##### 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 June 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
    
    
    3Statements of Operations
    
    
    4Statements of Changes in Stockholders Equity
    
    
    5Statements of Cash Flows
    
    
    6Notes to Condensed Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsExecutive Level Overview
    
    
    16Application of Critical Accounting Policies and Estimates
    
    
    19Results of Operations for the Three Months Ended June 30, 2010 and 2009
    
    
    20Results of Operations for the Six Months Ended June 30, 2010 and 2009
    
    
    22Changes in Financial Condition
    
    
    24Interest Rate Risk
    
    
    24Significant Concentration of Credit Risk
    
    
    24Liquidity Risk Management
    
    
    25Impact of Inflation and Changing Prices
    
    
    25Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    26PART II Other InformationItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3. Defaults Upon Senior Securities
    
    
    27Item 4. (Removed and Reserved)
    
    
    27Item 5. Other Information
    
    
    28Item 6. Exhibits
    
    
    28SignaturesExhibit IndexEX-3.1EX-3.2EX-14EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART I
 
 Item 1. Condensed Financial Statements
 EOS Preferred Corporation
 
 Balance Sheets
 (Unaudited)
 June 30,
    
    
    December 31,2010
    
    
    2009(In Thousands)ASSETSCash account with parent
    
    $
    184
    
    
    $
    184Interest-bearing deposits with parent
    
    
    57,446
    
    
    
    51,639Total cash and cash equivalents
    
    
    57,630
    
    
    
    51,823Loans held for sale, at fair value
    
    
    19,724
    
    
    
    22,531Loans held for sale, at lower of accreted cost or market value
    
    
    7,578
    
    
    
    7,292Loans
    
    
    27,302
    
    
    
    29,823Accrued interest and other receivables
    
    
    107
    
    
    
    393Total assets
    
    $
    85,039
    
    
    $
    82,039LIABILITIES AND STOCKHOLDERS EQUITYAccrued expenses and other liabilities
    
    $
    147
    
    
    $
    344Total liabilities
    
    
    147
    
    
    
    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
    
    
    (10,443
    )
    
    
    (13,640
    )Total stockholders equity
    
    
    84,892
    
    
    
    81,695Total liabilities and stockholders equity
    
    $
    85,039
    
    
    $
    82,039
  3




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##### Table of Contents



EOS Preferred Corporation
 
 Statements of Operations
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(In Thousands)
    
    
    (In Thousands)Interest income:Interest and fees on loans
    
    $
    483
    
    
    $
    679
    
    
    $
    1,119
    
    
    $
    1,508Interest on interest-bearing deposits
    
    
    41
    
    
    
    202
    
    
    
    79
    
    
    
    393Total interest income
    
    
    524
    
    
    
    881
    
    
    
    1,198
    
    
    
    1,901Gain (loss) on loans held for sale
    
    
    756
    
    
    
    (1,029
    )
    
    
    2,521
    
    
    
    (16,210
    )Reduction in allowance for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    915Net revenue
    
    
    1,280
    
    
    
    (148
    )
    
    
    3,719
    
    
    
    (13,394
    )Operating expenses:Loan servicing and advisory services
    
    
    116
    
    
    
    44
    
    
    
    244
    
    
    
    88Other general and administrative
    
    
    133
    
    
    
    284
    
    
    
    278
    
    
    
    570Total operating expenses
    
    
    249
    
    
    
    328
    
    
    
    522
    
    
    
    658Net income (loss)
    
    
    1,031
    
    
    
    (476
    )
    
    
    3,197
    
    
    
    (14,052
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    816Net income (loss) available to common stockholder
    
    $
    1,031
    
    
    $
    (476
    )
    
    $
    3,197
    
    
    $
    (14,868
    )
  4




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##### Table of Contents



EOS Preferred Corporation
 
 Statements of Changes in Stockholders Equity
 (Unaudited)
 Six Months ended June 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,197
    
    
    
