~~Table~~UNITED ofSTATES ~~Contents~~SECURITIES AND EXCHANGE COMMISSION

~~UNITED~~Washington, D.C. ~~STATES SECURITIES AND EXCHANGE COMMISSION~~ 20549

~~Washington, D.C. 20549~~ FORM 10-K

FORM 10-K

R	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Fiscal Year Ended December 31, 2011

or

£	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

þCommission ~~ANNUAL~~File ~~REPORT~~Number ~~PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~000-25193

~~For~~EOS ~~the~~PREFERRED ~~Fiscal Year Ended December 31, 2010~~CORPORATION

or(Exact name of registrant as specified in its charter)

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Massachusetts

04-3439366

(State of incorporation)

(IRS Employer

Identification No.)

Commission File Number 000-25193

1271 Avenue of the Americas, 46^th Floor	10020
New York, New York	(Zip code)
(Address of principal executive offices)

~~EOS~~Registrant’s ~~PREFERRED~~telephone ~~CORPORATION~~number, including area code:

(~~Exact name of registrant as specified in its charter~~212) 377-1503

Massachusetts		04-3439366
(State of incorporation)		(IRS Employer Identification No.)

Securities registered pursuant to Section 12(b) of the Act:

~~1271~~8.50% ~~Avenue~~Non-Cumulative ofExchangeable ~~the Americas~~Preferred Stock, ~~46th Floor New York, New York (Address of principal executive offices) 10020 (Zip code)~~Series D

~~Registrant’s~~(Title ~~telephone~~of ~~number, including area code: (212~~Class) ~~377-1503~~

Securities registered pursuant to Section 12(bg) of the Act: ~~8.50% Non-Cumulative Exchangeable Preferred Stock, Series D (Title of Class)~~

~~Securities registered pursuant to Section 12(g) of the Act:~~ None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o £ No þ R

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o £ No þ R

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ R No o £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).) Yes o £ No o £

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o R

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o£ Accelerated filer o£ Non-accelerated filer þR ~~(Do not check if a smaller reporting company)~~ Smaller reporting company o£

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o £ No þ R

The number of shares outstanding of the registrant’s sole class of common stock was 100 shares, $.01 par value per share, as of ~~March 31~~April 13, ~~2011~~2012. No common stock was held by non-affiliates of the registrant.

~~TABLE OF CONTENTS~~PART I

PART I
	ITEM 1. BUSINESS
	ITEM 1A. RISK FACTORS
	ITEM 1B. UNRESOLVED STAFF COMMENTS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. (REMOVED AND RESERVED)
PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
	ITEM 6. SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EX-12.1
EX-23.1
EX-31.1
EX-31.2
EX-32

ITEM 1. BUSINESS

~~Table~~This report for EOS Preferred Corporation (hereafter referred to as “EOS”, “the Company”, “the Corporation”, “we”, “us”, or “our”) contains certain statements that constitute “forward-looking statements” within the meaning of ~~Contents~~the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “believes,” “estimates” and other similar expressions or future or conditional verbs such as “will,” “should,” “would,” and “could” are intended to identify such forward-looking statements. The business is in the process of dissolution. Therefore, actual outcomes and results may differ materially from those expressed in, or implied by, any forward-looking statement. You should not place undue reliance on any forward-looking statement and should consider all uncertainties and risks, including, among other things, the risks set forth under Item 1A “Risk Factors,” as well as those discussed in any of the Company’s other subsequent Securities and Exchange Commission (“SEC”) filings. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

~~PART I~~ General

~~ITEM~~EOS is 1a Massachusetts corporation organized on March 20, 1998.Aurora ~~BUSINESS~~Bank, a wholly-owned subsidiary of Lehman Brothers Bancorp (“LB Bancorp”) and an indirect subsidiary of LBHI, owns all of our common stock. EOS became a subsidiary of Aurora Bank on February 14, 2007 when Capital Crossing Bank (“Capital Crossing”) was acquired by Aurora Bank.

~~This~~On March ~~report~~12, ~~contains~~2012, ~~and~~the ~~from~~Board ~~time~~of toDirectors ~~time~~of EOS ~~Preferred Corporation~~ (~~“EOS”, “~~the ~~Company”,~~ “~~we”,~~Board ~~“us”~~of ~~or “our~~Directors”) ~~may~~approved ~~make,~~a ~~certain~~Plan ~~statements that constitute “forward-looking statements” within the meaning~~ of ~~the~~Liquidation ~~Private~~and ~~Securities Litigation Reform Act of 1995. Words such as~~Dissolution ~~“expects,” “anticipates,” “believes,” “estimates”,~~ and ~~other~~on ~~similar~~March ~~expressions or future or conditional verbs such as “will~~13,” ~~“should~~2012,” ~~“would”,~~the ~~and~~Board ~~“could”~~of ~~are~~Directors ~~intended~~of toAurora ~~identify such forward-looking statements. These statements are not historical facts~~Bank, ~~but instead represent~~ the ~~Company’s~~ ~~current~~sole ~~expectations,~~common ~~plans~~shareholder ~~or forecasts~~ of ~~its future results~~EOS, ~~growth~~approved ~~opportunities, business outlook, loan growth, credit losses, liquidity position, and other similar matters, including, but not limited to,~~ the ~~requirement~~Plan ~~that~~of ~~Aurora Bank FSB (“Aurora Bank”) be sold or~~Liquidation ~~dissolved~~and asDissolution. anOur ~~asset purchased by its parent within defined time frames, the ability to pay dividends with respect to the~~ Series D preferred stock, ~~future~~previously ~~bank~~listed ~~regulatory~~on ~~actions~~the ~~that~~NASDAQ ~~may impact~~Stock ~~the Company~~Market, ~~and the effect of the bankruptcy of Lehman Brothers Holdings~~ Inc. (“~~LBHI~~NASDAQ”;) ~~LBHI~~under ~~with~~the ~~its~~ticker ~~subsidiaries,~~symbol “~~Lehman Brothers~~EOSPN”), onformally ~~the~~ceased ~~Company.~~trading ~~These~~on ~~statements~~March ~~are~~28, ~~not~~2012. ~~guarantees~~On ~~of future~~April ~~results~~9, or2012, ~~performance~~the ~~and~~Series ~~involve~~B ~~certain risks, uncertainties,~~ and ~~assumptions~~Series ~~that~~D ~~are~~shareholders ~~difficult~~were toliquidated ~~predict~~ and ~~often~~were ~~are~~paid ~~beyond~~their ~~the~~liquidation ~~Company’s control~~preference. ~~Actual~~These ~~outcomes~~shareholders ~~and~~no ~~results~~longer ~~may differ~~have ~~materially~~any ~~from~~rights ~~those~~as ~~expressed~~against ~~in, or implied by,~~ the ~~Company’s forward-looking statements~~Corporation. ~~You~~A ~~should~~notice ~~not~~to ~~place~~delist ~~undue~~from ~~reliance~~the ~~on any forward~~NASDAQ-~~looking~~OMX ~~statement~~exchange ~~and~~was ~~should~~filed ~~consider~~on ~~all uncertainties~~March ~~and risks~~29, ~~including,~~2012. ~~among~~That ~~other~~delisting ~~things,~~was ~~the~~effective ~~risks~~April ~~set~~9, ~~forth under Item 1A~~2012. ~~“Risk~~Management ~~Factors,”~~expects asto ~~well~~file asArticles ~~those~~of ~~discussed~~Dissolution inwith ~~any~~the Secretary of ~~the~~State ~~Company’s~~of ~~other~~the ~~subsequent~~Commonwealth ~~Securities~~of ~~and Exchange~~Massachusetts ~~Commission~~on ~~(“SEC”)~~April ~~filings~~16, 2012. ~~Forward-looking~~Management is ~~statements~~coordinating ~~speak~~the ~~only~~sale as of ~~the~~our ~~date~~remaining ~~they are made~~assets, ~~and~~ the ~~Company~~wind ~~undertakes~~down noof ~~obligation~~our tocorporate ~~update~~affairs ~~any~~and ~~forward-looking statement to reflect~~ the ~~impact~~liquidation of ~~circumstances~~the orcommon ~~events~~shares and ~~that~~expects ~~arise~~to ~~after~~be ~~the~~concluded ~~date~~during ~~the forward-looking statement was made~~2012.

~~Possible events or factors could cause results or performance to differ materially from what~~Prior ~~is expressed in our forward-looking statements. These possible events or factors include, but are not limited~~ to, ~~those risk factors discussed under Item 1A. “Risk Factors” in this report and~~ the ~~following:~~ ~~limitations~~merger bywith ~~regulatory authorities on the Company’s ability to implement its business plan and restrictions on its ability to pay dividends; further regulatory limitations on the business of~~ Aurora Bank ~~that are applicable to the Company; the requirement that Aurora Bank be sold or dissolved within defined time frames; negative economic conditions that adversely affect the general economy~~, ~~housing~~we ~~prices,~~were ~~the~~a ~~job~~subsidiary ~~market,~~of ~~consumer~~Capital ~~confidence~~Crossing, ~~and~~a ~~spending~~federally ~~habits~~insured ~~which may~~Massachusetts ~~affect,~~trust ~~among other things~~company, ~~the credit quality of~~ our ~~loan portfolio (the degree of the impact~~ ofcorporate ~~which~~name iswas ~~dependent~~Capital ~~upon~~Crossing ~~the~~Preferred ~~duration~~Corporation, and ~~severity~~Capital ofCrossing ~~these~~owned ~~conditions);~~all ~~the level and volatility~~ of ~~interest~~our ~~rates;~~common ~~changes~~stock. inEffective ~~consumer,~~June ~~investor~~21, ~~and counterparty confidence in, and the related~~ ~~impact on~~2010, ~~financial~~we ~~markets~~changed ~~and~~our ~~institutions;~~corporate ~~legislative~~name ~~and~~to ~~regulatory~~EOS ~~actions~~Preferred which may adversely affect the Company’s business and economic conditions as a whole; the impact of litigation and regulatory investigations; various monetary and fiscal policies and regulations; changes in accounting standards, rules and interpretations and the impact on the Company’s financial statements; and changes in the nature and quality of the types of loans held by the CompanyCorporation.

~~General~~The Company has operated in a manner intended to permit being taxed as a real estate investment trust, or a “REIT”, under the Internal Revenue Code of 1986, as amended.

~~EOS is a Massachusetts corporation organized on March~~At December 2031, ~~1998~~2011, ~~with~~we ~~the~~had ~~principal~~total ~~business objective to hold mortgage~~ assets ~~that~~of ~~will generate net income for distribution to stockholders~~$85. ~~We may acquire additional mortgage assets in the future. Aurora Bank~~6 million, anincluding ~~indirect~~cash ~~subsidiary~~and ~~of LBHI,~~cash ~~owns~~equivalents ~~all~~ of ~~our common stock~~$27. ~~Prior to the merger with Aurora Bank (discussed below)~~2 million, ~~we were a subsidiary of Capital Crossing Bank (“Capital Crossing Bank”), a federally insured Massachusetts trust company, our corporate name was Capital Crossing Preferred Corporation,~~ and ~~Capital Crossing~~ ~~Bank~~total ~~owned~~liabilities ~~all~~ of ~~our common stock~~$0. ~~Effective June~~9 ~~21,~~million. ~~2010,~~The wefollowing ~~changed~~material ~~our~~events ~~corporate~~occurred ~~name~~subsequent to ~~EOS Preferred~~December ~~Corporation~~31, 2011.

We operate in a manner intended to allow us to be taxed as a real estate investment trust, or a “REIT”, under the Internal Revenue Code of 1986, as amended. As a REIT, EOS will not be required to pay federal income tax if we distribute our earnings to our shareholders and continue to meet a number of other requirements.

•		On February 28, 2012, EOS executed an asset sale agreement with an unrelated third party for the sale of all of our commercial loans and assets acquired through foreclosure with a carrying value as of December 31, 2011 of $4.4 million. A competitive bid process was utilized and bids were received from multiple counterparties. The sales price was an indicator of fair value which we utilized in our valuation methodologies to determine the appropriate fair value adjustments at December 31, 2011 and we recorded a reduction to the carrying value of these assets at December 31, 2011 of $1.9 million. The transaction closed on March 30, 2012.

•		On April 4, 2012, we executed an Asset Sale Agreement with Aurora Bank for the sale of the investment portfolio of EOS at the fair market values of the investments as of March 30, 2012 which was $39.4 million.

In order to qualify as a REIT, we are generally required each year to distribute to our stockholders at least 90% of our net taxable income, excluding net capital gains. We may retain the remainder of REIT taxable income or all or part of our net capital gain, but will be subject to tax at regular corporate rates on such income. In addition, we 1

• On April 9, 2012, the shares of Series B and Series D preferred stock were liquidated and we made liquidation payments in the aggregate amount of $39.3 million to such holders. Liquidation payments to the Series B and Series D preferred shareholders were $1 ,000.00 and $25.00 per share, respectively. Payments of accrued and unpaid dividends to the Series B and Series D preferred shareholders were $22.00 per share and $0.584375 per share, respectively.

~~Table~~Aurora ~~of Contents~~Bank

~~are~~Aurora ~~subject~~Bank, towhich holds aall 4%of ~~nondeductible~~the ~~excise~~common ~~tax~~stock onof ~~the amount~~EOS, ifis ~~any,~~an byindirect ~~which~~subsidiary ~~certain distributions~~of ~~considered~~Lehman asBrothers ~~paid~~Holdings, byInc. us(“LBHI”). ~~with~~Its ~~respect~~primary federal tobanking ~~any~~regulator ~~calendar~~is ~~year~~the ~~are~~Office ~~less~~of ~~than~~ the ~~sum~~Comptroller of the Currency (1“OCC”) ~~85%~~. ofEffective ~~our~~July ~~ordinary~~21, ~~income~~2011, ~~for~~ the ~~calendar~~Office of ~~year,~~Thrift Supervision (2“OTS”) ~~95%~~ ofwas ~~our~~dissolved ~~capital~~in ~~gains~~accordance ~~net~~with ~~income~~the ~~for~~Dodd-Frank Wall Street Reform and Consumer Protection Act, all duties previously performed by the ~~calendar~~OTS ~~year~~were transferred to the OCC, and ~~(3) 100%~~the ofprimary ~~any~~regulator ~~undistributed~~of ~~income~~Aurora ~~from~~Bank ~~prior~~became ~~periods.~~the OCC.

~~Our~~Aurora Bank ~~Series D~~is ~~preferred~~involved ~~stock~~in virtually every aspect of our operations and is ~~publicly~~able ~~traded~~to onapprove ~~the~~unilaterally ~~National~~almost ~~Association~~all corporate actions of EOS ~~Securities~~as our sole common shareholder. The officers of EOS are also officers of Aurora Bank. EOS has retained Aurora Bank to be responsible ~~Dealers~~for ~~Automated~~the ~~Quotation~~administration ~~System~~of the day-to-day activities of EOS in its roles as servicer under a master service agreement between Aurora Bank and EOS (the “~~NASDAQ~~Master Service Agreement” or “MSA”) ~~stock~~and ~~exchange~~as advisor under an advisory agreement (the “Advisory ~~ticker~~Agreement” ~~symbol~~or “~~EOSPN~~AA”). These agreements were amended effective as of January 1, 2010.

~~At December 31, 2010, we had total assets of $87.2 million, including cash and cash~~Bankruptcy ~~equivalents~~ of ~~$62.6 million,~~Lehman ~~and~~Brothers ~~total~~Holdings ~~liabilities of $1~~Inc.~~9 million.~~

On September 15, 2008, LBHI, the indirect parent company of Aurora Bank, filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. The bankruptcy filing of LBHI has led to increased regulatory constraints being placed on Aurora Bank by its bank regulatory authorities, primarily the OCC. These constraints affect Aurora Bank’s subsidiaries, including EOS.

Pursuant to a Settlement Agreement (“Settlement Agreement”) approved by the bankruptcy court and executed on November 30, 2010 (“Execution Date”), Aurora Bank, ~~which~~LBHI, ~~holds~~LB ~~all~~Bancorp, ofand the ~~common~~OTS, ~~stock~~as ofregulatory ~~EOS,~~predecessor isto anthe ~~indirect~~OCC, ~~subsidiary~~entered ~~of Lehman~~into ~~Brothers~~a ~~with~~Capital ~~its~~Maintenance ~~home~~Agreement ~~office~~(“CMA”) ~~located~~ in ~~Wilmington~~which, ~~Delaware.~~among ~~Aurora~~other things, LBHI and the Bank isagreed athat ~~member~~it ofwould ~~the~~seek to ~~Federal~~sell ~~Home~~Aurora ~~Loan~~ Bank ~~System~~or ~~and~~all of its ~~deposits~~non-cash ~~are~~assets ~~insured~~for bysale with the ~~Deposit~~closing ~~Insurance~~to ~~Fund,~~occur ~~which~~within ~~is administered~~eighteen by(18) ~~the~~months ~~Federal~~from ~~Deposit~~Execution ~~Insurance~~Date. If ~~Corporation~~after a period of fifteen (~~“FDIC”~~15). ~~Its~~months ~~primary~~following ~~federal~~the ~~banking~~Execution Date, the OCC concluded that it was unlikely that a sale of Aurora ~~regulator~~Bank iswould be consummated by the ~~Office~~end of ~~Thrift~~the ~~Supervision~~eighteen (~~“OTS”~~18). month period, Aurora Bank would have been required to prepare and submit to the OCC a plan for dissolution. The OCC granted approval to Aurora Bank for various asset sales on April 5, 2012.

