##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2010
 Commission File Number 000-25193
 EOS PREFERRED CORPORATION
  Massachusetts  (State or other jurisdiction of incorporation or organization)
 04-3439366  (I.R.S. Employer Identification Number)
 1271 Avenue of the Americas, 46th Floor, New York, New York
 10020  (Zip Code)
 (212) 377-1503  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



EOS Preferred Corporation
 Table of Contents
 PagePART I  Financial InformationItem 1. Condensed Financial Statements (Unaudited):Balance Sheets
    
    
    2Statements of Operations
    
    
    3Statements of Changes in Stockholders Equity
    
    
    4Statements of Cash Flows
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Executive Level Overview
    
    
    16Application of Critical Accounting Policies and Estimates
    
    
    20Results of Operations for the Three Months Ended September 30, 2010 and 2009
    
    
    21Results of Operations for the Nine Months Ended September 30, 2010 and 2009
    
    
    23Changes in Financial Condition
    
    
    25Interest Rate Risk
    
    
    25Significant Concentration of Credit Risk
    
    
    26Liquidity Risk Management
    
    
    26Impact of Inflation and Changing Prices
    
    
    26Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 4T. Controls and Procedures
    
    
    28PART II Other InformationItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3. Defaults Upon Senior Securities
    
    
    30Item 4. (Removed and Reserved)
    
    
    30Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    30Signatures
    
    
    31Exhibit Index
    
    
    32EX-31.1EX-31.2EX-32




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##### Table of Contents



PART I
 
 Item 1. Condensed Financial Statements
 EOS Preferred Corporation
 
 Balance Sheets  (Unaudited)
 September 30,
    
    
    December 31,2010
    
    
    2009(In Thousands)ASSETSCash account with parent
    
    $
    184
    
    
    $
    184Interest-bearing deposits with parent
    
    
    62,379
    
    
    
    51,639Total cash and cash equivalents
    
    
    62,563
    
    
    
    51,823Loans held for sale, at fair value
    
    
    17,669
    
    
    
    22,531Loans held for sale, at lower of accreted cost or market value
    
    
    7,858
    
    
    
    7,292Loans
    
    
    25,527
    
    
    
    29,823Accrued interest and other receivables
    
    
    135
    
    
    
    393Total assets
    
    $
    88,225
    
    
    $
    82,039LIABILITIES AND STOCKHOLDERS EQUITYAccrued expenses and other liabilities
    
    $
    419
    
    
    $
    344Dividends payable
    
    
    2,376
    
    
    
    Total liabilities
    
    
    2,795
    
    
    
    344Stockholders equity:Preferred stock, Series B, 8% cumulative, non-convertible; $.01 par value;
$1,000 liquidation value per share plus accrued dividends; 1,000 shares
authorized, 937 shares issued and outstanding
    
    
    
    
    
    
    Preferred stock, Series D, 8.50% non-cumulative, exchangeable; $.01 par
value; $25 liquidation value per share; 1,725,000 shares authorized,
1,500,000 shares issued and outstanding
    
    
    15
    
    
    
    15Common stock, $.01 par value, 100 shares authorized, issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    95,320
    
    
    
    95,320Accumulated deficit
    
    
    (9,905
    )
    
    
    (13,640
    )Total stockholders equity
    
    
    85,430
    
    
    
    81,695Total liabilities and stockholders equity
    
    $
    88,225
    
    
    $
    82,039
  2




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##### Table of Contents



EOS Preferred Corporation
 
 Statements of Operations  (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)
    
    
    (In Thousands)Interest income:Interest and fees on loans
    
    $
    420
    
    
    $
    839
    
    
    $
    1,539
    
    
    $
    2,347Interest on interest-bearing deposits
    
    
    45
    
    
    
    75
    
    
    
    124
    
    
    
    468Total interest income
    
    
    465
    
    
    
    914
    
    
    
    1,663
    
    
    
    2,815Gain (loss) on loans held for sale
    
    
    2,715
    
    
    
    (541
    )
    
    
    5,236
    
    
    
    (16,751
    )Reduction in allowance for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    915Net revenue
    
    
    3,180
    
    
    
    373
    
    
    
    6,899
    
    
    
    (13,021
    )Operating expenses:Loan servicing and advisory services
    
    
    115
    
    
    
    35
    
    
    
    358
    
    
    
    123Other general and administrative
    
    
    150
    
    
    