    3,197Cumulative dividends on preferred stock, Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends on preferred stock, Series D
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at June 30, 2010
    
    
    1
    
    
    $
    
    
    
    
    1,500
    
    
    $
    15
    
    
    
    
    
    
    $
    
    
    
    $
    95,320
    
    
    $
    (10,443
    )
    
    $
    84,892
 Six Months ended June 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,052
    )
    
    
    (14,052
    )Cumulative dividends on preferred stock, Series B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    (19
    )Dividends on preferred stock, Series D
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (797
    )
    
    
    (797
    )Balance at June 30, 2009
    
    
    1
    
    
    $
    
    
    
    
    1,500
    
    
    $
    15
    
    
    
    
    
    
    $
    
    
    
    $
    95,121
    
    
    $
    (14,868
    )
    
    $
    80,268
  5




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##### Table of Contents



EOS Preferred Corporation
 
 Statements of Cash Flows
 (Unaudited)
 Six Months EndedJune 30,2010
    
    
    2009(In Thousands)Cash flows from operating activities:Net income (loss)
    
    $
    3,197
    
    
    $
    (14,052
    )Adjustments to reconcile net income (loss) to net cash from operating activities:(Gain) loss on loans held for sale
    
    
    (2,521
    )
    
    
    16,210Decrease in accrued interest and other receivable
    
    
    286
    
    
    
    33Increase (decrease) in accrued expenses and other liabilities
    
    
    (197
    )
    
    
    186Provision for loan losses
    
    
    
    
    
    
    (915
    )Increase in other assets
    
    
    
    
    
    
    (15
    )Net cash provided by operating activities
    
    
    765
    
    
    
    1,447Cash flows from investing activities:Loan repayments
    
    
    5,042
    
    
    
    3,624Cash provided by investing activities
    
    
    5,042
    
    
    
    3,624Cash 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
    
    
    5,807
    
    
    
    3,440Cash and cash equivalents at beginning of period
    
    
    51,823
    
    
    
    43,757Cash and cash equivalents at end of period
    
    $
    57,630
    
    
    $
    47,197
  6




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##### Table of Contents



EOS Preferred Corporation
 
 Notes to Condensed Financial Statements
Three and Six Months Ended June 30, 2010 and 2009
 NOTE 1. ORGANIZATION
       Business
  7




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##### Table of Contents



Recent Developments
 Asset Exchange.
 NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of presentation
  Use of estimates
  Cash and Cash Equivalents
  Loans Held for Sale
  8




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##### Table of Contents



Discounts on Acquired Loans
  Allowance for Loan Losses
  Revenue Recognition
  9




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##### Table of Contents



Taxes
    Significant Concentration of Credit Risk
  Recent Accounting Pronouncements
    10




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##### Table of Contents



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.
  Dividend Payments.
 NOTE 4. LOANS
    11




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June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Unpaid Principal
    
    
    Carrying
    
    
    Unpaid PrincipalValue
    
    
    Balance
    
    
    Value
    
    
    Balance(In Thousands)Mortgage loans, held for sale:Commercial real estate
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Multi-family residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    One-to-four family residential
    
    
    19,724
    
    
    
    27,717
    
    
    
    22,531
    
    
    
    32,007Total loans held for sale, at fair value
    
    
    19,724
    
    
    
    27,717
    
    
    
    22,531
    
    
    
    32,007Mortgage loans, held for sale (1):Commercial real estate
    
    $
    6,642
    
    
    $
    10,535
    
    
    $
    6,380
    
    
    $
    11,324Multi-family residential
    
    
    705
    
    
    
    1,142
    
    
    
    693
    
    
    
    1,203One-to-four family residential
    
    
    231
    
    
    
    353
    
    
    
    219
    
    
    
    379Total loans held for sale, at lower of accreted cost
or market value
    
    
    7,578
    
    
    
    12,030
    
    
    
    7,292
    
    
    