~~As an operating subsidiary of~~ Aurora Bank, ~~the~~has ~~assets~~determined ~~and~~to ~~liabilities~~wind ~~and~~down ~~results~~certain ~~of operations~~businesses ofincluding EOS ~~are consolidated with those of Aurora Bank for Aurora Bank’s financial reporting and regulatory capital purposes~~. ~~Any~~On ~~loans~~March ~~that~~12, ~~may~~2012 in the ~~future~~Board beof ~~acquired by~~ EOS, ~~therefore, will~~approved bea ~~treated~~Plan ~~as assets~~ of ~~Aurora Bank for purposes of compliance by Aurora Bank with OTS~~Liquidation ~~regulatory~~and ~~capital~~Dissolution. ~~requirements~~On ~~and~~March ~~reported~~13, in2012, Aurora Bank’s, ~~consolidated~~the ~~financial~~sole ~~statements. Interest~~common ~~income~~shareholder onof ~~such~~EOS, ~~loans~~approved ~~will~~the bePlan ~~reported as interest income~~ of ~~Aurora~~Liquidation ~~Bank~~and ~~in Aurora Bank’s consolidated financial statements~~Dissolution.

~~Aurora Bank is involved in virtually every aspect of our operations and is able to approve~~Dividend ~~unilaterally~~Payments almost all corporate actions of EOS as our sole common shareholder. The officers of EOS are also officers of Aurora Bank. EOS has retained Aurora Bank to be responsible for the administration of the day-to-day activities of EOS in its roles as servicer under a master service agreement between Aurora Bank and EOS (the “Master Service Agreement” or “MSA”) and as advisor under an advisory agreement (the “Advisory Agreement” or “AA”). These agreements were amended effective as of January 1, 2010.

~~Under~~Pursuant ~~the~~to ~~AA, Aurora Bank is responsible for administering~~ the ~~day-to-day~~Plan ~~activities, including monitoring~~ of ~~our~~Liquidation ~~loan portfolio’s credit quality~~ and ~~advising~~Dissolution approved usby ~~with respect to~~ the ~~acquisition,~~ ~~management,~~EOS ~~financing~~Board ~~and disposition~~ of ~~mortgage assets~~Directors, ~~and~~Series ~~our~~B ~~operations generally.~~preferred ~~Under~~shareholders ~~the~~received ~~MSA,~~accrued ~~Aurora~~and ~~Bank~~unpaid ~~services~~dividends ~~our~~in ~~commercial loans and oversees~~ the ~~servicing~~amount of ~~the residential loan portfolio~~$22.00 ~~Aurora~~per ~~Bank~~share ~~may~~and ~~subcontract~~Series ~~all~~D orpreferred ashareholders ~~portion~~received ofaccrued ~~its~~and ~~obligations under~~unpaid ~~the~~dividends AAin ~~to its affiliates or, with~~ the ~~approval~~amount of a$0.584375 ~~majority~~per ~~of the Board of Directors~~share. ~~including~~The adividends ~~majority~~were ofpaid ~~our~~on ~~independent~~April ~~directors~~9, ~~subcontract~~2012 ~~its obligations under the AA~~ to ~~unrelated~~ ~~third~~shareholders ~~parties.~~of ~~Aurora~~record ~~Bank~~as ~~will~~of ~~not, in connection with~~ the ~~subcontracting~~end of ~~any~~trading ofon ~~its obligations~~March ~~under the AA~~28, ~~be discharged or relieved from its obligations under the AA~~2012.

~~Bankruptcy of Lehman Brothers Holdings Inc.~~ Servicing

OnOur loan ~~September 15,~~portfolio ~~2008,~~is ~~LBHI,~~serviced ~~the~~by ~~indirect~~Aurora ~~parent~~Bank ~~company~~pursuant to the terms of the MSA. The MSA requires Aurora Bank to service, ~~filed~~or cause others to service, the loan portfolio in a ~~voluntary~~manner substantially the same as for similar work performed by Aurora Bank ~~petition~~for ~~under~~transactions ~~Chapter 11~~on ofits ~~the~~own Ubehalf.S. ~~Bankruptcy~~Aurora ~~Code.~~Bank ~~The~~collects ~~bankruptcy~~and ~~filing~~remits ofprincipal ~~LBHI~~and ~~has~~interest ~~led~~payments toon at least a monthly ~~increased~~basis; ~~regulatory~~maintains ~~constraints~~perfected ~~being~~collateral ~~placed~~positions; submits and pursues insurance claims; and initiates and supervises foreclosure proceedings on the loan portfolio it services. Aurora Bank byalso ~~its~~provides ~~bank~~accounting ~~regulatory~~and ~~authorities, primarily~~reporting services for the ~~OTS~~loan portfolio as required by EOS. ~~These~~We ~~constraints~~may ~~affect~~also direct Aurora Bank’s ~~subsidiaries~~to dispose of any loans in connection with an asset sale, ~~including~~as ~~EOS~~approved by the Board, in connection with the Plan of Liquidation and Dissolution as ~~applicable~~ approved by the Board.

Pursuant to a Settlement Agreement (“Settlement Agreement”) approved by the bankruptcy court and executed on November 30, 2010 (“Execution Date”), LBHI agreed to terms of a Capital Maintenance Agreement (“CMA”) in which, among other things, LBHI agreed that it will seek to sell Aurora Bank within eighteen (18) months from Execution Date. If after a period of fifteen (15) months following the Execution Date, the OTS concludes that a sale of Aurora Bank will not be consummated by the end of the eighteen (18) month period, Aurora Bank will prepare and submit to the OTS a plan for dissolution. The bankruptcy court will have the final review and approval of any proposed agreement for the sale or dissolution of Aurora Bank. There can be no assurance that a 2

2 Description of the Investment Portfolio

~~Table~~The following table provides the cost, less cumulative repayments, and fair value for the category of ~~Contents~~MBS in our portfolio at December 31, 2011.

sale or dissolution of Aurora Bank will be consummated within the specified time frames or at all. We also cannot predict the effect any such sale or dissolution of Aurora Bank would have on the business, financial condition and results of operations of EOS.

	Cost less Cumulative Repayments		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)
Residential mortgage-backed securities	$	41,809	$	—	$	(339	)	$	41,470

~~Regulatory~~There ~~Actions~~were ~~Involving~~no ~~Aurora~~investments ~~Bank~~sold during the year ended December 31, 2011, as such there were no realized gains and losses on the investments for the year ended December 31, 2011.

~~Following~~The ~~execution of the Settlement Agreement, Aurora Bank entered into a Stipulation and~~weighted-average ~~Consent~~yield tois ~~Issuance~~computed ofusing ~~Amended Order to Cease and Desist with~~ the ~~OTS~~contractual ~~whereby~~coupon ~~Aurora Bank consented to the issuance~~ of aneach ~~Amended~~security ~~Order~~weighted tobased ~~Cease~~on ~~and Desist (“Amended Order”) issued by~~ the ~~OTS,~~fair ~~which amended~~value ~~the~~of ~~Original~~each ~~Cease~~security and ~~Desist~~was ~~Order issued on January 26, 2009 (“Original Order”, and~~3.32% ~~together~~at ~~with~~December ~~the Amended Order~~31, ~~“Order”)~~2011. The ~~Amended~~estimated ~~Order~~weighted ~~amended~~average ~~certain~~months ~~requirements~~to ~~for Aurora~~maturity ~~Bank~~of ~~contained in~~ the ~~Original~~securities ~~Order.~~are ~~The~~based ~~provisions~~upon inour ~~the~~prepayment ~~Original Order that require~~expectations, ~~Aurora~~which ~~Bank~~were toestimated ~~ensure~~using ~~that~~a ~~each~~combination of ~~its subsidiaries~~assumptions, ~~including~~market ~~EOS,~~data ~~comply~~and ~~with~~internal ~~the Original Order were not amended~~models. ~~These~~As ~~operating~~of ~~restrictions,~~December ~~among other things~~31, ~~restrict transactions with affiliates~~2011, ~~capital distributions to shareholders (including redemptions), contracts outside~~ the average ~~ordinary~~weighted ~~course~~average life of ~~business,~~all ~~and~~holdings ~~changes~~ in ~~senior~~our ~~executive~~investment ~~officers,~~portfolio ~~board~~was ~~members~~2.3 ~~or their employment arrangements without prior written notice to the OTS~~years.

~~Under~~Description ~~the Order, EOS must continue to seek and receive approval or non-objection from the OTS for the declaration and payment~~ of ~~dividends~~Loan to our preferred and common shareholders. There is no assurance that the OTS will approve any future request for the declaration or payment of dividends. As an operating subsidiary of Aurora Bank, EOS remains subject to all of the terms and conditions of the Order which apply to such operating subsidiaries. The Order was still effective as of the date of issuance of this annual report. Portfolio

OnAll of ~~November 30,~~our ~~2010,~~mortgage ~~and~~loans ~~effective~~were onacquired ~~the~~from ~~same~~Capital ~~date,~~Crossing ~~the~~Bank ~~OTS~~or ~~issued~~Aurora ~~an order terminating the Prompt Correction Action Directive (“PCA”) issued on February 4, 2009~~Bank.

~~More~~Loans ~~detailed~~Held ~~information~~For ~~can~~Sale. beOn ~~found~~February 5, in2009, ~~the~~EOS ~~Original~~and ~~Order,~~Aurora ~~the~~Bank ~~Amended~~entered ~~Order,~~into an Asset Exchange Agreement (the ~~PCA,~~“February Asset Exchange”) pursuant to which we agreed to transfer loans secured primarily by commercial real estate and multi-family residential real estate in exchange for ~~the~~loans ~~termination~~secured primarily by residential real estate. As a result of entering into the ~~PCA~~February ~~themselves~~Asset Exchange, ~~copies~~we reclassified all of ~~which~~our ~~are~~loan ~~available~~assets onas held for sale, recorded a fair value adjustment, and reported these loans at the ~~OTS’~~lower ~~website~~of their accreted ~~(www~~cost or market value.~~ots.treas.gov).~~

~~Capital~~On July 20, 2009, EOS and Aurora Bank mutually agreed to terminate the February Asset Exchange following the OTS failing to grant Aurora Bank’s requests for non-objection with respect to the February Asset Exchange. We continue to carry these loan assets at the lower of their accreted cost or market value. Prior to February 5, 2009, our loan assets were considered held for investment and recorded at accreted cost. Effective November 18, 2009, EOS and Aurora Bank entered into and consummated an Asset Exchange Agreement (the “November Asset Exchange”) pursuant to which Aurora Bank agreed to assign various single family residential mortgage loans to EOS in exchange for EOS assigning certain commercial and multi-family mortgage loans to Aurora Bank. From the November Asset Exchange, we received residential mortgage loans, including jumbo mortgage loans, in exchange for commercial and multi-family loans transferred to Aurora Bank. The residential mortgage loans received were recorded at their fair value and currently are presented at fair value.

~~Under~~Fair value is defined as the ~~CMA~~price ~~LBHI~~at ~~agreed~~which ~~for~~an ~~the~~asset ~~duration~~or ofliability ~~LBHI’s~~could ~~ownership~~be ofexchanged ~~Aurora~~in ~~Bank~~a ~~that~~current transaction between knowledgeable, inwilling ~~the~~parties. Where ~~event~~available, ~~Aurora~~fair ~~Bank’s~~value ~~capital~~is ~~levels~~based ~~fall~~on ~~below~~observable ~~levels~~market ~~specified~~prices inor ~~the~~parameters ~~agreement~~or derived from such prices or parameters. Where observable prices or inputs are not available, ~~LBHI~~valuation ~~will~~models ~~promptly~~are applied. A third party valuation specialist uses various proprietary ~~make~~cash ~~capital~~flow ~~contributions~~models to ~~Aurora~~derive ~~Bank~~fair ~~sufficient~~value estimates. These models consider significant inputs such as loan type, loan age, loan to value ~~maintain~~ratio, payment history, and property location, as well as significant assumptions such as estimated rates of loan delinquency, potential recovery, discount rate, and the ~~specified~~impact ~~levels~~of interest rate reset. ~~The specified~~Recent ~~capital~~trade ~~levels~~quotes or prices are identified in estimating the ~~CMA~~amount ~~are~~at ~~greater~~which ~~than~~a third party might purchase the ~~thresholds~~loans ~~required~~and their yield requirements. In addition to ~~achieve~~the estimates from the ~~“well-capitalized”~~third ~~designation~~party ~~under~~valuation ~~OTS~~specialist, ~~regulations~~management also considers market information and quotes received from third parties, when available. The valuation of the loan portfolio involves some estimation and judgment, the degree of which is dependent on the terms of the loans and the availability of market prices and inputs.

As of December 31, 2010, as set forth in a public filing with the OTS, Aurora Bank’s capital ratios were above the thresholds required under the CMA. The classification of Aurora Bank’s capitalization level is subject to review and acceptance by the OTS. 3

~~OTS~~We ~~Approval~~use the term “carrying value” to reflect loans valued at the lower of ~~Dividends~~their accreted cost or market value, or at their fair value, as applicable to the individual loans’ valuation method as selected by us in accordance with accounting standards.

OnA ~~June 26,~~summary ~~2009, the OTS notified Aurora Bank that, as a result~~ of the ~~Original~~carrying ~~Order~~value and ~~the~~unpaid ~~PCA,~~principal ~~the~~balance ~~approval~~(“UPB”) of ~~the~~loans ~~OTS~~held ~~would~~for besale ~~required~~by ~~prior~~valuation tomethod ~~declaration~~ and ~~payment~~in oftotal ~~dividends~~is ~~by EOS.~~as ~~The OTS required Aurora Bank to submit a formal request for non-objection determination to permit the payment of dividends. A formal request was submitted to the OTS on July 28, 2009.~~ follows:

As a result of the notice from the OTS, our Board of Directors (the “Board of Directors”) did not declare or pay the Series B and Series D preferred stock dividends that would have been payable for the second, third and fourth quarters of 2009 and the first and second quarters of 2010. The Board of Directors also did not declare or pay dividends on the common stock that would have been payable for fiscal 2009.

	December 31,
	2011				2010
	Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance
	(In Thousands)
Commercial real estate	$	3,934	$	7,238	$	6,866	$	9,504
Multi-family residential		403		753		850		1,034
One-to-four family residential		82		164		219		272
Subtotal mortgage loans, carried at lower of accreted cost or market value (1)		4,419		8,155		7,935		10,810
One-to-four family residential, carried at fair value		12,188		16,416		16,505		22,048
Total	$	16,607	$	24,571	$	24,440	$	32,858

On(1) ~~September 9,~~Though ~~2010,~~ the ~~OTS~~table ~~provided~~compares athe ~~non-objection~~carrying ~~determination~~value ~~for~~of ~~the~~these ~~declaration~~loans ~~of dividends~~against ~~by September 14~~UPB, ~~2010~~these ~~and~~loans are carried at the ~~payment~~lower of ~~these~~accreted ~~dividends~~cost ~~between~~or ~~December 15,~~market ~~2010~~value and ~~December 31,~~ ~~2010~~the incarrying anvalue ~~amount~~cannot ~~sufficient~~exceed tothe ~~maintain~~cost ~~qualification~~of asthese aloans ~~REIT~~which for ~~the~~all ~~2009~~loans ~~tax year.~~is ~~The~~less ~~Board~~than ~~of Directors of EOS declared~~ UPB.

3The following table sets forth certain information regarding the geographic location of properties securing the mortgage loans in the loan portfolio at December 31, 2011:

Location	Number of Loans		Carrying Value		Percentage of Total Carrying Value
	(In Thousands)
California		37	$	7,469		45.0	%
Virginia		3		928		5.6
Texas		3		903		5.4
Washington		3		753		4.5
Michigan		2		671		4.0
Next five largest states as a group		16		2,598		15.6
All other states as a group		38		3,285		19.9
		102	$	16,607		100.0	%

such dividends on September 13, 2010, for the quarter ended September 30, 2010, consistent with the OTS non-objection determination. The dividends were payable to shareholders of record as of October 29, 2010 and included cumulative dividends on the Series B preferred stock of $120.00 per share, non-cumulative dividends on the Series D preferred stock of $0.53125 per share and dividends on our common stock of $1,467,000. 4

An additional formal request to declare dividends was submitted to the OTS on December 17, 2010 and on December 30, 2010, the OTS provided a non-objection determination for the declaration of dividends in an amount sufficient to maintain qualification as a REIT and avoid excise tax for the 2010 tax year. The ~~non-objection~~following ~~determination~~tables ~~did~~set ~~not provide any restriction as to the timing~~forth ofinformation ~~declaration~~regarding ~~or payment. The Board of Directors of EOS declared such dividends on December 31~~maturity, ~~2010,~~ ~~for~~contractual ~~the~~interest ~~quarter ended December 31~~rate, ~~2010,~~contractual ~~consistent~~interest ~~with~~rate ~~the OTS non-objection determination. The dividends were payable to shareholders of record as of December 31~~structure, ~~2010~~ and ~~included~~UPB ~~dividends on the Series B preferred stock~~ of ~~$20.00~~all ~~per~~loans ~~share, non-cumulative dividends on the Series D preferred stock of $0.53125 per share and dividends on our common stock~~ in the ~~amount of $884,000.~~loan ~~These~~portfolio ~~dividends~~at ~~were paid in 2011. At~~ December 31, ~~2010, there were no dividends in arrears related to our Series B preferred stock. Dividends on the Series D preferred stock are non-cumulative and as such, there were no dividends in arrears.~~ 2011:

The OTS has not approved or provided a non-objection to any further dividend distributions. There can be no assurance that such approval will be received from the OTS or when or if such OTS approval requirement will be removed. Failure to permit the distribution of sufficient dividends in future years will cause EOS to fail to qualify as a REIT. If EOS no longer qualifies as a REIT, we will be subject to federal and state income taxes in the tax year when loss of REIT status occurs and in years thereafter. Furthermore, even if approval is received from the OTS, any future dividends on the preferred stock will be payable only when, as and if declared by the Board of Directors. Aurora Bank and EOS will continue to work with the OTS regarding the resumption of normal payment of dividends. There can be no assurance that the OTS will grant any future non-objection request, nor can there be any assurance that any further dividends will be paid or that EOS will continue to qualify as a REIT.