    146
    
    
    
    430
    
    
    
    716Total operating expenses
    
    
    265
    
    
    
    181
    
    
    
    788
    
    
    
    839Net income (loss)
    
    
    2,915
    
    
    
    192
    
    
    
    6,111
    
    
    
    (13,860
    )Preferred stock dividends declared
    
    
    909
    
    
    
    
    
    
    
    909
    
    
    
    816Net income (loss) available to common stockholder
    
    $
    2,006
    
    
    $
    192
    
    
    $
    5,202
    
    
    $
    (14,676
    )
  3




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EOS Preferred Corporation
 
 Statements of Changes in Stockholders Equity  (Unaudited)
 Nine Months ended September 30, 2010Preferred Stock
    
    
    Preferred Stock
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Retained Earnings/
    
    
    TotalSeries B
    
    
    Series D
    
    
    Common Stock
    
    
    Paid-in
    
    
    (Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    Equity(In Thousands)Balance at
December 31, 2009
    
    
    1
    
    
    $
    
    
    
    
    1,500
    
    
    $
    15
    
    
    
    
    
    
    $
    
    
    
    $
    95,320
    
    
    $
    (13,640
    )
    
    $
    81,695Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,111
    
    
    
    6,111Cumulative dividends
declared on preferred
stock, Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (112
    )
    
    
    (112
    )Dividends declared on
preferred stock, Series D
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (797
    )
    
    
    (797
    )Dividends declared on
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,467
    )
    
    
    (1,467
    )Balance at
September 30, 2010
    
    
    1
    
    
    $
    
    
    
    
    1,500
    
    
    $
    15
    
    
    
    
    
    
    $
    
    
    
    $
    95,320
    
    
    $
    (9,905
    )
    
    $
    85,430
 Nine Months ended September 30, 2009Preferred Stock
    
    
    Preferred Stock
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Retained Earnings/
    
    
    TotalSeries B
    
    
    Series D
    
    
    Common Stock
    
    
    Paid-in
    
    
    (Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    Equity(In Thousands)Balance at
December 31, 2008
    
    
    1
    
    
    $
    
    
    
    
    1,500
    
    
    $
    15
    
    
    
    
    
    
    $
    
    
    
    $
    95,121
    
    
    $
    
    
    
    $
    95,136Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,860
    )
    
    
    (13,860
    )Cumulative dividends
declared on preferred
stock, Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    (19
    )Dividends declared on
preferred stock, Series D
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (797
    )
    
    
    (797
    )Balance at
September 30, 2009
    
    
    1
    
    
    $
    
    
    
    
    1,500
    
    
    $
    15
    
    
    
    
    
    
    $
    
    
    
    $
    95,121
    
    
    $
    (14,676
    )
    
    $
    80,460
  4




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EOS Preferred Corporation
 
 Statements of Cash Flows  (Unaudited)
 Nine Months EndedSeptember 30,2010
    
    
    2009(In Thousands)Cash flows from operating activities:Net income (loss)
    
    $
    6,111
    
    
    $
    (13,860
    )Adjustments to reconcile net income (loss) to net cash from operating activities:(Gain) loss on loans held for sale
    
    
    (5,236
    )
    
    
    16,751Decrease in accrued interest and other receivable
    
    
    258
    
    
    
    80Increase in accrued expenses and other liabilities
    
    
    75
    
    
    
    135Provision for loan losses
    
    
    
    
    
    
    (915
    )Net cash provided by operating activities
    
    
    1,208
    
    
    
    2,191Cash flows from investing activities:Loan repayments
    
    
    9,532
    
    
    
    5,921Cash provided by investing activities
    
    
    9,532
    
    
    
    5,921Cash flows from financing activities:Payment of preferred stock dividends
    
    
    
    
    
    
    (1,631
    )Cash used in financing activities
    
    
    
    
    
    
    (1,631
    )Net change in cash and cash equivalents
    
    
    10,740
    
    
    
    6,481Cash and cash equivalents at beginning of period
    
    
    51,823
    
    
    
    43,757Cash and cash equivalents at end of period
    
    $
    62,563
    
    
    $
    50,238
  5




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EOS Preferred Corporation
 
 Notes to Condensed Financial Statements
 Three and Nine Months Ended September 30, 2010 and 2009
 NOTE 1. ORGANIZATION
       Business
  6