    12,906Total mortgage loans, held for sale:Commercial real estate
    
    $
    6,642
    
    
    $
    10,535
    
    
    $
    6,380
    
    
    $
    11,324Multi-family residential
    
    
    705
    
    
    
    1,142
    
    
    
    693
    
    
    
    1,203One-to-four family residential
    
    
    19,955
    
    
    
    28,070
    
    
    
    22,750
    
    
    
    32,386Total loans
    
    $
    27,302
    
    
    $
    39,747
    
    
    $
    29,823
    
    
    $
    44,913
 
 (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.  June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Unpaid Principal
    
    
    Carrying
    
    
    Unpaid PrincipalValue
    
    
    Balance
    
    
    Value
    
    
    Balance(In Thousands)Mortgage loans in non-accrual status:Commercial real estate
    
    $
    516
    
    
    $
    718
    
    
    $
    318
    
    
    $
    792Multi-family residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    One-to-four family residential
    
    
    163
    
    
    
    337
    
    
    
    
    
    
    
    Total loans in non-accrual status
    
    $
    679
    
    
    $
    1,055
    
    
    $
    318
    
    
    $
    792
   Three Months Ended June 30,
    
    
    Six Months Ended June 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
    
    BalanceMarch 31, 2010
    
    Payments
    
    In / Out
    
    (Losses) (1)
    
    June 30, 2010(In Thousands)Loans Held for Sale:Commercial real estate
    
    $
    6,916
    
    
    $
    (316
    )
    
    $
    
    
    
    $
    42
    
    
    $
    6,642Multi-family residential
    
    
    743
    
    
    
    (42
    )
    
    
    
    
    
    
    4
    
    
    
    705One-to-four family residential
    
    
    20,502
    
    
    
    (1,257
    )
    
    
    
    
    
    
    710
    
    
    
    19,955Total
    
    $
    28,161
    
    
    $
    (1,615
    )
    
    $
    
    
    
    $
    756
    
    
    $
    27,302
 
 (1)
    
    Net Gains and Losses are included in Gain (loss) on loans held for sale on the Statement of
Operations.  Balance
    
    
    
    
    
    Net Transfers
    
    Net Gains
    
    BalanceDecember 31, 2009
    
    Payments
    
    In / Out
    
    (Losses) (1)
    
    June 30, 2010(In Thousands)Loans Held for Sale:Commercial real estate
    
    $
    6,380
    
    
    $
    (665
    )
    
    $
    
    
    
    $
    927
    
    
    $
    6,642Multi-family residential
    
    
    693
    
    
    
    (61
    )
    
    
    
    
    
    
    73
    
    
    
    705One-to-four family residential
    
    
    22,750
    
    
    
    (4,316
    )
    
    
    
    
    
    
    1,521
    
    
    
    19,955Total
    
    $
    29,823
    
    
    $
    (5,042
    )
    
    $
    
    
    
    $
    2,521
    
    
    $
    27,302
 
 (1)
    
    Net Gains and Losses are included in Gain (loss) on loans held for sale on the Statement of
Operations. Fair Value of Financial Instruments
   14




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Cash and cash equivalents:
 Loans:
 Accrued interest and other receivables:
  June 30, 2010
    
    December 31, 2009Fair
    
    
    
    
    
    FairCarrying Value
    
    Value
    
    Carrying Value
    
    Value(In Thousands)Cash and cash equivalents
    
    $
    57,630
    
    
    $
    57,630
    
    
    $
    51,823
    
    
    $
    51,823Loans
    
    
    27,302
    
    
    
    27,302
    
    
    
    29,823
    
    
    
    29,823Accrued interest and other
receivables
    
    
    107
    
    
    
    107
    
    
    
    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 $18.7 million. In the first half
of 2010 there was a gain on loans held for sale of $2.5 million as compared to a loss of
$16.2 million in the first half 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 half of 2010 resulted from an
increase in the fair value measurement of the loan portfolio as of June 30, 2010 as compared
to December 31, 2009. The increase in the fair value measurement during 2010 was primarily
due to a decrease in expected loss rates on the loan portfolio.
    
