182,763 110,109,207 Retained earnings: Reserve fund 8,029,106
8,029,106 Undivided profits 40,914,466 49,773,573 Treasury stock,
940,183 shares in 2009 and 939,883 in 2008, at cost (9,918,147)
(9,916,962) Accumulated other comprehensive loss: Unrealized loss
on available for sale securities (7,187,763) (12,392,943)
Other-than-temporary impairment losses for which a portion has been
recognized in earnings (13,004,927) - ----------- --- Total
stockholders' equity 139,983,317 156,569,800 -----------
----------- Total liabilities and stockholders' equity
$2,738,099,543 $2,860,428,923 ============== ==============
EUROBANCSHARES, INC. AND SUBSIDIARIES Condensed Consolidated
Statements of Operations (Unaudited) For the three-month periods
ended June 30, 2009 and 2008 and March 31, 2009, and six-month
periods ended June 30, 2009 and 2008 Three Months Ended Six Months
Ended ----------------------------------- June 30, June 30, June
30, March 31, ---------------- 2009 2008 2009 2009 2008 ---- ----
---- ---- ---- Interest income: Loans, including fees $23,025,962
$29,106,477 $24,599,905 $47,625,867 $61,864,250 Investment
securities: Taxable 1,912 2,588 1,947 3,859 5,231 Exempt 10,119,844
10,822,424 11,519,063 21,638,907 20,314,226 Interest bearing
deposits, securities purchased under agreements to resell, and
other 200,060 411,651 78,790 278,849 798,638 ------- ------- ------
------- ------- Total interest income 33,347,778 40,343,140
36,199,705 69,547,482 82,982,345 ---------- ---------- ----------
---------- ---------- Interest expense: Deposits 17,143,727
20,609,064 17,542,319 34,686,046 42,382,230 Securities sold under
agreements to repurchase, notes payable, and other 4,416,595
5,030,573 4,619,903 9,036,498 10,663,270 --------- ---------
--------- --------- ---------- Total interest expense 21,560,322
25,639,637 22,162,222 43,722,544 53,045,500 ---------- ----------
---------- ---------- ---------- Net interest income 11,787,456
14,703,503 14,037,483 25,824,938 29,936,845 Provision for loan and
lease losses 12,707,000 9,986,800 5,689,000 18,396,000 17,819,800
---------- --------- --------- ---------- ---------- Net interest
(expense) income after provision for loan and lease losses
(919,544) 4,716,703 8,348,483 7,428,938 12,117,045 --------
--------- --------- --------- ---------- Noninterest income:
Other-than- temporary impairment losses: Total other- than-
temporary impairment losses (1,791,876) - (15,491,220)(17,283,095)
- Portion of loss recognized in other comprehensive income
(883,876) - 14,683,627 13,799,751 - -------- --- ----------
---------- --- Net impairment losses recognized in
earnings(2,675,752) - (807,593) (3,483,344) - Net gain on sale of
securities 3,526,781 - 4,036,387 7,563,169 - Service charges - fees
and other 2,059,174 3,218,454 2,124,879 4,184,053 5,641,828 Net
loss on sale of repossessed assets and on disposition of other
assets (108,145) (85,721) (213,724) (321,869) (119,479) Net gain on
sale of loans and leases 18,847 116,942 795,572 814,419 1,352,137
------ ------- ------- ------- --------- Total noninterest income
2,820,905 3,249,675 5,935,521 8,756,428 6,874,486 ---------
--------- --------- --------- --------- Noninterest expense:
Salaries and employee benefits 4,685,863 5,318,139 4,802,139
9,488,002 10,897,052 Occupancy, furniture and equipment 2,490,437