Period Until Maturity	Number of Loans		Carrying Value		Percentage of Total Carrying Value
	(In Thousands)
Six months or less		3	$	2		0.1	%
Greater than six months to one year		2		54		0.3
Greater than one year to three years		7		153		0.9
Greater than three years to five years		7		254		1.5
Greater than five years to ten years		8		494		3.0
Greater than ten years		75		15,650		94.2
		102	$	16,607		100.0	%

Business Strategies and Operations

Contractual Interest Rate	Number of Loans		Carrying Value		Percentage of Total Carrying Value
	(In Thousands)
Less than 4.00%		49	$	12,334		74.30	%
4.00 to 4.99%		40		3,702		22.3
5.00 to 5.99%		3		12		0.1
6.00 to 7.99%		5		151		0.9
8.00 to 9.99%		2		139		0.8
10.00% and above		3		269		1.6
		102	$	16,607		100.0	%

Our principal business objective is to hold mortgage assets that will generate net income for distribution to stockholders. We may acquire additional mortgage assets in the future. All of the mortgage assets in our loan portfolio at December 31, 2010 were acquired from Capital Crossing Bank or Aurora Bank and it is anticipated that substantially all additional mortgage assets, if any are acquired in the future, will be acquired from Aurora Bank. Our loan portfolio at December 31, 2010 consisted of mortgage assets secured by residential, multi-family and commercial properties.

Contractual Interest Structure	Number of Loans		Carrying Value		Percentage of Total Carrying Value
	(In Thousands)
Fixed Interest Rate		54	$	4,243		25.6	%
Variable Interest Rate		48		12,364		74.4
		102	$	16,607		100.0	%

Aurora Bank is responsible for the administration of the day-to-day activities of EOS in its roles as servicer under the MSA and advisor under the AA. EOS paid Aurora Bank fees for services provided under the MSA and AA. Aurora Bank and its affiliates have interests that are not identical to those of EOS. Consequently, conflicts of interest may arise with respect to transactions, including, without limitation:

Unpaid Principal Balance	Number of Loans		Carrying Value		Percentage of Total Carrying Value
	(In Thousands)
$100,000 and less		35	$	696		4.2	%
Greater than $100,000 to $250,000		27		2,953		17.8
Greater than $250,000 to $500,000		27		6,809		41.0
Greater than $500,000 to $1,000,000		13		6,149		37.0
		102	$	16,607		100.0	%

• future acquisitions of mortgage assets from Aurora Bank or its affiliates; • servicing of mortgage assets, particularly with respect to mortgage assets that become non-accrual; and • the modification of the AA and the MSA.5

~~Both~~Asset ~~the~~Quality ~~AA and the MSA as amended were effective as~~ of ~~January 1, 2010. The amended AA and~~ the ~~amended~~ ~~MSA~~Loan change the fees paid by us. It is our intention that any agreements and transactions between EOS and Aurora Bank are fair to all parties and consistent with market terms, including the price paid and received for mortgage assets on their acquisition or disposition by EOS or in connection with the servicing of such mortgage assets. However, there can be no assurance that such agreements or transactions will be on terms as favorable to us as those that could have been obtained from unaffiliated third parties. Portfolio

4Payment Status of Loan Portfolio. The following table sets forth certain information relating to the payment status of loans in the loan portfolio at the dates indicated:

	Carrying Value at December 31,
	2011		2010
	(In Thousands)
Current	$	16,189	$	23,514
Past due (over thirty days to eighty-nine days)		295		10
Total loans in accrual status		16,484		23,524
Non-accrual loans (ninety days or more past due)		123		916
Total	$	16,607	$	24,440

~~Management~~A ~~Policies~~summary ~~and~~of ~~Programs~~the loans on non-accrual status is as follows:

In order to preserve our status as a REIT under the Internal Revenue Code, substantially all of the assets of EOS must consist of mortgage loans and other qualified assets of the type set forth in Section 856(c)(4)(A) of the Internal Revenue Code. Such other qualifying assets include cash, cash equivalents and securities, including shares or interests in other REITs, although we do not currently intend to invest in shares or interests in other REITs.

	December 31,
	2011					2010
	Carrying Value			Unpaid Principal Balance		Carrying Value			Unpaid Principal Balance
	(In Thousands)
Mortgage loans on real estate on non-accrual status:
Commercial real estate	$	123		$	549	$	692		$	802
Multi-family residential		—			—		—			—
One-to-four family residential		—			—		224			337
Total loans on non-accrual status	$	123		$	549	$	916		$	1,139

Number of loans on non-accrual status		3					8
Number of borrowers with loans on non-accrual status		3					8
Non-accrual loans, as a percent of loans		0.74	%				3.75	%
Non-accrual loans, as a percent of total assets		0.14	%				1.05	%

The ~~administration~~number of ~~EOS~~loans ~~has~~in ~~been~~non-accrual ~~significantly~~status ~~impacted by regulatory orders issued to~~as ~~Aurora~~of ~~Bank~~year-end bydecreased ~~the~~from ~~OTS.~~December ~~The~~31, ~~Order~~2010 ~~requires Aurora Bank~~ to ~~ensure~~December ~~that~~31, ~~each~~2011. ofOf ~~its~~the ~~subsidiaries, including~~eight ~~EOS,~~loans be in ~~compliance~~non-accrual ~~with~~status ~~provisions,~~as ~~including~~of the ~~operating~~prior ~~restrictions contained therein. These operating restrictions~~year-end, ~~among other things, restrict transactions with affiliates,~~ ~~capital~~four ~~distributions~~loans returned to ~~shareholders~~accrual ~~(including redemptions)~~status, ~~contracts~~two ~~outside~~loans ~~the~~were ~~ordinary course~~foreclosed ~~of business,~~ and ~~changes~~two remained in ~~senior~~non-accrual ~~executive officers, board members or their employment arrangements without prior written notice to the OTS~~status. ~~Until~~There ~~the~~was ~~termination~~one ofloan ~~the Order,~~which ~~effectively,~~became ~~any~~non-accrual ~~cash or~~ in~~-kind~~ ~~distribution,~~2011 ~~any~~which ~~asset~~was ~~acquisition~~in oraccrual ~~disposition,~~status orat ~~any significant change in~~ the ~~business~~end of ~~operations~~the ~~of EOS will be subject to~~ prior ~~approval of the OTS~~year.

~~The~~Foreclosures. ~~OTS~~During ~~has~~the ~~informed~~year ended ~~Aurora~~December ~~Bank~~31, ~~our parent~~2011, ~~that~~one ~~approval~~commercial ofloan ~~the OTS is required prior to declaration~~ and ~~payment~~one ofresidential ~~dividends~~loan towere ~~our~~foreclosed ~~preferred~~ and ~~common shareholders. To date,~~ the ~~OTS~~collateral ~~has issued~~underlying ~~non-objection determinations for~~ the ~~formal requests submitted by Aurora Bank for the~~residential ~~declaration~~loan ~~and~~was ~~payment of dividends~~sold. However, there can be no assurance that such approvals will be received in the future from the OTS or when or if the OTS will release Aurora Bank from the Order. Furthermore, any future dividends will be payable only when, as and if declared by the Board of Directors.

Asset Acquisition and Disposition Policies. Subject to prior approval by the OTS, we may, from time to time, purchase additional mortgage assets. To the extent any acquisitions are made, we intend to acquire all or substantially all of any such mortgage assets from Aurora Bank on terms that are comparable to those that could be obtained by us if such mortgage assets were purchased from unrelated third parties. We intend generally to acquire only accrual loans from Aurora Bank. We may also acquire mortgage assets from unrelated third parties. To date, we have not adopted any arrangements or procedures by which we would purchase mortgage assets from unrelated third parties, and we have not entered into any agreements with any third parties with respect to the purchase of mortgage assets. We anticipate that we will purchase mortgage assets from unrelated third parties only if neither Aurora Bank nor any of its affiliates had an amount or type of mortgage asset sufficient to meet our requirements. We currently anticipate that the mortgage assets that we may purchase will primarily include residential, multi-family, and commercial mortgage loans, although if Aurora Bank develops an expertise in additional mortgage asset products, we may purchase such additional types of qualified mortgage assets. In addition, we may also acquire limited amounts of other assets eligible to be held by REITs. Employees

~~Capital and Leverage Policies. To the extent that the Board of Directors determines, subject~~EOS tohas ~~regulatory~~four ~~approval~~employees, ~~that~~including ~~additional~~the ~~funding~~President isand ~~required,~~Chief weFinancial ~~may~~Officer. ~~raise~~EOS ~~such~~employees ~~funds~~currently ~~through additional~~are ~~equity~~also ~~offerings,~~officers ~~debt financing or retention~~ of ~~cash~~Aurora ~~flow~~Bank and ~~(after~~do ~~consideration~~not ~~of provisions~~receive ofseparate ~~the~~compensation ~~Internal~~from ~~Revenue~~EOS. ~~Code~~EOS ~~requiring~~maintains ~~the~~corporate ~~distribution~~records byand aaudited ~~REIT~~financial ofstatements ~~not~~that ~~less~~are ~~than 90%~~separate offrom ~~our~~those ~~REIT~~of ~~taxable~~Aurora ~~income~~Bank. ~~and~~We ~~taking~~do ~~into~~not ~~account~~have ~~taxes~~any ~~that~~other ~~would~~employees bebecause ~~imposed~~we onhave ~~undistributed taxable~~retained ~~income),~~Aurora orBank ato ~~combination~~perform ofall ~~these~~necessary ~~methods~~functions.

~~EOS~~Environmental has no debt outstanding, and we currently do not intend to incur any indebtedness. The organizational documents of EOS limit the amount of indebtedness which we are permitted to incur without approval of the Series D preferred stockholders to no more than 100% of our total stockholders’ equity. Any such debt incurred may include intercompany advances made by Aurora Bank to EOS. Matters

~~EOS,~~In the ~~subject~~course ~~to regulatory approval, may also issue additional series~~ of ~~preferred~~our ~~stock. However~~business, itwe may ~~not~~acquire ~~issue~~through ~~additional~~foreclosure, ~~shares~~properties ofsecuring ~~preferred~~loans ~~stock~~we ~~ranking~~have ~~senior~~purchased towhich ~~the~~are ~~Series D~~in default ~~preferred~~and ~~stock~~involve ~~without~~environmental ~~consent~~matters. ofWith ~~holders~~respect ofto atsuch ~~least~~real ~~two-thirds~~estate ofowned, ~~the~~there ~~outstanding~~is ~~Series D preferred~~a ~~stock.~~risk ~~Although~~that ~~our~~hazardous ~~charter~~substances ~~does not prohibit~~ or ~~otherwise restrict Aurora Bank or its~~wastes, ~~affiliates~~contaminants ~~from owning~~ or ~~voting~~pollutants ~~shares~~could ofbe ~~Series D~~discovered ~~preferred~~on ~~stock,~~such toproperties ~~our~~after ~~knowledge,~~acquisition. asIn ofsuch ~~December 31~~event, ~~2010,~~we ~~Aurora Bank held no shares of Series D preferred stock. Similarly, EOS~~ may ~~not issue~~be ~~additional~~required ~~shares~~to ofremove ~~preferred~~such ~~stock~~substances ~~ranking~~from ~~on parity with~~ the ~~Series D~~affected ~~preferred~~properties ~~stock without~~at ~~the approval of a majority of~~ our ~~independent~~sole ~~directors~~cost ~~(as~~and ~~defined~~expense inand ~~the~~may ~~EOS~~not ~~charter). Prior~~be able to recoup any ~~future issuance~~ of ~~additional~~such ~~shares~~costs offrom ~~preferred~~any ~~stock,~~third ~~EOS will take into consideration Aurora Bank’s regulatory capital requirements and the cost of raising and maintaining that capital at the time~~party.

5 6

~~Table~~Available ~~of Contents~~Information

~~Conflicts~~We ofhave ~~Interest~~historically ~~Policies.~~filed ~~Because~~an ofannual ~~the nature of our relationship with Aurora Bank~~report ~~and~~on ~~its~~Form ~~affiliates~~10-K, ~~conflicts~~quarterly ofreports ~~interest~~on ~~may~~Form ~~arise with respect to certain transactions~~10-Q, ~~including without~~current ~~limitation,~~reports ~~our~~on ~~acquisition~~Form ~~of mortgage assets from~~8-K, orand ~~return~~all ofamendments ~~mortgage assets~~ to ~~Aurora Bank,~~these orreports ~~disposition~~with ~~of mortgage assets or foreclosed property to, Aurora Bank or its affiliates, and~~ the ~~modification of the MSA and AA~~SEC. ~~It is our policy that the terms of any financial dealings~~You ~~with~~may ~~Aurora~~read ~~Bank~~ and ~~its~~copy ~~affiliates~~any ~~will~~document befiled ~~consistent~~by ~~with~~us ~~those~~at ~~available~~the ~~from~~SEC’s ~~unaffiliated~~Public ~~third parties~~Reference inRoom ~~the~~at ~~mortgage~~100 ~~lending~~F ~~industry~~Street, N.E., ~~In addition~~Washington, ~~EOS~~D.C. ~~maintains~~20549 on anofficial ~~Audit~~business ~~Committee~~days ofduring the ~~Board~~ hours of ~~Directors,~~10:00 ~~which~~a.m. isto ~~comprised~~3:00 ~~solely~~p.m. ofPlease ~~independent~~call ~~directors who satisfy~~ the ~~standards~~SEC ~~for~~at ~~independence~~1-800-SEC-0330 ~~promulgated~~for byinformation on the ~~NASDAQ~~Public ~~Stock~~Reference ~~Market, Inc~~Room. ~~Among~~We ~~other~~do ~~functions,~~not ~~the~~maintain ~~Audit Committee~~an ~~(or~~internet ~~the~~website, ~~Board~~but ofthe ~~Directors~~SEC asmaintains a website ~~whole)~~that ~~will~~contains ~~review~~annual, ~~transactions~~quarterly, ~~between EOS~~ and ~~Aurora Bank~~current ~~and its affiliates. Furthermore~~reports, ~~under~~proxy ~~the terms of the AA~~statements, ~~Aurora Bank provides advice~~ and ~~recommendations~~ ~~with~~other ~~respect~~information tothat ~~all~~issuers ~~aspects~~(including ofus) file ~~our~~electronically ~~business~~with ~~and operations, subject to~~ the ~~control and~~SEC. ~~discretion~~The ofSEC’s ~~the~~website ~~Board~~address ofis ~~Directors~~www. sec.gov.

Conflicts of interest between EOS and Aurora Bank and its affiliates may also arise in connection with decisions bearing upon the credit arrangements that Aurora Bank or one of its affiliates may have with a borrower. Conflicts could also arise in connection with actions taken by Aurora Bank as the controlling person of EOS. It is the intention of EOS and Aurora Bank that any agreements and transactions between EOS and Aurora Bank or its affiliates are fair to all parties and are consistent with market terms for such types of transactions. The MSA provides that foreclosures and dispositions of the mortgage assets are to be performed in a manner substantially the same as for similar work performed by Aurora Bank for transactions on its own behalf. However, there can be no assurance that any such agreement or transaction will be on terms as favorable to us as would have been obtained from unaffiliated third parties. 7

~~There~~ITEM are no provisions in our charter limiting any officer, director, security holder or affiliate of EOS from having any direct or indirect pecuniary interest in any mortgage asset to be acquired or disposed of by EOS or in any transaction in which we have an interest or from engaging in acquiring and holding mortgage assets1A. AsRISK described herein, it is expected that Aurora Bank and its affiliates may have direct interests in transactions with EOS (including, without limitation, the sale of mortgage assets to EOS). It is not currently anticipated, however, that any of our officers or directors will have any interests in such mortgage assets. FACTORS

~~Other~~A ~~Policies.~~number Weof ~~intend~~risk tofactors, ~~operate~~including, inwithout limitation, athe ~~manner~~risks ~~that~~factors ~~will~~set ~~not~~forth ~~subject~~below, usmay cause our actual results to ~~regulation~~differ ~~under~~materially from anticipated future results, ~~the~~performance ~~Investment~~or ~~Company~~achievements ~~Act~~expressed ofor ~~1940,~~implied asin ~~amended~~any forward-looking statements contained in this Annual Report on Form 10-K. WeThe doreader ~~not~~of ~~intend~~this ~~to:~~Annual Report on Form 10-K should be aware that there may be other factors that could cause difference in future results, performance or achievements.