    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.
    
    A decrease in interest income of $0.7 million resulting mainly from the discontinuance of
the amortization of purchase discount and fees on loans as a result of the loans being
reclassified as held for sale during the first half of 2009 and a decrease in average loan
balances.
    
    A decrease of $0.8 million in preferred stock dividends.
    
    A decrease in operating expenses of $0.2 million mainly attributable to a decrease in
 legal fees incurred in connection with the
February 2009 Asset Exchange Agreement.
 Impact of Economic Recession
   17




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##### Table of Contents



Bankruptcy of LBHI
  Asset Exchange
  Regulatory Actions Involving Aurora Bank
   18




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##### Table of Contents



Application of Critical Accounting Policies and Estimates
  19




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Results of Operations for the Three Months Ended June 30, 2010 and 2009
 Interest income
  Three Months Ended June 30,2010
    
    
    2009Average
    
    
    
    
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield
    
    
    Balance
    
    
    Interest
    
    
    Yield(In Thousands)
    
    
    
    
    
    
    (In Thousands)Loans (1)
    
    $
    39,900
    
    
    $
    483
    
    
    
    4.84
    %
    
    $
    47,229
    
    
    $
    679
    
    
    
    5.77
    %Interest-bearing deposits
    
    
    54,958
    
    
    
    41
    
    
    
    0.30
    
    
    
    46,124
    
    
    
    202
    
    
    
    1.75Total interest-earning assets
    
    $
    94,858
    
    
    $
    524
    
    
    
    2.21
    %
    
    $
    93,353
    
    
    $
    881
    
    
    
    3.79
    %
 
 (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.     Three Months Ended June 30,2010
    
    
    2009Interest
    
    
    
    
    
    
    InterestIncome
    
    
    Yield
    
    
    Income
    
    
    Yield(In Thousands)Regularly scheduled interest and accretion income
    
    $
    471
    
    
    
    4.72
    %
    
    $
    663
    
    
    
    5.63
    %Interest and fee income recognized on loan pay-offs:Accretable discount
    
    
    12
    
    
    
    0.12
    
    
    
    
    
    
    
    Other interest and fee income
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    0.1412
    
    
    
    0.12
    
    
    
    16
    
    
    
    0.14Total interest from loans
    
    $
    483
    
    
    
    4.84
    %
    
    $
    679
    
    
    
    5.77
    %
 20




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##### Table of Contents



Change in allowance for loan losses
  Operating expenses
   Preferred stock dividends
  21




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##### Table of Contents



Results of Operations for the Six Months Ended June 30, 2010 and 2009
 Interest income
  Six Months Ended June 30,2010
    
    
    2009Average
    
    
    
    
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield
    
    
    Balance
    
    
    Interest
    
    
    Yield(In Thousands)
    
    
    
    
    
    
    (In Thousands)Loans (1)
    
    $
    41,248
    
    
    $
    1,119
    
    
    
    5.43
    %
    
    $
    48,060
    
    
    $
    1,508
    
    
    
    6.33
    %Interest-bearing deposits
    
    
    53,580
    
    
    
    79
    
    
    
    0.30
    
    
    
    45,265
    
    
    
    393
    
    
    
    1.75Total interest-earning assets
    
    $
    94,828
    
    
    $
    1,198
    
    
    
    2.53
    %
    
    $
    93,325
    
    
    $
    1,901
    
    
    
    4.11
    %
 
 (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.     Six Months Ended June 30,2010
    
    
    2009Interest
    
    
    
    
    
    
    InterestIncome
    
    
    Yield
    
    
    Income
    
    
    Yield(In Thousands)Regularly scheduled interest and accretion income
    
    $
    995
    
    
    
    4.83
    %
    
    $
    1,402
    
    
    