2,757,843 2,548,096 5,038,533 5,700,611 Professional services
1,704,644 1,243,021 1,556,474 3,261,119 2,484,239 Insurance
4,373,530 636,177 1,174,569 5,548,099 1,282,768 Promotional 135,601
213,655 117,918 253,519 580,673 Other 2,666,015 2,463,228 2,280,975
4,946,989 4,952,425 --------- --------- --------- ---------
--------- Total noninterest expense 16,056,090 12,632,063
12,480,171 28,536,261 25,897,768 ---------- ---------- ----------
---------- ---------- Income (loss) before income taxes
(14,154,729) (4,665,685) 1,803,833 (12,350,895) (6,906,237) Income
tax benefit (2,558,816) (2,902,780) (1,241,097) (3,799,913)
(4,140,008) ---------- ---------- ---------- ---------- ----------
Net income (loss) $(11,595,913)$(1,762,905) $3,044,930
$(8,550,982)$(2,766,229) ============ =========== ==========
=========== =========== Basic earnings (loss) per share $(0.60)
$(0.10) $0.15 $(0.45) $(0.16) ====== ====== ===== ====== ======
Diluted earnings (loss) per share $(0.60) $(0.10) $0.15 $(0.45)
$(0.16) ====== ====== ===== ====== ====== EUROBANCSHARES, INC. AND
SUBSIDIARIES OPERATING RATIOS AND OTHER SELECTED DATA (Dollars in
thousands, except share data) Unaudited As of
------------------------------------------ June 30, ---------------
March 31, December 31, 2009 2008 2009 2008 ---- ---- ---- ---- Loan
Mix -------- Loans secured by real estate Commercial and industrial
$857,098 $828,277 $856,835 $851,494 Construction 234,338 222,056
230,352 220,579 Residential mortgage 130,144 126,458 125,511
125,557 Consumer 2,483 2,228 2,519 2,445 ----- ----- ----- -----
1,224,063 1,179,019 1,215,217 1,200,075 Commercial and industrial
221,625 292,435 246,738 263,332 Consumer 45,510 52,657 47,366
49,415 Lease financing contracts 215,743 309,011 230,828 267,325
Overdrafts 1,522 3,902 2,140 2,146 ----- ----- ----- ----- Total
1,708,463 1,837,024 1,742,289 1,782,293 Deposit Mix -----------
Noninterest-bearing deposits 100,731 118,313 105,239 108,645 Now
and money market 63,443 68,881 56,040 59,309 Savings 105,237
110,388 103,575 104,424 Broker deposits 1,389,765 1,393,935
1,530,107 1,423,814 Regular CD's & IRAS 129,712 97,103 124,077
109,732 Jumbo CD's 289,819 261,169 289,800 278,384 ------- -------
------- ------- Total 2,078,707 2,049,789 2,208,838 2,084,308
Balance Sheet Data (at end of period) --------------------------
Total assets 2,738,100 2,829,716 2,900,786 2,860,429 Total
investments 698,793 828,270 823,990 898,747 Loans and leases, net
of unearned 1,708,912 1,840,410 1,742,150 1,784,052 Allowance for
loan and lease losses 42,729 30,156 39,346 41,639 Total deposits
2,078,707 2,049,789 2,208,838 2,084,308 Other borrowings 492,663
577,118 517,678 592,492 Preferred stock 10,763 10,763 10,763 10,763
Shareholders' equity 139,983 164,739 149,195 156,570 Capital Ratios
-------------- Leverage ratio 5.66% 6.84% 6.52% 6.55% Tier 1
risk-based capital 8.45 9.36 8.94 8.99 Total risk-based capital
9.71 10.61 10.20 10.25 Quarters Ended Six Months Ended
-------------------------------- ----------------- June 30, June
30, ------------------- March 31, ----------------- 2009 2008 2009
2009 2008 ---- ---- ---- ---- ---- Common Share Data
----------------- Average shares outstanding - basic 19,499,403
19,500,315 19,499,515 19,499,459 19,336,419 Average shares
outstanding - assuming dilution 19,499,403 19,530,491 19,499,515