•Risks invest in the securities of other issuers for the purpose of exercising control over such issuers; • underwrite securities of other issuers; • actively trade in loans or other investments; • offer securities in exchange for property; or • make loans Related to ~~third parties, including without limitation~~ our ~~officers~~Loan ~~or directors and any affiliates of EOS.~~Portfolio

We ~~may,~~could ~~under~~be ~~certain circumstances, and subject to applicable federal and state laws and the~~held ~~requirements~~responsible for ~~qualifying~~environmental asliabilities ~~a REIT, purchase Series D preferred stock in the open market or otherwise, for redemption by us. Any such redemption may only be effected with the prior approval~~ of ~~the~~properties ~~OTS~~acquired ~~while~~through ~~the Original Order and Amended Order are in place~~foreclosure.

WeIf we ~~currently~~choose ~~intend~~ to ~~make~~foreclose ~~investments~~on ~~and~~a ~~operate~~defaulted ~~our~~mortgage ~~business~~loan atto ~~all~~recover ~~times~~our ininvestment, ~~such~~we amay ~~manner as~~be subject to beenvironmental ~~consistent~~liabilities ~~with~~related to the ~~requirements~~underlying real property. Approximately 30% of the ~~Internal~~carrying ~~Revenue~~value ~~Code~~in toour ~~qualify~~portfolio asat aDecember 31, ~~REIT. However~~2011, ~~future~~was ~~economic,~~for ~~market~~commercial mortgage loans, ~~legal~~which generally are subject to relatively greater environmental risks than other types of loans. Hazardous substances or wastes, ~~regulatory~~contaminants, ~~tax~~pollutants or ~~other~~sources ~~considerations~~thereof may ~~cause~~be ~~the~~discovered on properties during our ownership or after a sale to ~~Board~~a third party. The amount of ~~Directors~~environmental toliability ~~determine~~could exceed the value of the real property. There can be no assurance that we itwould isnot inbe fully liable for the ~~best~~entire ~~interests~~cost of ~~EOS~~any removal and ~~our~~clean-up ~~stockholders~~on ~~to revoke~~an ~~our~~acquired ~~REIT~~property, ~~status~~that ~~which~~the cost of removal and clean-up would ~~have~~not exceed the ~~immediate~~value ~~result~~of the property, or that we could recoup any of ~~subjecting~~the ~~EOS~~costs tofrom ~~federal~~any ~~and~~third ~~state~~party. In addition, ~~income~~we ~~tax~~may atfind ~~regular~~it ~~corporate~~difficult ~~rates~~or impossible to sell the property prior to or following any such remediation. The incurrence of any significant environmental liabilities with respect to a property securing a mortgage loan could have a material adverse effect on our financial condition.

6 8

~~Table~~ITEM of1B. ~~Contents~~UNRESOLVED STAFF COMMENTS

Under the AA, Aurora Bank monitors and reviews our compliance with the requirements of the Internal Revenue Code regarding our qualification as a REIT on a quarterly basis and has an independent public accounting firm, selected by the Board of Directors, annually review the results of the analysisNone.

~~Servicing~~ ITEM 2. PROPERTIES

~~Our~~We conduct ~~loan~~all ~~portfolio is serviced by Aurora Bank pursuant to the terms~~ of ~~the~~our ~~MSA.~~business ~~The~~out ~~MSA as amended was effective as~~ of ~~January 1,~~offices ~~2010.~~maintained ~~The amended MSA changed the fees paid~~ by ~~EOS to reflect the fees payable to each sub-servicer. Through December 31, 2009,~~ Aurora Bank. inThe ~~its~~mailing ~~role as~~address ~~servicer~~is ~~under~~1271 ~~the~~Avenue ~~terms~~ of the ~~MSA received an annual servicing fee equal to 0.20%~~Americas, ~~payable~~46th Floor, ~~monthly~~New York, onNY ~~the~~10020. ~~gross~~EOS ~~average~~does ~~unpaid~~not ~~principal~~directly ~~balances~~reimburse ofAurora ~~loans~~Bank ~~serviced~~ for the ~~immediately preceding~~use ~~month. Additionally, loan servicing expense includes third party expenses associated with the collection~~ of ~~certain~~such ~~non-accrual loans~~space.

~~The~~ITEM ~~MSA requires Aurora Bank to service the loan portfolio in a manner substantially the same as for similar work performed by Aurora Bank for transactions on its own behalf~~3. ~~Aurora~~LEGAL Bank collects and remits principal and interest payments on at least a monthly basis; maintains perfected collateral positions; submits and pursues insurance claims; and initiates and supervises foreclosure proceedings on the loan portfolio it services. Aurora Bank also provides accounting and reporting services for the loan portfolio as required by EOS. We may also direct Aurora Bank to dispose of any loans placed on non-accrual status, or are modified due to financial deterioration of the borrower. Aurora Bank may facilitate loan modifications and short sales where circumstances are so warranted. Aurora Bank may institute foreclosure proceedings and foreclose, manage and protect the mortgaged premises, including exercising any power of sale contained in any mortgage or deed of trust, obtaining a deed-in-lieu-of-foreclosure, or otherwise acquiring title to a mortgaged property underlying a mortgage loan by operation of law or otherwise in accordance with the terms of the MSA. PROCEEDINGS

~~The~~From time ~~MSA~~to ~~may~~time, bewe ~~terminated~~have onbeen ~~thirty~~involved ~~days~~in ~~notice~~routine ~~pursuant~~litigation incidental to ~~agreement~~our ~~between~~business, ~~the~~including ~~parties.~~a ~~The MSA~~variety ~~will~~of ~~automatically~~legal ~~terminate~~proceedings with ifborrowers, ~~EOS~~which ~~ceases~~could contribute to bethe aCompany’s ~~subsidiary~~expenses, including the costs of ~~Aurora~~carrying ~~Bank~~non-accrual loans.

~~When~~ITEM any mortgaged property underlying a mortgage loan is conveyed by a mortgagor, Aurora Bank generally, upon notice of the conveyance, will enforce any due-on-sale clause contained in the mortgage loan, to the extent permitted under applicable law and governmental regulations4. ~~The~~(REMOVED ~~terms of~~AND a particular mortgage loan or applicable law, however, may prohibit Aurora Bank from exercising the due-on-sale clause under certain circumstances related to the collateral underlying the mortgage loan and the borrowers’ ability to fulfill the obligations under the related mortgage noteRESERVED).

~~Advisory~~Not ~~Services~~ applicable.

EOS has entered into the AA pursuant to which Aurora Bank administers our day-to-day operations. The AA as amended was effective as of January 1, 2010. The amended AA changed the fees paid by EOS. Through December 31, 2009, Aurora Bank was paid an annual advisory fee equal to 0.05%, payable monthly, of the gross average unpaid principal balances of our loans for the immediately preceding month, plus reimbursement for certain expenses incurred by Aurora Bank as advisor. During 2010, the amended agreement, among other things, changed the management fee to a flat $25,000 per month. As advisor, Aurora Bank is responsible for: 9

• monitoring the credit quality of our loan portfolio; • advising us with respect to the acquisition, management, financing, and disposition of our loans and other assets; and • maintaining our corporate and shareholder records.PART II

~~Aurora~~ITEM Bank may, from time to time, subcontract all or a portion of its obligations under the AA to one or more of its affiliates involved in the business of managing mortgage assets or, with the approval of a majority of Board of Directors as well as a majority of its independent directors, subcontract all or a portion of its obligations under the AA to unrelated third parties5. ~~Aurora~~ ~~Bank~~MARKET ~~will~~FOR ~~not,~~REGISTRANT’S inCOMMON ~~connection with the subcontracting of any of its obligations under the AA~~EQUITY, be ~~discharged~~RELATED orSTOCKHOLDER ~~relieved~~MATTERS inAND ~~any~~ISSUER ~~respect~~PURCHASES ~~from~~OF ~~its~~EQUITY ~~obligations under the AA~~SECURITIES.

7 Common Stock

~~Table~~In connection with our formation on March 20, 1998, we issued 100 shares of ~~Contents~~our common stock to Capital Crossing Bank. These shares of common stock were issued in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. There is no established public trading market for the common stock. As of April 13, 2012, there were 100 issued and outstanding shares of common stock, all of which were held by Aurora Bank.

~~The~~On February 14, AA2007, ~~has~~Capital aCrossing ~~term~~Bank ofwas ~~one~~acquired ~~year,~~by ~~renewable~~Aurora ~~annually~~Bank ~~for~~through ana ~~additional~~two ~~one-year~~step ~~period~~merger ~~unless~~transaction. ~~EOS delivers~~An ~~notice~~interim thrift subsidiary of ~~nonrenewal to~~ Aurora Bank. Wewas ~~may~~merged ~~terminate~~into ~~the~~Capital AACrossing ~~at any time upon ninety days’ prior notice~~Bank. AsImmediately ~~long~~following assuch ~~any Series D preferred stock remains outstanding~~merger, ~~any~~Capital ~~decision~~Crossing byBank uswas merged ~~either~~into ~~not~~Aurora toBank. ~~renew~~Under the AAterms orof ~~to terminate~~ the AAagreement, ~~must~~Lehman beBrothers ~~approved~~paid by$30.00 aper ~~majority~~share ofin ~~our~~cash ~~Board~~in ~~of Directors,~~exchange asfor ~~well~~each asoutstanding share ~~by a majority~~ of ~~our~~Capital ~~independent~~Crossing ~~directors~~Bank. ~~Other~~Effective ~~than~~as ~~the~~of ~~servicing~~April ~~fee~~27, ~~and the advisory fee~~2009, ~~Aurora~~Lehman Brothers Bank, isFSB, ~~not~~the ~~entitled~~owner toof aall ~~fee~~of ~~for~~our ~~providing~~common ~~advisory~~stock, formally ~~and~~changed ~~management services~~its name to ~~EOS~~Aurora Bank FSB.

~~Description~~On our common stock during 2011, there were no dividends declared or returns of ~~Loan~~capital ~~Portfolio~~paid to the common stockholder. During 2010, dividends of $2.4 million were declared to the common stockholder and no returns of capital were paid to the common stockholder. During 2009, no dividends or returns of capital were declared or paid to the common stockholder. There were no capital contributions from parent during 2011 or 2010. There was a capital contribution of $0.2 million during 2009 in connection with the November Asset Exchange.

ToPreferred date, all of our mortgage loans have been acquired or were contributed from Capital Crossing Bank or Aurora Bank. It is anticipated that substantially all additional mortgage assets, if any additional assets are acquired in the future, will be acquired or contributed from Aurora Bank. The characteristics of our loan portfolio described below may or may not exist at future dates. Stock

~~Loans Held For Sale.~~ On ~~February~~ March 531, ~~2009~~1998, ~~EOS~~Capital ~~and~~Crossing ~~Aurora~~ Bank ~~entered~~capitalized ~~into~~EOS anby ~~Asset~~transferring ~~Exchange Agreement~~mortgage ~~(the “February Asset Exchange”) pursuant to which we agreed to transfer~~ loans ~~secured primarily~~valued byat ~~commercial~~$140.7 million ~~real estate and multi-family residential real estate~~ in exchange for ~~loans secured primarily by residential real estate. As a result of entering into the February Asset Exchange~~1,000 shares ~~we reclassified all~~ of ~~our loan assets as held for sale. On July 20, 2009,~~ EOS ~~and Aurora Bank mutually agreed to terminate the February Asset Exchange following the OTS failing to grant Aurora Bank~~’s ~~requests~~8% ~~for~~Cumulative ~~non~~Non-~~objection~~Convertible ~~with~~Preferred ~~respect to the February Asset Exchange. We continue to carry these loan assets at the lower of their accreted cost or market value. Prior to February 5~~Stock, ~~2009~~Series B, ~~our~~valued ~~loan assets were considered held for investment and recorded~~ at ~~accreted cost~~$1. ~~On November~~0 ~~18,~~million ~~2009, EOS~~ and ~~Aurora Bank entered into an Asset Exchange Agreement (the “November~~ ~~Asset~~100 shares ~~Exchange”)~~of ~~pursuant to which Aurora Bank agreed to assign various single family residential mortgage loans to~~ EOS’ incommon ~~exchange~~stock ~~for~~valued ~~EOS~~at ~~assigning certain commercial and multi-family mortgage loans to Aurora Bank~~$139. ~~From the November Asset Exchange, we received residential mortgage loans, including jumbo mortgage loans, in exchange for commercial and multi-family loans transferred to Aurora Bank~~7 million. The ~~residential~~carrying ~~mortgage~~value ~~loans~~of ~~received~~these ~~were~~loans ~~recorded~~approximated at their fair ~~value~~values ~~and currently~~at ~~are~~the ~~presented~~date atof ~~fair value~~contribution.

~~Fair~~On May 11, ~~value~~2004, iswe ~~defined~~closed asour ~~the~~public ~~price~~offering atof ~~which~~1,500,000 shares anof ~~asset~~our or8.50% ~~liability~~Non-cumulative ~~could~~exchangeable bepreferred ~~exchanged in a current transaction between knowledgeable~~stock, ~~willing parties~~ Series D. ~~Where~~The ~~available,~~net ~~fair~~proceeds ~~value~~to isEOS ~~based~~from ~~on observable~~the ~~market~~sale ~~prices~~of orSeries D ~~parameters~~preferred orstock ~~derived~~was ~~from such prices or parameters~~$35.3 million. ~~Where~~The ~~observable~~Series D ~~prices~~preferred orstock ~~inputs~~became ~~are~~redeemable ~~not~~at ~~available,~~the ~~valuation~~option ~~models~~of ~~are~~EOS ~~applied.~~at ~~Various~~a ~~cash~~redemption ~~flow models~~price ~~are~~of ~~used to derive fair value estimates~~$25.00 ~~These~~per ~~models~~share ~~consider~~plus ~~significant~~accrued ~~inputs such as loan type, loan age, loan to value ratio, payment history,~~ and ~~property~~unpaid ~~location~~dividends, ~~as well as~~ ~~significant~~effective ~~assumptions such as estimated rates of loan delinquency~~July 15, ~~potential recovery~~2009, ~~discount rate,~~with ~~and~~ the ~~impact~~prior approval of ~~interest rate reset. Recent trade quotes or prices are identified in estimating~~ the ~~amount~~OTS atand ~~which a third party might purchase~~ the ~~loans and their yield requirements~~FDIC. ~~Management~~ ~~also~~The ~~considers~~Series ~~market~~D ~~information~~preferred ~~and~~stock ~~quotes~~has ~~received~~a ~~from~~liquidation ~~third parties, when~~amount ~~available. The valuation~~ of ~~the~~$25.00 ~~loan~~per ~~portfolio~~share ~~involves~~plus ~~some~~any ~~estimation~~accrued and ~~judgment,~~unpaid ~~the~~dividends ~~degree~~for ~~of which is dependent on~~ the ~~terms~~quarter ofin ~~the~~which ~~loans and~~ the ~~availability~~liquidation ~~of market prices and inputs~~occurs.

~~We use the term “carrying value” to reflect loans valued at the lower~~ Plan of ~~their~~Liquidation ~~accreted~~and ~~cost or market value, or at their fair value, as applicable to the individual loans’ valuation method as selected by us in accordance with accounting standards.~~ Dissolution

8On March 12, 2012, the Board of EOS approved a Plan of Liquidation and Dissolution of EOS and on March 13, 2012, the Board of Directors of Aurora Bank, the sole common shareholder of EOS, approved the Plan of Liquidation and Dissolution. In accordance therewith, the Series D shareholders were paid their liquidation distribution of $25.00 per share, and were paid accrued and unpaid dividends for the first and second quarters of 2012 in the amount of $0.584375 per share. Concurrently, the Series B shareholders were paid their liquidation distribution of $1,000.00 per share and were paid accrued and unpaid dividends for the first and second quarters of 2012 in the amount of $22.00 per share. The dividends for the second quarter of 2012 were a prorated based on nine calendar days.

