1164554--3/16/2006--EUROBANCSHARES

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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING INFORMATION 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. We rely heavily on short-term funding sources, 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. We have certain risks associated with our lease servicing activities. Risks Relating to an Investment in Our Common Stock Our common stocks have 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. 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. 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 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. Repeal of foreign personal holding company rules.

Full 10-K form ▸

1164554--3/16/2006--EUROBANCSHARES_INC