19,499,459 19,380,971 Number of shares outstanding at end of period
19,499,215 19,500,315 19,499,515 19,499,215 19,500,315 Book value
per common share $6.63 $7.90 $7.10 $6.63 $7.90 Balance Sheet Data
(average balances) ------------------- Total assets 2,832,651
2,833,262 2,796,011 2,814,374 2,787,916 Loans and leases, net of
unearned 1,732,373 1,846,116 1,777,171 1,754,648 1,856,054
Interest- earning assets(1) 2,708,018 2,714,924 2,673,977 2,691,092
2,673,936 Interest- bearing deposits 2,064,798 1,940,606 1,969,054
2,017,190 1,897,115 Other borrowings 493,217 569,708 549,205
521,057 564,798 Preferred stock 10,763 10,763 10,763 10,763 10,763
Shareholders' equity 148,862 175,390 149,302 149,081 179,300 Other
Financial Data -------------------- Total interest income 33,348
40,343 36,200 69,547 82,982 Total interest expense 21,561 25,639
22,162 43,722 53,046 Provision for loan and lease losses 12,707
9,987 5,689 18,396 17,820 OTTI losses recognized in earnings
(2,676) - (808) (3,483) - Gain on sale of securities 3,527 - 4,036
7,563 - Services charges - fees and other 2,059 3,218 2,125 4,184
5,642 Gain on sale of loans 19 117 796 814 1,352 Net loss on sale
of other assets (108) (86) (214) (322) (119) Non-interest expense
16,056 12,632 12,480 28,536 25,897 Tax benefit (2,559) (2,903)
(1,241) (3,800) (4,140) Net income (loss) (11,596) (1,763) 3,045
(8,551) (2,766) Dividends on preferred stock 124 186 184 308 371
Nonperforming assets 208,828 141,099 167,754 208,828 141,099
Nonperforming loans 196,106 126,940 154,297 196,106 126,940 Net
charge-offs 9,324 6,259 7,982 17,306 15,801 Performance Ratios
------------------ Return on average assets(2) (1.64)% (0.25)%
0.44% (0.61)% (0.20)% Return on average common equity(3) (33.59)
(4.28) 8.79 (12.36) (3.28) Net interest spread(4) 1.76 2.02 2.14
1.95 1.99 Net interest margin(5) 1.97 2.37 2.37 2.16 2.37
Efficiency ratio(6) 99.63 65.41 57.47 75.43 67.02 Earnings (loss)
per common share - basic $(0.60) $(0.10) $0.15 $(0.45) $(0.16)
Earnings (loss) per common share - diluted (0.60) (0.10) 0.15
(0.45) (0.16) Asset Quality Ratios --------------------
Nonperforming assets to total assets 7.63% 4.99% 5.78% 7.63% 4.99%
Nonperforming loans to total loans 11.48 6.90 8.86 11.48 6.90
Allowance for loan and lease losses to total loans 2.50 1.64 2.26
2.50 1.64 Net loan and lease charge- offs to average loans 2.15
1.36 1.80 1.97 1.70 Provision for loan and lease losses to net loan
and lease charge-offs 136.28 159.56 71.27 106.30 112.78 (1)
Includes nonaccrual loans, which balance as of the periods ended
June 30, 2009 and 2008, March 31, 2009 and December 31, 2008 was
$162.4 million, $86.3 million, $130.4 million and $141.3 million,
respectively. (2) Return on average assets (ROAA) is determined by
dividing net income by average assets. (3) Return on average common
equity (ROAE) is determined by dividing net income by average
common equity. (4) Represents the average rate earned on
interest-earning assets less the average rate paid on
interest-bearing liabilities. (5) Represents net interest income on
fully taxable equivalent basis as a percentage of average
interest-earning assets. (6) The efficiency ratio is determined by
dividing total noninterest expense by an amount equal to net
interest income (fully taxable equivalent) plus noninterest income.