~~Table of Contents~~10

AITEM 6. SELECTED ~~summary~~FINANCIAL ~~of the carrying value and unpaid principal balance (“UPB”) of loans by valuation method and in total is as follows:~~ DATA

	December 31,
	As of and for the Year Ended December 31,
	2010						2009
	2011			2010			2009			2008			2007
				Unpaid Principal						Unpaid Principal
	(In Thousands)
	Carrying Value			Balance			Carrying Value			Balance
Financial condition data:
				(Dollars In Thousands)
Total assets	$	85,575		$	87,222		$	82,039		$	96,067		$	116,358
Total mortgage loans, held for sale:
Investments at fair value		41,470			—			—			—			—
Commercial real estate	$	6,866		$	9,504		$	6,380		$	11,324
Loans held for sale, at fair value		12,188			16,505			22,531			—			—
Multi-family residential		850			1,034			693			1,203
Loans held for sale, at lower of accreted cost or market value		4,419			7,935			7,292			—			—
One-to-four family residential		16,724			22,320			22,750			32,386
Loans held for investment, net		—			—			—			53,025			66,686
Total	$	24,440		$	32,858		$	29,823		$	44,913
Allowance for loan losses		—			—			—			(915	)		(1,180	)
Portion carried at fair value:
Deferred loan fees		—			—			—			(27	)		(32	)
Commercial real estate	$	—		$	—		$	—		$	—
Loans, net	$	16,607		$	24,440		$	29,823		$	52,083		$	65,474
Multi-family residential		—			—			—			—
Non-accrual loans, net		123			916			318			1,596			—
One-to-four family residential		16,505			22,048			22,531			32,007
Cash and cash equivalents	$	27,179		$	62,569		$	51,823		$	43,757		$	50,581
Total	$	16,505		$	22,048		$	22,531		$	32,007
Stockholders’ equity		84,631			85,276			81,695			95,136			115,369
Portion carried at lower of accreted cost or market value (1):
Operations data:
Commercial real estate	$	6,866		$	9,504		$	6,380		$	11,324
Total interest income	$	2,362		$	2,194		$	3,564		$	6,175		$	8,133
Multi-family residential		850			1,034			693			1,203
Reduction in allowance for loan losses		—			—			915			265			339
One-to-four family residential		219			272			219			379
Gain (loss) on loans held for sale		71			6,498			(16,263	)		—			—
Total	$	7,935		$	10,810		$	7,292		$	12,906
Loss on repossessed assets		(82	)		—			—			—			—
Loss on investments		(339	)		—			—			—			—
Other income		—			—			—			—			76
Operating expenses		(988	)		(1,035	)		(1,040	)		(410	)		(299	)
Net income (loss)		1,024			7,657			(12,824	)		6,030			8,249
Preferred stock dividends declared		(1,669	)		(1,725	)		(816	)		(3,262	)		(4,006	)
Net income (loss) available to common shareholder	$	(645	)	$	5,932		$	(13,640	)	$	2,768		$	4,243
Ratio of earnings to fixed charges		1.61	x		5.44	x		(14.72	)x		2.85	x		3.06	x
Selected other information:
Non-accrual loans, as a percent of total assets (1)		0.14	%		1.05	%		0.39	%		1.66	%		0.00	%
Non-accrual loans, as a percentage of loans, net of discount and deferred loan income (1)		0.74			3.75			1.07			3.01			0.00
Allowance for loan losses as a percent of total loans, net of discount and deferred loan fees (2)		—			—			—			1.73			1.77
Allowance for loan losses as a percent of non-accrual loans (2)		—			—			—			57.33			0.00

(1) ~~Though~~The ~~the~~calculated ~~table~~percentage ~~compares~~was impacted by the ~~carrying~~change ~~value~~in ~~of these loans against UPB, these loans are carried at~~ the ~~lower~~composition of ~~accreted~~our ~~cost~~portfolio ~~or market value and the carrying value cannot exceed the cost~~ of ~~these~~ loans ~~which~~resulting ~~for~~from ~~all~~the ~~loans~~exchange iswith ~~less~~Aurora ~~than~~Bank ~~UPB~~during 2009.

~~The~~(2) ~~following~~Concurrent ~~table~~with ~~sets~~the ~~forth~~February ~~certain~~Asset ~~information~~Exchange Agreement ~~regarding~~for the ~~geographic~~exchange ~~location~~of loans with Aurora Bank, during the first quarter of 2009, we reclassified all of our loan assets ~~properties~~as ~~securing~~held for sale and recorded a valuation allowance to reflect these loan assets at the ~~mortgage~~lower ~~loans~~of intheir accreted cost or market value. Additionally, concurrent with the November Asset Exchange, loan ~~portfolio~~assets were acquired that are recorded at ~~December 31,~~their ~~2010:~~ fair value.

					Percentage of
					Total
	Number of		Carrying		Carrying
Location	Loans		Value		Value
			(Dollars In Thousands)
California		44	$	9,758		40.0	%
Maryland		5		1,533		6.3
Washington		4		1,404		5.8
Virginia		4		1,233		5.1
Massachusetts		12		1,142		4.7
Michigan		3		952		3.9
Texas		3		930		3.8
Florida		9		924		3.8
North Dakota		4		792		3.2
Colorado		2		663		2.7
Kentucky		2		608		2.5
All others		41		4,501		18.2
		133	$	24,440		100.0	%

9 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The~~Executive ~~following tables set forth information regarding maturity, contractual interest rate, contractual interest rate structure, and UPB of all loans in the loan portfolio at December~~Level ~~31, 2010:~~ Overview

					Percentage of
	Number of		Carrying		Total Carrying
Period Until Maturity	Loans		Value		Value
			(Dollars In Thousands)
Six months or less		5	$	476		1.9	%
Greater than six months to one year		5		188		0.8
Greater than one year to three years		9		366		1.5
Greater than three years to five years		10		783		3.2
Greater than five years to ten years		10		927		3.8
Greater than ten years		94		21,700		88.8
		133	$	24,440		100.0	%

EOS is a Massachusetts corporation organized on March 20, 1998. Aurora Bank, an indirect wholly-owned subsidiary of LBHI and a wholly-owned subsidiary of Lehman Brothers Bancorp (“LB Bancorp”), owns all of our common stock. Effective June 21, 2010, we changed our corporate name to EOS Preferred Corporation. On March 12, 2012 the Board of Directors approved a Plan of Liquidation and Dissolution, and management is in the process of winding down the company.

					Percentage of
	Number of		Carrying		Total Carrying
Contractual Interest Rate	Loans		Value		Value
			(Dollars In Thousands)
Less than 4.00%		10	$	438		1.8	%
4.00 to 4.49		52		7,304		29.8
4.50 to 4.99		21		5,337		21.9
5.00 to 5.49		27		8,186		33.5
5.50 to 5.99		6		1,205		4.9
6.00 to 7.99		8		806		3.3
8.00 to 9.99		5		808		3.3
10.00% and above		4		356		1.5
		133	$	24,440		100.0	%

EOS investments are carried at fair value. There were no investments sold during the year ended December 31, 2011.

					Percentage of
	Number of		Carrying		Total Carrying
Contractual Interest Structure	Loans		Value		Value
			(Dollars In Thousands)
Fixed Interest Rate		75	$	7,755		31.7	%
Variable Interest Rate		58		16,685		68.3
		133	$	24,440		100.0	%

All mortgage assets in our loan portfolio at December 31, 2011 were acquired from Capital Crossing Bank or Aurora Bank As of December 31, 2011, we held loans acquired from Capital Crossing Bank and Aurora Bank with a carrying value of $16.6 million and an unpaid principal balance of $24.6 million.

					Percentage of
	Number of		Carrying		Total Carrying
Unpaid Principal Balance	Loans		Value		Value
			(Dollars In Thousands)
$50,000 and less		29	$	571		2.3	%
Greater than $50,000 to $100,000		15		795		3.2
Greater than $100,000 to $250,000		31		4,005		16.4
Greater than $250,000 to $500,000		42		11,283		46.2
Greater than $500,000 to $1,000,000		16		7,786		31.9
		133	$	24,440		100.0	%

Residential loans constituted approximately 73% of the total loans in our loan portfolio at December 31, 2011. Loans collateralized by commercial and multi-family properties constituted the remaining 27%. As of December 31, 2011, 99% of the carrying value of all loans was classified as accrual.

10As of December 31, 2011, properties underlying our mortgage assets were concentrated primarily in California and comprised approximately 45.0% of the total carrying value.

~~Table~~ As of ~~Contents~~December 31, 2011, the Series B preferred stock and Series D preferred stock remained outstanding and remain subject to their existing terms and conditions. On April 9, 2012 the Series B and Series D shareholders were liquidated and were paid their liquidation preference. These shareholders have no further rights against the Corporation.

~~Loan~~For the ~~Purchasing~~year ~~Activities.~~ended ~~All~~December of31, ~~our~~2011 ~~commercial~~as ~~loans~~compared ~~and~~to ~~multi-family~~2010, ~~residential~~net ~~loans were~~(loss) ~~purchased~~income oravailable ~~contributed~~to ~~from~~common ~~Capital~~shareholder ~~Crossing~~decreased ~~Bank~~$6.6 ~~who originally purchased such loans from~~million ~~third~~to ~~parties.~~net ~~All~~loss of ~~our~~$0.7 ~~residential~~million ~~loans~~in ~~were~~2011 ~~acquired~~compared ~~from~~to ~~Aurora Bank~~$5.9 million Itin isnet ~~anticipated~~income ~~that substantially~~in ~~all~~2010. ~~additional~~The ~~loans,~~decrease ~~if any loans are acquired by us~~ in ~~the~~2011 ~~future,~~as ~~will~~compared beto ~~acquired~~2010 ~~from~~was ~~Aurora Bank. Existing loans~~ primarily ~~are~~the ~~secured~~result byof ~~commercial, multi-family residential, or one-to-four family residential real estate located throughout~~ the ~~United~~decrease ~~States. Aurora Bank does not intend to utilize any specific threshold underwriting criteria~~ in ~~evaluating~~the ~~individual~~gain ~~loans or~~on ~~pools of~~ loans held for ~~purchase,~~sale ~~but~~of ~~rather~~$6.5 ~~anticipates~~million ~~that~~and ita ~~will~~$0.3 ~~evaluate~~million ~~each~~loss ~~individual~~on ~~loan,~~investments ifin ~~it is purchasing an individual loan~~2011, orpartially ~~pool~~offset ofby ~~loans,~~an ifincrease ~~it is purchasing a pool~~ of ~~loans,~~$0.2 onmillion ~~a case~~in byinterest ~~case~~income ~~basis~~and ~~in making~~ a ~~purchase~~$0.1 ~~decision~~million asdecrease ~~described~~ in ~~more~~declared ~~detail~~dividends ~~below.~~to preferred stockholders.

~~The estimated value of~~ For the ~~real~~year ~~property~~ended ~~collateralizing~~December ~~a loan will be determined by considering~~31, ~~among~~2010 ~~other~~as ~~factors,~~compared ~~the~~to ~~type of property~~2009, ~~its~~net ~~condition~~income ~~and~~(loss) ~~location,~~available ~~and~~to ~~its~~common ~~highest and~~shareholder ~~best~~increased ~~use in its marketplace~~$19.5 Inmillion to ~~many~~net ~~cases,~~income ~~real estate brokers and/or appraisers with specific knowledge~~ of ~~the~~$5.9 ~~local~~million ~~real~~in ~~estate~~2010 ~~market~~compared ~~will~~to ~~be consulted~~$13.6 million ~~For~~in ~~larger~~net ~~commercial~~loss ~~loans,~~in ~~typically a~~2009. ~~site~~The ~~inspection~~increase ofin ~~the~~2010 ~~real~~over ~~property~~2009 ~~collateralizing~~was ~~the loan and an internal rental analysis of~~primarily ~~similar commercial properties in~~ the ~~local~~result ~~area is undertaken. An analysis~~ of the ~~current~~increase ~~and likely~~in ~~future cash flows generated by~~ the ~~collateral~~gain to(loss) ~~repay~~on ~~the~~loans ~~loan~~held ~~and~~for ~~consideration~~sale of ~~minimum debt~~$22.8 ~~service coverage ratios~~million, ~~consisting~~partially ofoffset ~~the~~by ~~ratio~~decreases of ~~net~~$1.4 ~~operating income to total principal~~million ~~and~~in interest ~~payments~~income, ~~will~~decreases beof ~~made~~$0.9 ~~New~~million ~~tax~~reduction ~~and~~in ~~title~~allowance ~~searches~~for ~~may~~loan ~~also~~losses beand ~~obtained~~$0.9 tomillion ~~verify~~in ~~the status~~increases of ~~any prior liens on the collateral. Additionally, if necessary, environmental specialists~~declared ~~will~~dividends ~~review available information with respect~~ to ~~each~~preferred ~~property collateralizing a loan to assess potential environmental risk~~stockholders.

InAt December 31, ~~order~~2011, towe ~~determine~~had ~~the~~total ~~amount~~assets ~~that~~of we$85.6 million, ~~are~~including ~~willing~~cash toand ~~bid~~cash toequivalents ~~acquire~~of ~~individual~~$27.2 million, ~~loans or~~and ~~loan~~total ~~pools,~~liabilities weof ~~will~~$0.9 million. ~~consider,~~The ~~among~~following ~~other~~material ~~factors:~~ events occurred subsequent to December 31, 2011.

• the collateral securing the loan; • the financial resources of the borrowers or guarantors, if any; • the recourse nature of the loan; • the age and performance of the loan; • the length of time during which the loan has performed in accordance with its repayment terms; • geographic location; • the yield expected to be earned; and • servicing restrictions, if any.12

In• ~~addition~~On toFebruary 28, 2012, EOS executed an asset sale agreement with an unrelated third party for the ~~factors~~sale ~~listed~~of ~~above~~all of our commercial loans and assets acquired through foreclosure with a carrying value at December 31, 2011 of $4.4 million. A competitive bid process was utilized and bids were received from multiple counterparties. The sales price was an indicator of fair value which we ~~will~~utilized ~~also~~in ~~consider~~our valuation methodologies to determine the ~~amount~~appropriate itfair ~~may~~value ~~realize through~~adjustments ~~collection~~at ~~efforts~~December or31, ~~foreclosure~~2011 and ~~sale~~we ofrecorded a reduction to the ~~collateral~~carrying value of these assets at December 31, ~~net~~2011 of ~~expenses~~$1.9 million. The transaction closed on March 30, ~~and~~2012. • On April 4, 2012, we executed an Asset Sale Agreement with Aurora Bank for the ~~length~~ sale of ~~time~~the ~~and~~investment ~~costs~~portfolio ~~required~~of toEOS ~~complete~~at the ~~collection~~fair ormarket ~~foreclosure~~values ~~process~~of the investments as of March 30, 2012 which was $39.4 million. • On April 9, 2012, the Series B and Series D preferred shareholders were liquidated and we made liquidation payments in the ~~event~~aggregate ~~a loan~~amount ~~becomes~~of ~~non-accrual~~$39.3 ormillion isto asuch ~~non-accrual~~holders. ~~loan~~Liquidation atpayments to the ~~purchase~~Series ~~date~~B and Series D preferred shareholders were $1,000. 00 and $25.00 per share, respectively. Payments of accrued and unpaid dividends to the Series B and Series D preferred shareholders were $22.00 per share and $0.584375 per share, respectively.

~~Loan Servicing and Asset Resolution. In the event that a purchased loan becomes delinquent, or if it is delinquent at the time of purchase,~~ Aurora Bank, as servicer, promptly initiates collection activities. If a delinquent loan is placed in non-accrual status, Aurora Bank may pursue a number of alternatives with the goal of maximizing the overall return on each loan in a timely manner. In instances when a loan is not returned to accrual status, Aurora Bank may seek resolution through negotiating a discounted pay-off with borrowers, which may be accomplished through refinancing by the borrower with another lender, restructuring the loan to a level that is supported by existing collateral and debt service capabilities, foreclosure, sale of the collateral, or other loss mitigation activities.

11There were no capital contributions from or returns of capital to Aurora Bank in 2011 or 2010. There was a capital contribution of $0.2 million during 2009 in connection with the November Asset Exchange.

~~Table of Contents~~Dividends

~~Asset~~During ~~Quality~~the first quarter of 2011, we submitted a formal request for non-objection to the OTS to declare dividends. The OTS had not issued a ruling on our request prior to the filing of our quarterly report on Form 10-Q for the period ended March 31, 2011, and as a result, dividends were not declared for the first quarter of 2011. On July 12, 2011, the OTS granted a non-objection determination for the declaration of preferred stock dividends. On July 13, 2011, the Board of Directors declared dividends for the second quarter of 2011 which were comprised of cumulative dividends on the Series B preferred stock of $40.00 per share and non-cumulative dividends on the Series D preferred stock of $0.53125 per share. Dividends were not declared on our common stock.

~~Payment~~During the ~~Status~~third quarter of ~~Loan~~2011, ~~Portfolio.~~federal ~~The~~regulatory ~~following~~oversight ~~table~~of ~~sets~~Aurora ~~forth~~Bank ~~certain~~and ~~information~~EOS ~~relating~~transitioned from the OTS to the OCC. As part of the transition of primary regulators, the OCC, as successor to the OTS, is charged with undertaking a review of various matters impacting Aurora Bank and EOS which included the payment ~~status~~of dividends to our preferred and common shareholders. The OCC’s review of ~~loans~~matters relating to Aurora Bank and EOS continued throughout the transition period. Accordingly, ~~net~~our inBoard of Directors did not declare or pay a dividend on the ~~loan~~Series ~~portfolio~~D atpreferred stock or the ~~dates~~Series ~~indicated:~~B preferred stock, that would have been payable on October 17, 2011.

	Carrying Value at
	December 31,
	2010		2009
	(Dollars In Thousands)
Current	$	23,514	$	29,353
Past due (over thirty days to eighty-nine days)		10		152
Total loans in accrual status		23,524		29,505
Non-accrual loans (ninety days or more past due)		916		318
Total	$	24,440	$	29,823

On December 20, 2011, the OCC provided authorization for the declaration of dividends in an amount sufficient to maintain qualification as a REIT and avoid excise tax for the 2011 tax year provided such dividends were declared by December 31, 2011 and these dividends were paid by January 31, 2012. The Board of Directors of EOS declared such dividends on December 21, 2011, for the fourth quarter of 2011, consistent with the OCC authorization. The dividends were payable to shareholders of record as of January 5, 2012 and included cumulative dividends on the Series B preferred stock of $40.00 per share, non-cumulative dividends on the Series D preferred stock of $0.53125 per share. No dividends were declared on our common stock. Notwithstanding the lack of dividends paid on our common stock, EOS satisfied the income distribution requirements in 2011 to retain its status as a REIT.