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Asset Exchange.
 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of presentation
  Use of estimates
  Cash and Cash Equivalents
  Loans Held for Sale
  7




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Discounts on Acquired Loans
  Allowance for Loan Losses
  8




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Revenue Recognition
  Taxes
   Significant Concentration of Credit Risk
  Recent Accounting Pronouncements
    9




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NOTE 3. BANKRUPTCY OF LBHI AND REGULATORY ACTIONS INVOLVING AURORA BANK
 Bankruptcy of Lehman Brothers Holding Inc.
 Bankruptcy of Lehman Brothers Holdings Inc.
  Regulatory Actions Involving Aurora Bank
 Aurora Bank  Regulatory Actions and Capital Levels.
  10




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Dividend Payments.
    NOTE 4. LOANS
    11




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##### Table of Contents



September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Unpaid Principal
    
    
    Carrying
    
    
    Unpaid PrincipalValue
    
    
    Balance
    
    
    Value
    
    
    Balance(In Thousands)Total mortgage loans, held for sale:Commercial real estate
    
    $
    6,945
    
    
    $
    10,199
    
    
    $
    6,380
    
    
    $
    11,324Multi-family residential
    
    
    695
    
    
    
    1,062
    
    
    
    693
    
    
    
    1,203One-to-four family residential
    
    
    17,887
    
    
    
    23,901
    
    
    
    22,750
    
    
    
    32,386Total
    
    $
    25,527
    
    
    $
    35,162
    
    
    $
    29,823
    
    
    $
    44,913Portion carried at fair value:Commercial real estate
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Multi-family residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    One-to-four family residential
    
    
    17,669
    
    
    
    23,574
    
    
    
    22,531
    
    
    
    32,007Total
    
    
    17,669
    
    
    
    23,574
    
    
    
    22,531
    
    
    
    32,007Portion carried at lower of accreted cost or
market value (1):Commercial real estate
    
    $
    6,945
    
    
    $
    10,199
    
    
    $
    6,380
    
    
    $
    11,324Multi-family residential
    
    
    695
    
    
    
    1,062
    
    
    
    693
    
    
    
    1,203One-to-four family residential
    
    
    218
    
    
    
    327
    
    
    
    219
    
    
    
    379Total
    
    
    7,858
    
    
    
    11,588
    
    
    
    7,292
    
    
    
    12,906
 
 (1)
    
    Though the table compares the carrying value of these loans against UPB, these loans are
carried at the lower of accreted cost or market value and the carrying value cannot exceed the
cost of these loans which for all loans is less than UPB.  September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Unpaid Principal
    
    
    Carrying
    
    
    Unpaid PrincipalValue
    
    
    Balance
    
    
    Value
    
    
    Balance(In Thousands)Mortgage loans in non-accrual status:Commercial real estate
    
    $
    746
    
    
    $
    801
    
    
    $
    318
    
    
    $
    792Multi-family residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    One-to-four family residential
    
    
    455
    
    
    
    810
    
    
    
    
    
    
    
    Total loans in non-accrual status
    
    $
    1,201
    
    
    $
    1,611
    
    
    $
    318
    
    
    $
    792
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)
    
    
    (In Thousands)Balance at beginning of period
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    915Reversal of allowance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (915
    )Balance at end of end of period
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 12




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NOTE 5. RELATED PARTY TRANSACTIONS
   NOTE 6. FAIR VALUE MEASUREMENTS
 Fair Value Measurements
       13




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Balance
    
    
    
    
    
    
    Net Transfers
    
    
    Net Gains
    
    
    BalanceJune 30, 2010
    
    
    Payments
    
    
    In / Out
    
    
    (Losses) (1)
    
    
    September 30, 2010(In Thousands)Loans Held for Sale:Commercial real estate
    
    $
    6,642
    
    
    $
    (236
    )
    
    $
    
    
    
    $
    539
    
    
    $
    6,945Multi-family residential
    
    
    705
    
    
    
    (79
    )
    
    
    
    
    
    
    69
    
    
    
    695One-to-four family residential
    
    
    19,955
    
    
    
    (4,175
    )
    
    
    
    
    
    
    2,107
    
    
    
    17,887Total
    
    $
    27,302
    
    
    $
    (4,490
    )
    
    $
    
    
    
    $
    2,715
    
    
    $
    25,527
 
 (1)
    
    Net Gains and Losses are included in Gain (loss) on loans held for sale on the Statements of
Operations.  Balance
    