    5.89
    %Interest and fee income recognized on loan pay-offs:Accretable discount
    
    
    124
    
    
    
    0.60
    
    
    
    86
    
    
    
    0.36Other interest and fee income
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    0.08124
    
    
    
    0.60
    
    
    
    106
    
    
    
    0.44Total interest from loans
    
    $
    1,119
    
    
    
    5.43
    %
    
    $
    1,508
    
    
    
    6.33
    %
 22




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##### Table of Contents



Reductions in allowance for loan losses
  Operating expenses
   Preferred stock dividends
  23




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##### Table of Contents



Changes in Financial Condition
 Interest-bearing Deposits with Parent
  Loan Portfolio
  June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Percentage
    
    
    Carrying
    
    
    PercentageValue
    
    
    of Total
    
    
    Value
    
    
    of Total(In Thousands)Mortgage loans:Commercial real estate
    
    $
    6,642
    
    
    
    24.3
    %
    
    $
    6,380
    
    
    
    21.4
    %Multi-family residential
    
    
    705
    
    
    
    2.6
    
    
    
    693
    
    
    
    2.3One-to-four family residential
    
    
    19,955
    
    
    
    73.1
    
    
    
    22,750
    
    
    
    76.3Total
    
    $
    27,302
    
    
    
    100.0
    %
    
    $
    29,823
    
    
    
    100.0
    %
    
 Interest Rate Risk
  
 Significant Concentration of Credit Risk
  24




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##### Table of Contents



Liquidity Risk Management
    
 Impact of Inflation and Changing Prices
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  25




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##### Table of Contents



June 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
    
    $
    57,446
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    57,446
    
    
    $
    57,446Weighted average yield
    
    
    .30
    %Fixed rate loans (1)
    
    
    249
    
    
    
    1,013
    
    
    
    551
    
    
    
    428
    
    
    
    505
    
    
    
    473
    
    
    
    6,577
    
    
    
    9,796
    
    
    
    6,089Weighted average yield
    
    
    14.50
    %
    
    
    6.12
    %
    
    
    4.77
    %
    
    
    4.25
    %
    
    
    5.01
    %
    
    
    5.42
    %
    
    
    4.12
    %Adjustable rate loans (1)
    
    
    390
    
    
    
    26,657
    
    
    
    1,666
    
    
    
    123
    
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    28,896
    
    
    
    20,534Weighted average yield
    
    
    4.47
    %
    
    
    4.91
    %
    
    
    5.38
    %
    
    
    4.79
    %
    
    
    7.39
    %Total rate sensitive assets
    
    $
    58,085
    
    
    $
    27,670
    
    
    $
    2,217
    
    
    $
    551
    
    
    $
    565
    
    
    $
    473
    
    
    $
    6,577
    
    
    $
    96,138
    
    
    $
    84,069
 
 (1)
    
    Loans are presented at UPB and exclude non-accrual loans.  
 Item 4. Controls and Procedures
   26




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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
Report on Form 10-Q for the quarterly period ended March 31, 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
   
 Item 2. Unregistered Sales of Equity Securities
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. (Removed and Reserved)
  27




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##### Table of Contents



Item 5. Other Information
 Corporate Governance
   
 Item 6. Exhibits
 3.1
    
    Restated Articles of Organization of EOS Preferred Corporation.3.2
    
    Amended and Restated By-Laws of EOS Preferred Corporation.14
    
    EOS Code of Conduct.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.
 28




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##### Table of Contents



SIGNATURES
  EOS PREFERRED CORPORATIONDate: August 13, 2010
    By:
    /s/ Thomas OSullivanThomas OSullivanPresident
(Principal Executive Officer)Date: August 13, 2010
    By:
    /s/ Robert J. Leist, Jr.Robert J. Leist, Jr.Chief Financial Officer
(Principal Financial Officer) 29




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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.14
    
    EOS Code of Conduct.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.
 30