As of ~~servicing~~December ~~agent~~31, ~~for~~2011, ~~our~~there ~~commercial~~were ~~loan~~no ~~portfolio,~~dividends ~~Aurora~~in ~~Bank~~arrears ~~monitors~~related to our ~~loans~~cumulative ~~through its~~Series ~~review~~B ~~procedures~~preferred ~~and updated appraisals~~stock. ~~Additionally,~~Dividends inon ~~order to monitor~~ the ~~adequacy of~~Series ~~cash~~D ~~flows~~preferred onstock ~~income~~are non-~~producing~~cumulative ~~properties, Aurora Bank may obtain financial statements~~ and ~~other information~~as ~~from the borrower and the guarantor~~such, ~~including,~~there ~~but~~were ~~not~~no ~~limited~~dividends ~~to,~~in ~~information relating to rental rates and income, maintenance costs, and an update of real estate property tax payments~~arrears.

Non-Accrual Loans. The performance of our loan portfolio is evaluated regularly by Aurora Bank. Management generally classifies a loan as non-accrual and the accrual of interest on loans is discontinued when the collectability of principal and interest is not probable or estimable which generally occurs when the loan is ninety days or more past due as to either principal or interest. Unpaid interest income previously accrued on such loans is reversed against current period interest income. Interest payments received on non-accrual loans are recorded as interest income. A loan is returned to accrual status when it is brought current. Loans are charged off when they are determined to be uncollectible. 13

AThe following ~~summary~~table ofsummarizes the ~~loans~~dividends onwhich ~~non-accrual~~were ~~status~~declared isand aspaid ~~follows~~by class:

	December 31,
	Year			Total Dividend Declared		Amount to Parent
	2010					2009
				(In Thousands)
				Unpaid Principal					Unpaid Principal
Series B		2011		$	75	$	72
	Carrying Value			Balance		Carrying Value			Balance
Series D		2011			1,594		—
	(Dollars In
Common Stock		2011			—		—
	Thousands)
Series B		2010			131		126
Mortgage loans on real estate on non-accrual status:
Series D		2010			1,594		—
Commercial real estate	$	692		$	802	$	318		$	792
Common Stock		2010			2,351		2,351
Multi-family residential		—			—		—			—
Series B		2009			19		18
One-to-four family residential		224			337		—			—
Series D		2009			797		—
Total loans on non-accrual status	$	916		$	1,139	$	318		$	792
Common Stock		2009			—		—
Number of loans on non-accrual status		8					7
Number of borrowers with loans on non-accrual status		8					5
Non-accrual loans, net, as a percent of loans		3.75	%				1.07	%
Non-accrual loans, net, as a percent of total assets		1.05	%				0.39	%

~~Non-accrual~~Bankruptcy ~~loans increased as~~ of December 31, 2010 as compared to December 31, 2009. During 2010, four loans became non-accrual and three loans were written off. The carrying value increased from December 31, 2009 to December 31, 2010 due to unrealized gains resulting from increases in the fair market value of the loans held for sale and the residential loan that became non-accrual during 2010. LBHI

~~Discount~~On September 15, ~~and~~2008, ~~Allowance~~LBHI, ~~for~~the ~~Loan~~indirect ~~Losses~~parent company of Aurora Bank, filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. The bankruptcy filing of LBHI has led to increased regulatory constraints being placed on Aurora Bank by its bank regulatory authorities, primarily the OCC, as successor to the OTS. These constraints affect Aurora Bank’s subsidiaries, including EOS.

~~Discounts~~Pursuant to the CMA executed on ~~Acquired~~November ~~Loans.~~30, ~~Prior~~2010, toAurora ~~February 5~~Bank, ~~2009~~LBHI, ~~our~~LB ~~loan~~Bancorp, ~~assets~~and ~~were~~the ~~considered~~OTS, ~~held~~as regulatory predecessor to the OCC, entered ~~for~~into ~~investment~~a ~~and~~Capital ~~recorded~~Maintenance atAgreement ~~accreted~~(“CMA”) ~~cost~~in which, ~~accounts~~among other things, LBHI, LB Bancorp and Aurora Bank agreed that it would seek to sell Aurora Bank or all of its non-cash assets for sale with the ~~amortization~~closing to occur within eighteen (18) months from Execution Date. If after a period of ~~any~~fifteen ~~purchase~~(15) months following the Execution Date, the OCC concluded that it was unlikely ~~discount~~that a sale of Aurora Bank would be consummated by the end of the eighteen (18) month period, Aurora Bank would have been required to prepare and ~~deferred~~submit to the OCC a plan for dissolution. The OCC granted approval to Aurora Bank for various asset sales on April 5, 2012.

Aurora Bank has determined to wind down certain businesses including EOS. On March 12, 2012 the Board of EOS approved a Plan of Liquidation and Dissolution. On March 13, 2012, Aurora Bank, the sole common shareholder of EOS, approved the Plan of Liquidation and Dissolution.

~~Table~~Regulatory ofActions Involving ~~Contents~~Aurora Bank

~~fees less an allowance for loan losses. We reviewed acquired loans for differences between~~Detailed ~~contractual~~information ~~cash~~on ~~flows~~regulatory ~~and~~actions ~~cash~~involving ~~flows~~Aurora ~~expected~~Bank toare beavailable ~~collected~~on ~~from our initial investment in~~ the ~~acquired~~ ~~loans to determine if those differences were attributable, at least in part, to credit quality. If those differences were attributable to credit quality, the loan~~OTS’s ~~contractually required~~website ~~payments receivable in excess of the amount of its cash flows expected at acquisition, or nonaccretable discount, was not accreted into income~~(www. Prior to February 5, 2009, we recognized the excess of all cash flows expected at acquisition over our initial investment in the loan as interest income using the interest method over the term of the loanots. treas.gov).

~~Prior~~Application ~~to February 5, 2009, for loans at acquisition which did not have evidence~~ of ~~deterioration~~ ofCritical ~~credit quality since origination, the discount, representing the excess of the~~Accounting ~~amount~~Policies ~~of reasonably estimable~~ and probable discounted future cash collections over the purchase price, was accreted into interest income using the interest method over the term of the loan. Prepayments were not considered in the calculation of accretion income. Additionally, discount was not accreted on non-accrual loans. If cash flows could not be reasonably estimated for any loan, and collection was not probable, the cost recovery method of accounting was used. Under the cost recovery method, any amounts received were applied against the recorded amount of the loan. Nonaccretable discount was generally offset against the related unpaid principal balance when the amount at which a loan was resolved or restructured. There was no effect on the income statement as a result of these reductions. Subsequent to acquisition, if cash flow projections improved, and it was determined that the amount and timing of the cash flows related to the nonaccretable discount were reasonably estimable and collection was probable, the corresponding decrease in the nonaccretable discount was transferred to the accretable discount and was accreted into interest income over the remaining life of the loan on the interest method. If cash flow projections deteriorated subsequent to acquisition, the decline was accounted for through a provision for loan losses included in earnings. Estimates

~~Allowance~~Our ~~for~~discussion ~~Loan~~and ~~Losses.~~analysis ~~Prior~~of tofinancial ~~February 5,~~condition and ~~2009,~~results of operations are based upon our ~~loan~~financial ~~assets~~statements, ~~were~~which ~~considered~~have ~~held~~been prepared in accordance with U.S. generally accepted ~~for~~accounting ~~investment~~principles, or GAAP. The preparation of these financial statements in conformity with GAAP requires us to make estimates and ~~recorded~~assumptions atthat ~~accreted~~affect ~~cost,~~the ~~which~~reported ~~accounts~~amounts ~~for~~of assets and liabilities at the ~~amortization~~date of ~~any~~the ~~purchase discount~~financial statements and ~~deferred~~the ~~fees,~~reported amount ~~less~~of anrevenues ~~allowance~~and ~~for~~expenses ~~loan~~in ~~losses~~the reporting period. ~~The~~Our ~~allowance~~actual ~~for~~results ~~loan~~may ~~losses~~differ ~~was increased~~from orthese ~~decreased~~estimates. ~~through~~We have provided a summary ~~provision~~of ~~for~~our ~~loan~~significant ~~losses~~accounting orpolicies ain ~~reduction~~Note 2 to our financial statements included elsewhere in this report. We describe below those accounting policies that require material subjective or complex judgments and that have the ~~allowance~~most ~~for~~significant ~~loan~~impact ~~losses~~on ~~included~~our infinancial ~~earnings~~condition and results of operations. Our management evaluates these estimates on an ongoing basis, based upon information currently available and on various assumptions management believes are reasonable as of the date on the front cover of this report.

~~Employees~~ 14

~~EOS~~Investments ~~has~~at ~~four~~Fair ~~employees, including the President and Chief Financial Officer~~Value. ~~EOS~~We ~~employees~~held investments ~~currently~~in ~~are~~non-agency ~~also~~residential ~~officers~~mortgage-backed ofsecurities ~~Aurora~~(“MBS”). ~~Bank~~These ~~and~~investments dowere ~~not~~acquired ~~receive~~at ~~separate~~the ~~compensation~~then ~~from~~current ~~EOS. EOS~~fair ~~maintains~~value ~~corporate~~in ~~records~~July ~~and~~2011 ~~audited financial statements that are separate~~ from ~~those of~~ Aurora Bank. WeThe doinvestments ~~not~~in ~~have~~our ~~any~~portfolio ~~other~~were ~~employees~~comprised ~~because~~of wenon-agency ~~have~~residential ~~retained~~MBS. ~~Aurora~~The ~~Bank to perform all~~investment ~~necessary~~portfolio ~~functions~~was ~~pursuant~~a tocomponent ~~the AA and the MSA. There are no provisions in our charter limiting any~~ of the ~~officers or directors from having any direct or indirect pecuniary interest in any mortgage~~ asset/liability tomanagement beprocess ~~acquired or disposed~~ of byAurora usBank orwho inmanaged ~~any~~these ~~transaction~~investments into ~~which~~maximize ~~we have an~~portfolio ~~interest~~yield orwithin ~~from~~capital ~~engaging~~risk inlimits ~~acquiring~~approved ~~and~~by ~~holding~~Aurora ~~mortgage~~Bank’s ~~assets.~~Board ~~None~~ of ~~the~~Directors ~~officers~~as ~~or directors~~monitored ~~currently~~by ~~has,~~the ~~nor~~Asset is/ itLiability ~~anticipated~~Management Committee ~~that~~of ~~they~~Aurora ~~will have, any such interest in our mortgage assets~~Bank.

~~Competition~~We elected the fair value option for our investments which were determined primarily based on quotes received from third parties and other information available from primary and secondary markets. We recognized unrealized gains and losses from changes in fair value. We recognized realized gains and losses on the sale or maturity of these securities using the specific identification method. We reported both realized and unrealized gains and losses on investments in the Statements of Operations. Unamortized premiums and discounts were recognized in Interest on investments in the Statements of Operations using the effective interest method over the contractual life of the security, as adjusted for expected prepayments. See Notes 4 and 6 for more information.

~~Numerous~~Loans ~~banks~~Held ~~and~~for ~~non-bank~~Sale. ~~financial~~On ~~institutions~~February ~~have~~5, 2009, ~~historically~~EOS ~~competed~~and ~~with~~ Aurora Bank entered into the February Asset Exchange pursuant to which EOS agreed to transfer the entire loan portfolio ~~for~~secured ~~deposit~~primarily ~~accounts~~by commercial real estate and ~~the~~multi-family ~~acquisition~~residential ofreal ~~loans.~~estate ~~The~~to ~~primary~~Aurora ~~factors~~Bank in ~~competing~~exchange for ~~deposit~~loans secured ~~accounts~~primarily ~~include~~by ~~interest~~residential ~~rates~~real ~~and~~estate. ~~the~~As ~~quality~~a ~~and~~result, ~~range~~during the first quarter of ~~financial~~2009 ~~services~~we ~~offered.~~reclassified ~~The primary~~all ~~factor~~of inour ~~competing~~loan assets as held for ~~purchased~~sale ~~loans~~and isrecorded ~~price~~a fair value adjustment. On July 20, 2009, EOS and Aurora Bank ~~continues~~mutually agreed to beterminate ~~subject~~the toFebruary ~~restrictions~~Asset ~~imposed~~Exchange byfollowing the ~~Order~~OTS failing to grant Aurora Bank’s requests for non-objection. ~~With~~We ~~respect~~continued to ~~deposits~~carry these loan assets at the lower of their accreted cost or market value. On November 18, ~~additional~~2009, ~~significant~~EOS ~~competition~~and ~~may~~Aurora Bank entered into the November ~~arise~~Asset ~~from~~Exchange ~~corporate~~pursuant ~~and~~to ~~government~~which ~~debt~~Aurora ~~securities,~~Bank asagreed ~~well~~to asassign ~~money~~various ~~market~~single ~~mutual~~family ~~funds~~residential mortgage loans to EOS in exchange for EOS assigning certain commercial and multi-family mortgage loans to Aurora Bank. The residential mortgage loans received were recorded at their value and currently are presented at fair value.

WeFair dovalue ~~not~~is ~~anticipate~~defined ~~that~~as wethe ~~will~~price ~~engage~~at which an asset or liability could be exchanged in ~~the~~a ~~business~~current oftransaction ~~originating~~between ~~mortgage~~knowledgeable, ~~loans~~willing parties. Where available, fair ~~Subject~~value tois ~~prior~~based ~~approval~~on byobservable ~~the~~market ~~OTS,~~prices weor ~~may~~parameters ~~acquire~~or ~~mortgage~~derived ~~assets~~from insuch ~~addition~~prices toor ~~those~~parameters. inWhere ~~the~~observable prices or ~~loan~~inputs ~~portfolio~~are ~~and~~not ~~anticipate~~available, ~~that~~valuation ~~substantially~~models ~~all~~are ~~these~~applied. ~~mortgage~~A ~~assets,~~third ifparty ~~any~~valuation ~~assets~~specialist ~~are acquired~~uses invarious ~~the~~proprietary ~~future,~~cash ~~will~~flow bemodels to ~~acquired~~derive ~~from~~fair ~~Aurora~~value ~~Bank~~estimates. ~~Accordingly,~~These wemodels doconsider ~~not~~significant ~~expect~~inputs tosuch ~~compete with~~as ~~mortgage~~loan ~~conduit~~type, ~~programs~~loan age, ~~investment~~loan ~~banking~~to ~~firms~~value ratio, ~~savings~~payment history, and property location, as well as significant assumptions such as estimated rates of loan ~~associations~~delinquency, ~~banks~~potential recovery, ~~thrift~~discount rate, and ~~loan~~the ~~associations,~~impact ~~finance~~of ~~companies,~~interest ~~mortgage~~rate ~~bankers,~~reset. Recent trade quotes or ~~insurance~~prices ~~companies~~are identified in estimating the amount at ~~acquiring~~which ~~our~~a ~~mortgage~~third ~~assets~~party ~~from~~might ~~Aurora~~purchase ~~Bank~~the loans and their yield requirements. ~~Aurora~~In ~~Bank~~addition to the estimates from the third party valuation specialist, ~~however~~management also considers market information and quotes received from third parties, ~~may~~when ~~face~~available. ~~significant~~The valuation ~~competition~~of in the ~~purchase~~loan ofportfolio ~~mortgage~~involves ~~loans~~some estimation and judgment, ~~which~~the ~~could~~degree ~~have~~of anwhich ~~adverse~~is ~~effect~~dependent on ~~our~~the ~~ability~~terms ~~to acquire~~of ~~mortgage~~the loans. Ifand ~~Aurora~~the availability of market prices and inputs.

13For our loans carried at fair value, the amount by which the carrying value of our loan assets changes as a result of an updated valuation is recorded as an unrealized gain or loss and is included in the determination of net income in the period in which the change occurs.

~~Table~~Allowance for Loan Losses. Since the loan portfolio is classified as held for sale, we no longer maintain an allowance for loan losses. Prior to February 5, 2009, our loan assets were considered held for investment and recorded at accreted cost, which accounts for the amortization of ~~Contents~~any purchase discount and deferred fees, less an allowance for loan losses. The allowance for loan losses was increased or decreased through a provision for loan losses. We recorded reductions in the allowance for loan losses to reverse unused loss reserves related to loans that have been paid off. The reduction in the allowance for loan losses was based on the volume and types of loan payoffs. The allowance for loan losses was based on the size of the portfolio and its historical performance. The determination of the allowance required management’s use of estimates and assumptions regarding the risks inherent in individual loans and the loan portfolio in its entirety. In February 2009, the loan portfolio was reclassified as held for sale and we reduced the Allowance for loan losses by $915,000.

~~Bank~~Recent ~~does~~Accounting Pronouncements. ~~not~~In ~~successfully~~January ~~compete~~2010, inthe FASB issued a standards update on improving disclosures about fair value measurements. The update required expanded disclosures including the ~~purchase~~techniques and ~~origination~~inputs used to measure fair value, transfers in and out of ~~mortgage~~Levels ~~loans~~1 and 2, ~~there~~both effective for our annual reporting period ended December 31, 2009, and ~~could~~disaggregation beof ancomponents ~~adverse~~within ~~effect~~the onreconciliation of Level 3 fair value measurements, effective for our annual ~~business~~reporting period ended December 31, 2011. The now fully adopted update to the standards did not impact our financial ~~condition~~statements, as ~~and~~it ~~results~~only impacts the footnote disclosures. Comparative disclosures are not required in the period of ~~operations~~initial adoption. We have included the applicable disclosures in Note 14, Fair Value Measurements.