    
    
    
    
    
    Net Transfers
    
    
    Net Gains
    
    
    BalanceDecember 31, 2009
    
    
    Payments
    
    
    In / Out
    
    
    (Losses) (1)
    
    
    September 30, 2010(In Thousands)Loans Held for Sale:Commercial real estate
    
    $
    6,380
    
    
    $
    (901
    )
    
    $
    
    
    
    $
    1,466
    
    
    $
    6,945Multi-family residential
    
    
    693
    
    
    
    (140
    )
    
    
    
    
    
    
    142
    
    
    
    695One-to-four family residential
    
    
    22,750
    
    
    
    (8,491
    )
    
    
    
    
    
    
    3,628
    
    
    
    17,887Total
    
    $
    29,823
    
    
    $
    (9,532
    )
    
    $
    
    
    
    $
    5,236
    
    
    $
    25,527
 
 (1)
    
    Net Gains and Losses are included in Gain (loss) on loans held for sale on the Statements of
Operations. Fair Value of Financial Instruments
  14




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Cash and cash equivalents:
 Loans:
 Accrued interest and other receivables:
  September 30, 2010
    
    
    December 31, 2009Fair
    
    
    
    
    
    
    FairCarrying Value
    
    
    Value
    
    
    Carrying Value
    
    
    Value(In Thousands)Cash and cash equivalents
    
    $
    62,563
    
    
    $
    62,563
    
    
    $
    51,823
    
    
    $
    51,823Loans
    
    
    25,527
    
    
    
    25,527
    
    
    
    29,823
    
    
    
    29,823Accrued interest and other receivables
    
    
    135
    
    
    
    135
    
    
    
    393
    
    
    
    393
 NOTE 7. SUBSEQUENT EVENTS
  15




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
 Executive Level Overview
   16




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
    
    An increase in the gain (loss) on loans held for sale of $22.0 million. In the first
nine months of 2010 there was a gain on loans held for sale of $5.2 million as compared to
a loss of $16.8 million in the first nine months of 2009. A loss on loans held for sale was
recorded in the first quarter of 2009 as a result of the reclassification of our loan
portfolio to held for sale in connection with the February 2009 Asset Exchange Agreement
and the resultant change in fair value of the loan portfolio. The gain in the first nine
months of 2010 resulted from an increase in the fair value measurement of the loan
portfolio as of September 30, 2010 as compared to December 31, 2009. The increase in the
fair value measurement during 2010 was primarily due to a decrease in the
discount rates used to value the loan portfolio.
 
    
    A decrease in interest income of $1.2 million resulting mainly from a decrease in
average loan balances, the discontinuance of the accretion of purchase discount and fees on
loans as a result of the loans being reclassified as held for sale during the first quarter
of 2009 and a decrease in the amount of interest income accreted on loan payoffs.
 
    
    A decrease in the prior years provision for loan losses on loans held for investment
of $0.9 million. In the first half of 2009 the provision for loan losses decreased by $0.9
million to $0 as a result of the reclassification of the loan portfolio to held for sale.
 
    
    An increase of $0.1 million in preferred stock dividends. The preferred stock dividends
declared on September 13, 2010 were comprised of dividends for Series B and Series D
preferred stock for the third quarter of 2010 along with cumulative dividends in arrears on
the Series B preferred stock for the second, third and fourth quarters of 2009 and the
first and second quarters of 2010. Dividends on the Series D preferred stock are
non-cumulative and as such, there were no dividends in arrears.
 17




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
    
    A decrease in operating expenses of $0.1 million during the first nine months of 2010
as decreases in legal fees incurred in connection with the February 2009 Asset Exchange
Agreement and accounting fees were partially offset by increases in loan servicing and
advisory services.
 Impact of Economic Downturn
   Bankruptcy of LBHI
   Asset Exchange
  18




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Regulatory Actions Involving Aurora Bank
   Dividend Payments
    19




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##### Table of Contents



Application of Critical Accounting Policies and Estimates
  20




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Results of Operations for the Three Months Ended September 30, 2010 and 2009
 Interest income
  Three Months Ended September 30,2010
    
    
    2009Average Balance
    
    
    Interest
    
    
    Yield
    
    
    Average Balance
    
    
    Interest
    
    
    Yield(In Thousands)
    
    
    
    
    
    
    
    
    