EUROBANCSHARES, INC. AND SUBSIDIARIES NONPERFORMING ASSETS (Dollars
in thousands) Unaudited For the periods ended
------------------------------------------- June 30, March 31,
December 31, June 30, 2009 2009 2008 2008 ---- ---- ---- ---- Loans
contractually past due 90 days or more but still accruing interest
$33,660 $23,898 $22,590 $40,626 Nonaccrual loans 162,446 130,399
141,304 86,314 ------- ------- ------- ------ Total nonperforming
loans(1) 196,106 154,297 163,894 126,940 Repossessed property:
Other real estate 10,266 9,706 8,759 7,627 Other repossessed assets
2,456 3,751 4,747 6,532 ----- ----- ----- ----- Total repossessed
property 12,722 13,457 13,506 14,159 ------ ------ ------ ------
Total nonperforming assets $208,828 $167,754 $177,400 $141,099
======== ======== ======== ======== Nonperforming loans to total
loans 11.48% 8.86% 9.19% 6.90% Nonperforming assets to total loans
plus repossessed property 12.13 9.56 9.87 7.61 Nonperforming assets
to total assets 7.63 5.78 6.20 4.99 (1) As of June 30, 2009, March
31, 2009 and December 31, 2008, we had troubled debt restructured
loans, as defined in Statement of Financial Standards No. 15,
"Accounting by Debtors and Creditors for Troubled Debt
Restructurings," amounting to $62.8 million, $53.0 million and
$30.1 million, respectively, that were not included as
nonperforming loans in the table above since they are performing
under renegotiated contractual terms. There were no troubled debt
restructured loans as of June 30, 2008. EUROBANCSHARES, INC. AND
SUBSIDIARIES NET CHARGE-OFFS (Dollars in thousands) Unaudited
Quarter Ended ------------------------------------ Year Ended June
March December September June December 30, 31, 31, 30, 30, 31, 2009
2009 2008 2008 2008 2008 ---- ---- ---- ---- ---- ---- Charge-offs:
------------ Real estate secured $4,666 $3,648 $2,129 $420 $2,683
$8,748 Other commercial and industrial 2,156 704 3,363 516 654
7,461 Consumer 707 992 496 421 563 2,129 Leases financing contracts
2,340 3,098 3,086 3,541 3,064 12,508 Other 52 38 14 25 65 268 ---
--- --- --- --- --- Total charge-offs 9,921 8,480 9,088 4,923 7,029
31,114 Recoveries: ----------- Real estate secured $1 $- $1 $2 $3
$21 Other commercial and industrial 112 42 70 65 460 737 Consumer
52 87 99 97 62 322 Leases financing contracts 429 369 399 263 242
1,213 Other 3 - 1 3 3 9 --- --- --- --- --- --- Total recoveries
597 498 570 430 770 2,302 Net charge-offs: ---------------- Real
estate secured $4,665 $3,648 $2,128 $418 $2,680 $8,727 Other
commercial and industrial 2,044 662 3,293 451 194 6,724 Consumer
655 905 397 324 501 1,807 Leases financing contracts 1,911 2,729
2,687 3,278 2,822 11,295 Other 49 38 13 22 62 259 --- --- --- ---
--- --- Total net charge- offs $9,324 $7,982 $8,518 $4,493 $6,259
$28,812 ====== ====== ====== ====== ====== ======= Net charge-offs
to average loans: ------------------ Real estate secured 1.52%
1.21% 0.71% 0.14% 0.92% 0.75% Other commercial and industrial 3.46
1.03 4.84 0.63 0.26 2.30 Consumer 5.62 7.42 3.13 2.47 3.71 3.38
Leases financing contracts 3.42 4.20 3.87 4.39 3.53 3.57 Other 9.90
7.08 2.06 2.52 4.70 5.59 ---- ---- ---- ---- ---- ---- Total net
charge-offs to average loans 2.15% 1.80% 1.89% 0.98% 1.36% 1.57%
==== ==== ==== ==== ==== ==== DATASOURCE: EuroBancshares, Inc.
CONTACT: AT THE COMPANY, Rafael Arrillaga-Torrens, Jr., Chairman,
President and CEO, or Yadira R. Mercado, Executive Vice-President,
CFO, +1-787-751-7340; or AT FINANCIAL RELATIONS BOARD, Marilynn
Meek, General Inquiries, +1-212-827-3773
Copyright