The banking industry in the United States is part of the broader financial services industry which also includes insurance companies, mutual funds, consumer finance companies, and securities brokerage firms. In recent years, intense market demands, technological and regulatory changes, and economic pressures have eroded industry classifications which were once clearly defined. Continuing realignment within the financial services sector could eliminate some competitors or introduce new ones. Likewise, government programs aimed at addressing the current credit crisis could facilitate additional companies and government sponsored entities to compete with Aurora Bank for attractive investments. 15

~~Environmental~~In ~~Matters~~April 2011, the FASB issued a standards update on troubled debt restructurings. The standards update clarified guidance on a creditor’s evaluation of whether (1) it has granted a concession and (2) a debtor is experiencing financial difficulties. This update is effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. This standards update is not applicable to EOS as our loan portfolio is recorded either at fair value or the lower of accreted cost or market value. This new guidance had no impact on our results of operations or financial position. None of the loans in our portfolio had their terms modified during the year ended December 31, 2011.

In May 2011, the ~~course~~FASB ofissued ~~our~~a ~~business,~~standards weupdate to ~~may~~achieve ~~acquire~~common ~~through~~fair ~~foreclosure,~~value ~~properties~~measurement ~~securing~~and ~~loans~~disclosure requirements between GAAP and International Financial Reporting Standards we(IFRS). ~~have~~The ~~purchased~~standards ~~which~~update ~~are~~modifies the wording used to describe many of the requirements in ~~default~~GAAP for measuring fair value and for ~~involve~~disclosing ~~environmental~~information ~~matters~~about fair value measurements. ~~With~~It ~~respect~~also toclarifies ~~other real~~the ~~estate~~existing ~~owned,~~fair ~~there~~value ismeasurement arequirements. ~~risk~~The standards ~~that~~update ~~hazardous~~expands ~~substances~~disclosures orabout ~~wastes~~fair value measurements, ~~contaminants~~including oradditional ~~pollutants~~disclosures regarding the valuation process ~~could~~for befair ~~discovered~~value onmeasurements ~~such~~categorized ~~properties~~as ~~after~~Level ~~acquisition.~~3 Inof ~~such~~the ~~event~~fair value hierarchy, wethe ~~may~~use beof ~~required~~a ~~to remove~~nonfinancial ~~such~~asset ~~substances~~in a way that differs from the ~~affected~~asset’s ~~properties~~best atuse ~~our~~when ~~sole~~that ~~cost~~asset ~~and~~is ~~expense~~measured at fair value, and ~~may~~the categorization by level of the fair value hierarchy for items that are not measured at fair value on the balance sheet but for which the fair value is required to be disclosed. This ~~able~~update tois ~~recoup~~effective ~~any~~for offirst ~~such~~interim ~~costs~~or ~~from~~annual ~~any~~period ~~third~~beginning ~~party~~after December 15, 2011. We are evaluating the impact of this update on our annual financial statement disclosures.

~~Available Information~~ 16

WeResults file an annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports with the SEC. You may read and copy any document filed by us at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 on official business days during the hours of ~~10:00 a.m.~~Operations ~~to 3:00 p.m. Please call the SEC at 1-800-SEC-0330~~ for ~~information~~ on the ~~Public~~Years ~~Reference~~Ended ~~Room. We do not maintain an internet website~~December 31, ~~but the SEC~~2011 ~~maintains a website that contains annual, quarterly,~~ and ~~current reports, proxy statements, and other information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov.~~ 2010

14The following table summarizes the changes in our results from operations for the years ended December 31, 2011 and 2010:

	Years Ended December 31,
						Change
	2011			2010		Amount			Percent
	(In Thousands)
Interest income:
Interest and fees on loans	$	1,286		$	2,022	$	(736	)		(36.4	)%
Interest on investments		734			—		734			—
Interest on interest-bearing deposits		342			172		170			98.8
Total interest income		2,362			2,194		168			7.7

Realized and unrealized gains on loans held for sale		71			6,498		(6,427	)		(98.9	)
Unrealized loss on repossessed asset		(82	)		—		(82	)		—
Unrealized losses on investments		(339	)		—		(339	)		—
Net revenue		2,012			8,692		(6,680	)		(76.9	)

Operating expenses:
Loan servicing and advisory services		421			470		(49	)		(10.4	)
Other general and administrative		567			565		2			0.4
Total operating expenses		988			1,035		(47	)		(4.5	)

Net income		1,024			7,657		(6,633	)		(86.6	)
Preferred stock dividends		1,669			1,725		(56	)		(3.2	)

Net (loss) income available to common stockholder	$	(645	)	$	5,932	$	(6,577	)		(110.9	)%

~~ITEM~~Interest ~~1A. RISK FACTORS~~ income

AThe ~~number~~increase ofin ~~risk~~interest ~~factors,~~income ~~including,~~from ~~without limitation,~~ the ~~risks~~year ended ~~factors~~December ~~set forth below~~31, ~~may~~ ~~cause~~2011 ~~our~~compared ~~actual results~~ to ~~differ~~the ~~materially~~year ~~from~~ended ~~anticipated~~December ~~future results~~31, ~~performance~~2010 ~~or achievements~~is ~~expressed~~primarily ora ~~implied~~result inof ~~any~~increases ~~forward-looking statements contained~~ in ~~this~~interest ~~Annual~~income ~~Report~~ on ~~Form~~our investment ~~10-K.~~portfolio ~~All~~purchased ofin ~~these~~2011 ~~factors should be carefully reviewed,~~ and ~~the~~interest ~~reader~~income ~~of this Annual Report~~ on ~~Form 10~~interest-Kbearing ~~should~~deposits, beoffset ~~aware~~by ~~that~~a ~~there~~decrease ~~may~~in beinterest ~~other~~and ~~factors that could cause difference in~~fee ~~future~~income ~~results,~~on ~~performance or achievements~~loans.

~~Risks Related to the LBHI Bankruptcy, Settlement Agreement and Regulatory Oversight of Aurora Bank~~ Investments

~~EOS~~Interest isincome ~~dependent~~on investments inincreased ~~virtually~~due ~~every~~to ~~phase~~our purchase of ~~its~~certain ~~operations~~MBS from Aurora Bank during 2011. The investment portfolio earned an annualized yield of 3.32% based on the ~~diligence~~coupon rate as adjusted for the amortization of purchase premiums and ~~skill~~discounts. Approximately 76% of the ~~management~~ fair value of ~~Aurora~~the ~~Bank.~~investment ~~The~~portfolio ~~Settlement~~as ~~Agreement~~of ~~requires~~December ~~LBHI~~31, to2011 ~~either~~was ~~sell~~held orin ~~dissolve~~securities ~~Aurora Bank~~with ~~within~~a ~~defined~~fixed ~~time~~coupon ~~frames~~rate of 3. 50%.

Aurora Bank, which holds all of the common stock of EOS, is involved in every aspect of our operations and is able to approve unilaterally almost all of our corporate actions as its sole common shareholder. We have four employees and the employees of EOS currently are also officers of Aurora Bank. EOS does not have any other employees because we have retained Aurora Bank to perform all necessary functions pursuant to the AA and the MSA. Loans

~~Under~~The decrease in interest and fee income on loans was due to a decrease in the AAaverage ~~between~~balance ~~EOS~~of loans and ~~Aurora~~a ~~Bank,~~decrease ~~Aurora~~in ~~Bank~~the isyield ~~responsible~~of loans. The average unpaid principal balance of our loans for ~~administering~~2011 ~~the~~totaled $27.2 million compared to $37.8 million for 2010. This decrease is primarily attributable ~~day-~~to~~-day~~ ~~activities~~loan payments. For the year ended December 31, ~~including~~2011, ~~monitoring~~the ofyield on our ~~credit~~loan ~~quality~~portfolio ~~and~~decreased ~~advising~~to it4.73% ~~with~~compared ~~respect~~ to 5.35% for 2010. For the ~~acquisition~~year ended December 31, ~~management~~2011, ~~financing~~interest and ~~disposition~~fee ofincome ~~mortgage~~recognized ~~assets~~on loan payoffs increased $97,000 ~~and~~or ~~our~~56% ~~operations~~to $270,000 ~~generally.~~from ~~Under~~$173,000 ~~the~~for ~~MSA~~2010. ~~between~~The ~~EOS~~level of interest and ~~Aurora~~fee ~~Bank~~income recognized on loan payoffs varies for numerous reasons, ~~Aurora~~as ~~Bank~~further discussed ~~services~~below. ~~our~~The ~~commercial~~yield ~~loans~~from regularly scheduled interest and ~~oversees~~ accretion income decreased to 3.74% for the ~~servicing~~year ofended December 31, 2011 from 4.89% for the ~~residential~~same ~~loan~~period ~~portfolio~~in 2010 primarily due to a reduction in average balances.

Pursuant to the CMA, LBHI agreed that it will seek to sell Aurora Bank within eighteen (18) months from Execution Date. If after a period of fifteen (15) months following the Execution Date, the OTS concludes that a sale of Aurora Bank will not be consummated by the end of the eighteen (18) month period, Aurora Bank will prepare and submit to the OTS a plan for dissolution. The bankruptcy court will have the final review and approval of any proposed agreement for the sale of Aurora Bank. 17

The ~~loss~~following oftable ~~the~~sets ~~services~~forth, offor ~~Aurora~~the ~~Bank~~periods indicated, or the ~~inability~~components of ~~Aurora~~interest ~~Bank~~and tofees ~~effectively provide~~on ~~such~~loans. ~~services~~There ~~whether~~can asbe ano ~~result~~assurance ofregarding ~~the~~future ~~loss~~interest ~~of key members of Aurora Bank’s management~~income, ~~early~~ ~~termination of~~ including the ~~agreements~~yields ~~or otherwise,~~ and ~~our~~related ~~inability~~level toof ~~replace~~ such ~~services on favorable terms~~income, or atthe ~~all,~~relative ~~could~~portion ~~adversely~~attributable ~~affect our ability~~ to ~~conduct~~loan ~~our~~payoffs ~~operations~~as ~~and~~compared ~~our results~~to ofother ~~operations~~sources.

Failure to honor the Capital Maintenance Agreement may result in an automatic exchange directive.

	Years Ended December 31,
	2011					2010
	Interest Income		Yield			Interest Income		Yield
	(In Thousands)
Regularly scheduled interest and accretion income	$	1,016		3.74	%	$	1,849		4.89	%
Interest and fee income recognized on loan pay-offs:
Accretable discount		270		0.99			173		0.46
Other interest and fee income		—		—			—		—
		270		0.99			173		0.46
Total interest from loans	$	1,286		4.73	%	$	2,022		5.35	%

OnNone ~~September 15, 2008, LBHI filed a voluntary petition for relief under Chapter 11~~ of ~~Title 11 of~~ the ~~United~~loans ~~States Code~~ in ~~the~~our ~~United~~portfolio ~~States~~had ~~Bankruptcy~~their terms ~~Court~~modified ~~for~~during the ~~Southern~~year ~~District~~ended ofDecember ~~New York. Aurora Bank is an indirect subsidiary of LBHI and EOS is an operating subsidiary of Aurora Bank. Aurora Bank has not been placed into bankruptcy~~31, ~~reorganization, conservatorship, or receivership and EOS has not filed for bankruptcy protection~~2011.

On the Execution Date, LBHI agreed to enter into the CMA with Aurora Bank and the OTS. Pursuant to the CMA, LBHI agreed for the duration of LBHI’s ownership of Aurora Bank to maintain Aurora Bank’s tier 1 risk based capital ratios at levels greater than the thresholds required to achieve a “wellInterest-~~capitalized” designation under OTS regulations. As of December 31, 2010, as set~~bearing forth in a public filing with the OTS, Aurora Bank’s capital ratios were above the thresholds required under the CMA. The classification of Aurora Bank’s capitalization level is subject to review and acceptance by the OTS. deposits

~~Notwithstanding~~For interest-bearing deposits, the ~~Settlement~~net ~~Agreement,~~decrease in the ~~bankruptcy~~average orbalance ~~other~~was ~~factors~~due ~~may~~to ~~limit~~ the ~~ability~~ ofcombined ~~LBHI~~effect toof ~~contribute~~cash ~~capital~~used for tothe ~~Aurora~~purchase ~~Bank~~of ~~now~~the orinvestment inportfolio and the ~~future.~~payment ~~The~~of ~~potential~~operating ~~inability of~~expenses ~~LBHI~~and todividends ~~contribute~~partially ~~capital~~offset toby ~~Aurora~~cash ~~Bank~~provided by ~~increases~~repayments on the ~~risk~~investment ~~that~~and ~~the~~loan ~~OTS~~portfolios. ~~may~~The ~~direct~~annualized ~~the~~percentage yield ~~automatic~~on ~~exchange~~interest-bearing ofdeposits ~~the~~increased ~~Series D~~by ~~preferred~~0.45% ~~stock~~to of0.75% ~~EOS~~ for ~~preferred~~the ~~shares~~year ofended ~~Aurora~~December ~~Bank~~31, at2011 ~~a ratio~~as ofcompared ~~one~~to ~~Series D~~0.30% ~~preferred~~for ~~share~~the ~~for~~same period ~~one-hundredth~~in of2010. ~~one~~

15 Realized and unrealized gains and losses

~~Table~~Realized and unrealized gains and losses primarily reflects fair value adjustments to our investment and loan portfolios. Realized and unrealized gains on loans held for sale decreased $6.4 million, or 98.5%, to $0.1 million in 2011 from $6.5 million in 2010. There were positive valuation adjustments on the loan portfolio in both 2011 and 2010, however, the amount of ~~Contents~~the valuation adjustment was less in 2011. The valuation methodology was consistent for both periods. During 2011 there was a negative valuation adjustment on the investment portfolio of $0.3 million with no corresponding transaction in 2010. Valuations of these assets were determined or established based on quotes received from third parties along with pricing and cash flow models with numerous inputs. As non-cash components of our Statements of Operations, valuation adjustments to our investment and loan portfolios were excluded from the determination of income required to be distributed to meet REIT requirements under the IRC.

~~preferred~~Operating share of Aurora Bank. Should that automatic exchange occur the Series D shareholders may hold bank stock for an institution that has inadequate capital, and whose stock is not listed and therefore possess an asset that is not liquid. expenses

~~EOS~~Loan isservicing ~~subject~~and advisory expenses decreased $49,000, or 10.4%, to ~~extensive~~$421,000 ~~government~~in ~~regulation~~2011 ~~and~~from ~~supervision~~$470,000 in 2010. The decrease in 2011 was primarily due to decreases in the UPB of the loan portfolio.

~~EOS,~~Other asgeneral ~~an operating subsidiary of Aurora Bank, is subject to extensive federal regulation~~ and ~~supervision.~~ ~~Banking~~administrative ~~regulations~~expenses ~~are primarily intended to protect depositors’ funds, federal~~were ~~deposit~~comparable ~~insurance funds,~~ and ~~the~~increased ~~banking~~only ~~system as a whole~~$2, ~~not shareholders. These regulations have an effect on our capital structure~~000, ~~dividend~~or ~~policy, and growth, among other things~~0. ~~Congress and federal regulatory agencies continually review and revise banking laws~~4%, ~~regulations, and policies~~ to ~~enhance the safety and soundness of the banking system. Changes to statutes~~$567, ~~regulations~~000 ~~or regulatory policies, including changes~~ in ~~interpretation~~2011 orfrom ~~implementation of statutes~~$565,000 ~~regulations or policies, could affect us~~ in ~~substantial and unpredictable ways~~2010. Failure to comply with laws, regulations or policies could result in, among other things, sanctions by regulatory agencies, civil money penalties, and/or reputation damage, which could have a material adverse effect on our business, financial condition, and results of operations.

OnPreferred ~~July 21,~~stock ~~2010,~~dividends the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Act”) was signed into law. Under the Act financial institutions, including Aurora Bank will be subject to significant new conditions and limitations. In addition, Aurora Bank’s primary federal regulator, the OTS, will be dissolved with supervision and enforcement powers being transferred to the Office of the Comptroller of the Currency (“OCC”). This transfer of supervisory and enforcement powers will directly impact EOS. The OCC will become the administrator of the Order, as well as be the agency empowered with approving dividend declaration requests and other actions impacting the capital and/or assets of EOS. There can be no assurance that the OCC will approve any dividend declaration request, or any other requests impacting the capital and/or assets of EOS. declared

~~The~~Preferred ~~failure~~stock ofdividends ~~Aurora~~declared ~~Bank~~were ~~could~~$1,669,000 and ~~result~~$1,725,000 infor the ~~loss~~years ofended ~~our~~December ~~funds~~31, on2011 ~~deposit~~and ~~with~~2010, ~~Aurora~~respectively. ~~Bank,~~The ~~which~~amount of dividends in 2011 was less than the ~~could~~amount ~~reduce~~from 2010 because of the ~~amount~~cumulative aspect of ~~cash~~Series ~~available~~B topreferred ~~pay~~stock. ~~distributions,~~The ~~including~~dividend ~~dividends~~declared onfor the ~~Series D~~third quarter of 2010 included dividends in arrears for Series B preferred stock from 2009.

AsAt of December 31, ~~2010,~~2011 ~~the~~and ~~FDIC, will only insure amounts up to $250,000 per depositor in any particular bank. As of December 31,~~ 2010, wethere ~~had~~were ~~approximately $62.4 million of interest~~no ~~bearing~~dividends ~~deposits with Aurora Bank, which is significantly~~ in ~~excess~~arrears ofrelated ~~federally-insured levels. If Aurora Bank were~~ to ~~fail~~our orSeries beB ~~placed~~preferred ~~into~~stock. ~~receivership,~~Dividends weon ~~may~~the ~~lose~~Series ~~any~~D ~~amount~~preferred ofstock ~~deposit~~are ~~value over federally~~non-~~insured~~cumulative ~~amounts. The loss of deposit value could reduce the amount of cash we have~~and ~~available~~as tosuch, ~~pay~~there ~~distributions,~~were ~~including~~no dividends onin ~~the Series D preferred stock~~arrears.