    
    (In Thousands)Loans (1)
    
    $
    36,253
    
    
    $
    420
    
    
    
    4.63
    %
    
    $
    45,376
    
    
    $
    839
    
    
    
    7.34
    %Interest-bearing deposits
    
    
    60,352
    
    
    
    45
    
    
    
    0.30
    %
    
    
    48,482
    
    
    
    75
    
    
    
    0.62
    %Total interest-earning assets
    
    $
    96,605
    
    
    $
    465
    
    
    
    1.93
    %
    
    $
    93,858
    
    
    $
    914
    
    
    
    3.86
    %
 
 (1)
    
    For purposes of providing a meaningful yield comparison, the foregoing table reflects the
average accreted cost of the loans or alternatively, the UPB for loans acquired in the
November Asset Exchange, and not the fair value of the loan portfolio. Loans in non-accrual
status are excluded from average balance calculations.     21




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##### Table of Contents



Three Months Ended September 30,2010
    
    
    2009Interest Income
    
    
    Yield
    
    
    Interest Income
    
    
    Yield(In Thousands)Regularly scheduled interest and accretion income
    
    $
    416
    
    
    
    4.59
    %
    
    $
    641
    
    
    
    5.60
    %Interest and fee income recognized on loan pay-offs:Accretable discount
    
    
    4
    
    
    
    0.04
    
    
    
    192
    
    
    
    1.68Other interest and fee income
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    0.064
    
    
    
    0.04
    
    
    
    198
    
    
    
    1.74Total interest from loans
    
    $
    420
    
    
    
    4.63
    %
    
    $
    839
    
    
    
    7.34
    %
  Change in allowance for loan losses
  Operating expenses
   Preferred stock dividends declared
  22




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##### Table of Contents



Results of Operations for the Nine Months Ended September 30, 2010 and 2009
 Interest income
  Nine Months Ended September 30,2010
    
    
    2009Average
    
    
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield
    
    
    Balance
    
    
    Interest
    
    
    Yield(In Thousands)
    
    
    
    
    
    
    (In Thousands)Loans (1)
    
    $
    39,478
    
    
    $
    1,539
    
    
    
    5.20
    %
    
    $
    47,155
    
    
    $
    2,347
    
    
    
    6.65
    %Interest-bearing deposits
    
    
    55,902
    
    
    
    124
    
    
    
    0.30
    %
    
    
    46,349
    
    
    
    468
    
    
    
    1.35
    %Total interest-earning assets
    
    $
    95,380
    
    
    $
    1,663
    
    
    
    2.32
    %
    
    $
    93,504
    
    
    $
    2,815
    
    
    
    4.03
    %
 
 (1)
    
    For purposes of providing a meaningful yield comparison, the foregoing table reflects the
average accreted cost of the loans or alternatively, the UPB for loans acquired in the
November Asset Exchange, and not the fair value of the loan portfolio. Loans in non-accrual
status are excluded from average balance calculations.     23




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##### Table of Contents



Nine Months Ended September 30,2010
    
    
    2009Interest
    
    
    
    
    
    
    InterestIncome
    
    
    Yield
    
    
    Income
    
    
    Yield(In Thousands)Regularly scheduled interest and accretion income
    
    $
    1,411
    
    
    
    4.77
    %
    
    $
    2,043
    
    
    
    5.79
    %Interest and fee income recognized on loan pay-offs:Accretable discount
    
    
    128
    
    
    
    0.43
    
    
    
    278
    
    
    
    0.79Other interest and fee income
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    0.07128
    
    
    
    0.43
    
    
    
    304
    
    
    
    0.86Total interest from loans
    
    $
    1,539
    
    
    
    5.20
    %
    
    $
    2,347
    
    
    
    6.65
    %
  Reductions in allowance for loan losses
  Operating expenses
   Preferred stock dividends declared
  24




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##### Table of Contents



Changes in Financial Condition
 Interest-bearing Deposits with Parent
  Loan Portfolio
  September 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Percentage
    
    
    Carrying
    
    
    PercentageValue
    
    
    of Total
    
    
    Value
    
    
    of Total(In Thousands)Mortgage loans:Commercial real estate
    
    $
    6,945
    
    
    
    27.2
    %
    
    $
    6,380
    
    
    
    21.4
    %Multi-family residential
    
    
    695
    
    
    
    2.7
    
    
    
    693
    
    
    
    2.3One-to-four family residential
    
    
    17,887
    
    
    
    70.1
    
    
    
    22,750
    
    
    
    76.3Total
    
    $
    25,527
    
    
    
    100.0
    %
    
    $
    29,823
    
    
    
    100.0
    %
    
 Interest Rate Risk
  25




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##### Table of Contents



Significant Concentration of Credit Risk
   
 Liquidity Risk Management
    
 Impact of Inflation and Changing Prices
  26




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##### Table of Contents



Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    September 30, 2010Within 1
    
    
    1  2
    
    
    2  3
    
    
    3  4
    
    
    4  5
    
    
    Over 5
    
    
    Total
    
    
    TotalOvernight
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    UPB
    
    
    Fair Value(In Thousands)Interest-bearing deposits
    
    $
    62,379
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    62,379
    
    
    $
    62,379Weighted average yield
    
    
    .30
    %Fixed rate loans (1)
    
    
    
    
    
    
    1,062
    
    
    
    559
    
    
    
    758
    
    
    
    445
    
    
    
    635
    
    
    
    7,069
    
    
    
    10,528
    
    
    
    6,942Weighted average yield
    
    
    
    
    
    
    6.08
    %
    
    
    4.96
    %
    
    
    5.02
    %
    
    
    4.78
    %
    
    
    6.12
    %
    
    
    4.37
    %Adjustable rate loans (1)
    
    
    
    
    
    
    23,023
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,023
    
    
    
    17,384Weighted average yield
    
    
    
    
    
    
    4.97
    %Total rate sensitive assets
    
    $
    62,379
    
    
    $
    24,085
    
    
    $
    559
    
    
    $
    758
    
    
    $
    445
    
    
    $
    635
    
    
    $
    7,069
    
    
    $
    95,930
    
    
    $
    86,705
 
 (1)
    
    Loans are presented at UPB and exclude non-accrual loans.  27




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##### Table of Contents



Item 4T. Controls and Procedures
   28




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##### Table of Contents



PART II
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 A number of risk factors, including, without limitation, the risk factors found in Item 1A of
our Annual Report on Form 10-K for the annual period ended December 31, 2009 and our Quarterly
Reports on Form 10-Q for the quarterly periods ended March 31, 2010 and June 30, 2010, may cause
our actual results to differ materially from anticipated future results, performance or
achievements expressed or implied in any forward-looking statements contained in this Quarterly
Report on Form 10-Q or any other report filed by us with the SEC. All of these factors should be
carefully reviewed, and the reader of this Quarterly Report on Form 10-Q should be aware that there
may be other factors that could cause difference in future results, performance or achievements.
 Risk Factor
 If the OTS does not approve the declaration and payment of sufficient dividends for 2010 and in the
future, we would be prohibited from declaring and paying sufficient dividends for 2010 and in the
future and therefore may fail to qualify as a REIT.
     29




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. (Removed and Reserved)
 
 Item 5. Other Information
  
 Item 6. Exhibits
 3.1
    
    Restated Articles of Organization of EOS Preferred Corporation.*3.2
    
    Amended and Restated By-Laws of EOS Preferred Corporation.*31.1
    
    Certification pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) of the President.31.2
    
    Certification pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) of the Chief Financial Officer.32
    
    Certification pursuant to 18 U.S.C. Section 1350 of the President and Chief Financial Officer.
 
 *
    
    Incorporated by reference herein from the exhibit of the same description filed on August 13,
2010 on Form 10-Q. 30




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##### Table of Contents



SIGNATURES
  EOS PREFERRED CORPORATIONDate: November 12, 2010
    By:
    /s/ Thomas OSullivanThomas OSullivanPresident

(Principal Executive Officer)Date: November 12, 2010
    By:
    /s/ Robert J. Leist, Jr.Robert J. Leist, Jr.Chief Financial Officer

(Principal Financial Officer) 31




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    Item3.1
    
    Restated Articles of Organization of EOS Preferred Corporation.*3.2
    
    Amended and Restated By-Laws of EOS Preferred Corporation.*31.1
    
    Certification pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) of the President.31.2
    
    Certification pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) of the Chief Financial Officer.32
    
    Certification pursuant to 18 U.S.C. Section 1350 of the President and Chief Financial Officer.
 
 *
    
    Incorporated by reference herein from the exhibit of the same description filed on August 13,
2010 on Form 10-Q. 32