16 18

~~Table~~Results of ~~Contents~~Operations for the Years Ended December 31, 2010 and 2009

~~Risks~~The ~~Related~~following totable ~~our~~summarizes ~~Loan~~the ~~Portfolio~~changes in our results from operations for the years ended December 31, 2010 and 2009:

Fluctuations in interest rates could reduce our earnings and affect our ability to pay dividends.

	Years Ended December 31,
						Change
	2010		2009			Amount			Percent
	(In Thousands)
Interest income:
Interest and fees on loans	$	2,022	$	3,057		$	(1, 035)			(33.9	)%
Interest on interest-bearing deposits		172		507			(335	)		(66.1	)
Total interest income		2,194		3,564			(1,370	)		(38.4	)

Realized and unrealized gains (losses) on loans held for sale		6,498		(16,263	)		22,761			140.0
Reduction in allowance for loan losses		—		915			(915	)		—
Net revenue (loss)		8,692		(11,784	)		20,476			173.8
Operating expenses:
Loan servicing and advisory services		470		282			188			66.7
Other general and administrative		565		758			(193	)		(25.5	)
Total operating expenses		1,035		1,040			(5	)		(0.5	)

Net income (loss)		7,657		(12,824	)		20,481			159.7
Preferred stock dividends		1,725		816			909			111.4

Net income (loss) available to common stockholder	$	5,932	$	(13,640	)	$	19,572			143.5	%

~~Our~~Interest income consists primarily of interest earned on our mortgage assets and cash deposits. Approximately 68% of our accrual mortgage assets bear interest at adjustable rates. If there is a decline in interest rates, we will experience a decrease in income available to be distributed to our stockholders. If interest rates decline, we may also experience an increase in prepayments on our mortgage assets and may find it difficult to purchase additional mortgage assets bearing rates sufficient to support the payment of dividends. Conversely, an increase in mortgage rates could result in decreased interest income and increased non-interest expense related to workouts and other collection efforts. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on our loans may lead to an increase in non-accrual loans, which could have a material adverse effect on our results of operations.

The ~~realizable~~decrease ~~value~~in interest income from the year ended December 31, 2010 compared to the year ended December 31, 2009 is a result of a decrease in the average balance of loans and a decrease in the yield of loans. The average balance of our loans for 2010 totaled $37.8 million compared to $46.2 million for 2009. This decrease is primarily attributable to loan payments. For the year ended December 31, 2010, the yield on our loan portfolio ~~may~~decreased ~~differ~~to 5.35% compared to 6.62% for 2009. For the year ended December 31, 2010, interest and fee income recognized on loan payoffs decreased $171,000, or 50%, to $173,000 from ~~fair~~$344,000 ~~value~~for 2009. The level of interest and fee income recognized on loan payoffs varies for numerous reasons, as further discussed below. The yield from regularly scheduled interest and accretion income decreased to 4.89% for the year ended December 31, 2010 from 5.87% for the same period in 2009 primarily due to a reduction in average balances.

The ~~fair~~average balance ~~value~~ of our ~~loan~~interest-bearing ~~portfolio~~deposits isincreased ~~estimated~~$10.1 ~~based~~million ~~upon~~or ~~various~~21.4% ~~cash~~to ~~flow models~~$57.6 ~~These~~million ~~models~~for ~~consider~~the ~~significant~~year ~~inputs~~ended ~~such~~December ~~as loan type~~31, ~~loan age~~2010, compared ~~loan~~ to ~~value~~$47.5 ~~ratio, payment~~million ~~history,~~for ~~and~~2009. ~~property~~The ~~location,~~changes asin ~~well~~the asaverage ~~significant~~balances ~~assumptions such as estimated rates~~ of ~~loan delinquency, potential recovery, discount rate, and the impact of~~ interest-bearing ~~rate~~deposits ~~reset. Recent trade quotes or prices~~ are ~~identified in estimating~~ the ~~amount~~result atof ~~which a third party might~~dividend ~~purchase~~payments ~~the~~offset ~~loans~~by ~~and~~cash ~~their~~flows ~~yield requirements. Management also considers market information and quotes received~~ from ~~third~~loan ~~parties, when available~~repayments. The ~~valuation~~rate ofearned ~~the loan portfolio involves a significant level of management estimation and judgment, the degree of which is dependent~~ on ~~the~~interest-bearing ~~terms~~deposits ofhas ~~the~~remained ~~loans~~unchanged ~~and~~since ~~the~~its ~~availability~~decrease ofin ~~market~~July ~~prices~~2009 ~~and~~from ~~inputs~~1.75% ~~The~~to ~~realizable~~0.30%, ~~value~~resulting ofin ~~the loan~~a ~~portfolio~~decrease ~~may~~in ~~differ~~interest ~~from fair value~~ income and ~~actual~~yield ~~losses~~for ~~could~~the ~~materially~~year ~~and~~ended ~~adversely~~December ~~affect our~~31, ~~results of operations~~2010.

~~Continued~~Prior ~~declines~~to inFebruary ~~home~~5, ~~prices~~2009, ~~would~~when ~~negatively~~a ~~impact~~loan was paid off, the ~~performance~~excess of ~~residential~~any ~~mortgages~~cash received over the net investment was recorded as interest income. In addition to the amount of purchase discount that was recognized at that time, income may also have included interest owed by the borrower prior to our acquisition of the loan, interest collected if on non-accrual status, prepayment fees and other loan fees. For periods after February 5, 2009, when a loan paid off, the excess of any cash received over the net investment was recorded as income.

Beginning in 2007, there has been a steep decline in the national housing market with home prices falling dramatically and increases in foreclosures. The global recession has brought increased levels of unemployment and underemployment. If housing prices continue to fall and unemployment and underemployment continue to rise, the number of defaults, and related foreclosures, on residential mortgages will remain at their current elevated levels or possibly increase. In addition, governmental initiatives could impact the ability of lenders to foreclose on residential properties and realize the value of the collateral for residential loans that are in default. These factors could have a material adverse effect on a portfolio of loans secured primarily by residential real estate such as ours, which could result in a material adverse effect on our financial condition and results of operations. 19

~~Loans~~The infollowing ~~our~~table ~~portfolio~~sets ~~will~~forth, ~~most~~for ~~likely~~the beperiods indicated, ~~originated~~the bycomponents ~~other~~of ~~parties~~interest and fees on loans.

EOS does not originate mortgage loans but rather purchases mortgage loans originated by third parties. It is anticipated that additional mortgage assets would be acquired from Aurora Bank. Loans purchased by Aurora Bank would likely consist of loans originated by third parties which may not be subject to the same level of due diligence that Aurora Bank would have conducted had it originated the loans and may lack current financial information. In addition, such loans may have incomplete legal documentation and outdated appraisals. Although it is anticipated that Aurora Bank would conduct a comprehensive acquisition review, it also may rely on certain information provided by the parties that originated the loans, who may have substantially different underwriting standards. These differences may include less rigorous appraisal requirements and debt service coverage ratios, and less rigorous analysis of property location and environmental factors, building condition and age, tenant quality, compliance with zoning regulations, any use restrictions, easements or rights of ways that may impact the property value, and the borrower’s ability to manage the property and service the mortgage. As a result, we may not have information with respect to an acquired loan which, if known at the time of acquisition, would have caused it to reduce its bid price or not bid for the loan at all. This may adversely affect our yield on loans. Loans such as these could have a higher risk of becoming non-accrual loans in the future and adversely affect our results of operations.

	Years Ended December 31,
	2010					2009
	Interest Income		Yield			Interest Income		Yield
	(In Thousands)
Regularly scheduled interest and accretion income	$	1,849		4.89	%	$	2,713		5.87	%
Interest and fee income recognized on loan pay-offs:
Accretable discount		173		0.46			309		0.67
Other interest and fee income		—		—			35		0.08
		173		0.46			344		0.75
Total interest from loans	$	2,022		5.35	%	$	3,057		6.62	%

17 Allowance for loan losses

~~Table~~Following the reclassification of ~~Contents~~the loan portfolio as held for sale in February 2009, we did not maintain an allowance for loan losses. Prior to February 2009, we recorded reductions in the allowance for loan losses to reverse unused loss reserves related to loans that have been paid off. The reduction in the allowance for loan losses was based on the volume and types of loan payoffs. The allowance for loan losses was based on the size of the portfolio and its historical performance. The determination of the allowance required management’s use of estimates and assumptions regarding the risks inherent in individual loans and the loan portfolio in its entirety.

~~The~~Realized ~~loans~~and inunrealized ~~our~~gains ~~portfolio are concentrated in California~~ and ~~adverse conditions in that market could adversely affect our financial results.~~ losses

~~Properties~~Realized ~~underlying~~and ~~the~~unrealized ~~current~~gains ~~mortgage~~(losses) ~~assets~~on ofloans held ~~EOS~~for ~~are~~sale ~~concentrated~~increased ~~in California~~$22.8 ~~As of December 31~~million, ~~2010,~~to ~~approximately~~a ~~40%~~$6.5 ofmillion ~~the~~gain ~~carrying~~in ~~value~~2011 offrom ~~our~~a ~~mortgage~~$16.3 ~~loans~~million ~~were~~loss ~~secured by properties located~~ in ~~California~~2010. ~~Adverse~~The ~~economic,~~increase ~~political~~in ~~or business developments or natural~~gains ~~hazards~~was ~~may~~primarily ~~affect~~due ~~this area and the ability of property owners in this area~~ to ~~make~~changes ~~payments of principal and interest on the underlying mortgages. Beginning~~ in ~~2007~~fair ~~and~~value throughout the following years, the housing and real estate sectors in California were particularly hard hit by the recession with higher overall foreclosure rates than the national average. If California experiences further adverse economic, political or business conditions, or natural hazards, we will likely experience higher rates of ~~loss and delinquency on our mortgage~~ loans ~~than~~held iffor ~~our loans were more geographically diverse~~sale.

AOperating ~~portion of our loan portfolio is made up of commercial mortgage loans, which are generally riskier than other types of loans.~~ expenses

~~Commercial~~Loan ~~mortgage~~servicing ~~loans~~and ~~constituted~~advisory ~~approximately~~expenses ~~28% of the carrying value of our loan~~increased ~~portfolio at December 31~~$188,000, ~~2010.~~or ~~Commercial mortgage loans are generally subject to greater risks than other types of loans~~66. ~~Our commercial mortgage loans~~7%, ~~like~~to ~~most commercial mortgage loans~~$470, ~~generally~~000 ~~lack~~in ~~standardized~~2010 ~~terms,~~from ~~may have shorter maturities than other mortgage loans and may not be fully amortizing~~$282,000 ~~meaning~~in ~~that they have an unpaid principal balance or “balloon” payment due on maturity~~2009. The ~~commercial~~increase ~~real~~was ~~estate~~primarily ~~properties~~due ~~underlying our commercial mortgage loans also tend~~ to bethe ~~unique~~Amended ~~and~~MSA ~~are more difficult to value than other real estate properties. They are also subject to relatively greater environmental risks than other types of loans~~ and to the Amended ~~corresponding~~AA ~~burdens and costs of compliance~~ with ~~environmental~~Aurora ~~laws~~Bank ~~and~~which ~~regulations.~~changed Because of these risks related to commercial mortgage loans, we may experience higher rates of default on our mortgage loans than we would if our loan portfolio was more diversified and included a greater number of owner-occupied residential or other mortgage loans. Higher rates of default will cause the ~~level~~fee ~~of impaired loans to increase, which may have a material adverse effect on our results of operations~~structure.

WeOther ~~may~~general ~~not~~and beadministrative ~~able~~expenses decreased $193,000, or 25.5% to ~~purchase~~$565,000 ~~loans~~in at2010 ~~the~~from ~~same~~$758,000 ~~volume~~in or2009. ~~with~~The ~~the~~decrease ~~same~~in ~~yields~~2011 aswas ~~purchased~~primarily attributable to decreases in ~~the~~legal ~~past~~fees and external audit expenses.

~~Future~~Preferred ~~loan~~stock ~~purchases,~~dividends if any, will depend on the availability of pools of loans offered for sale and Aurora Bank’s ability to submit successful bids or negotiate satisfactory purchase prices. Historically, the acquisition of loans has been highly competitive and there can be no assurance that Aurora Bank will be able to purchase loans at the same volume or with the same yields as we have historically purchased or that we will acquire any loans from Aurora Bank or at all. This may interfere with our ability to maintain the requisite level of mortgage assets to maintain our qualification as a REIT. If volumes of loans owned by us decline or the yields on these loans decline, we could experience a material adverse effect on our financial condition. declared

WePreferred ~~could~~stock bedividends ~~held~~declared ~~responsible~~were $1,725,000 and $816,000 for ~~environmental~~the ~~liabilities~~years ended December 31, 2010 and 2009, respectively. The amount for 2009 includes payment of ~~properties~~dividends iton the ~~acquires~~Series ~~through~~B and Series D preferred stock for the first quarter of 2009 prior to the communication from the OTS requiring non-objection ~~foreclosure~~for payment of dividends. The amount for 2010 includes dividends on the Series B and Series D preferred stock for the third and four quarters of 2010 and 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.

IfAt weDecember ~~choose to foreclose on a defaulted mortgage loan to recover our investment~~31, we2011 ~~may~~and ~~be subject to environmental liabilities related to the underlying real property. Approximately 28% of the carrying value in our portfolio at~~ December 31, 2010, ~~was for commercial mortgage loans, which~~ ~~generally~~there ~~are~~were subject to relatively greater environmental risks than other types of loans. Hazardous substances or wastes, contaminants, pollutants or sources thereof may be discovered on properties during our ownership or after a sale to a third party. The amount of environmental liability could exceed the value of the real property. There can be no ~~assurance~~dividends ~~that~~in wearrears ~~would~~related not be fully liable for the entire cost of any removal and clean-up on an acquired property, that the cost of removal and clean-up would not exceed the value of the property, or that we could recoup any of the costs from any third party. In addition, we may find it difficult or impossible to ~~sell the~~our ~~property~~Series ~~prior~~B topreferred ~~or following any such remediation~~stock. ~~The incurrence of any significant environmental liabilities with respect to a property securing a mortgage loan could have a material adverse effect on our financial condition.~~

18 20

~~Table~~Financial ~~of Contents~~Condition

~~Risks~~Interest-bearing ~~Related~~Deposits towith ~~Tax Status as a REIT~~ Parent

~~Our~~The ~~qualification~~balance asof ainterest-bearing ~~REIT~~deposits ~~requires~~decreased $35.2 usmillion to ~~satisfy~~$27.2 ~~numerous~~million ~~requirements~~at ~~(some~~December on31, an2011 ~~annual and~~compared ~~quarterly~~to ~~basis)~~$62.4 ~~established~~million ~~under~~at ~~the~~December ~~highly~~31, ~~technical~~2010. ~~and~~The ~~complex~~decrease ~~Internal~~in ~~Revenue~~the ~~Code~~balance ~~provisions,~~of ~~including~~interest-bearing ~~share~~deposits ~~ownership~~is ~~tests,~~primarily ~~organizational~~the ~~requirements~~result of our purchase, ~~distribution~~at ~~tests~~the then current fair value, ~~gross~~of certain investments from ~~income~~Aurora ~~tests,~~Bank in 2011 and ~~asset~~preferred ~~tests~~stock and common stock dividend payments, offset by cash flows from loan repayments.

IfInvestment wePortfolio ~~fail to qualify as a REIT, we will be subject to federal and state income tax at regular corporate rates.~~

IfThe webalance ~~fail~~of investments increased to ~~qualify~~$41.5 million as aof ~~REIT~~December ~~for any taxable year~~31, we2011 ~~will~~compared ~~be subject~~ to ~~federal~~$0 ~~income tax,~~as ~~including~~of ~~any~~December ~~applicable alternative minimum tax~~31, ~~on our taxable income at regular corporate rates~~2010. AsThe aincrease ~~result,~~was the ~~amount~~result ~~available~~of ~~for~~the ~~distribution~~purchase toof ~~our~~MBS ~~stockholders~~at ~~would~~the then becurrent ~~reduced~~fair ~~for the~~value ~~year~~in orJuly ~~years~~2011 ~~involved.~~from InAurora ~~addition~~Bank, ~~unless~~slightly ~~entitled~~offset toby ~~relief~~the ~~under~~cash ~~statutory~~flows ~~provisions, we would be disqualified~~ from ~~treatment as a REIT for~~ the ~~four~~securities ~~taxable~~generated ~~years~~by ~~following~~repayments on the ~~year~~underlying ~~which qualification~~mortgage ~~was lost~~loans. ~~The~~No ~~failure~~investments towere ~~qualify~~sold asduring ~~a REIT would reduce our net earnings available for distribution to our stockholders because of~~ the ~~additional~~year ~~tax~~ended ~~liability~~December ~~for~~31, ~~the year or years involved~~2011.

~~Although~~Actual wematurities ~~currently~~of ~~intend~~MBS toare ~~operate~~generally inshorter than astated ~~manner~~contractual ~~designed~~maturities toprimarily ~~qualify~~ as a ~~REIT,~~result ~~future~~of prepayments of principal of the underlying mortgages. The stated contractual ~~economic,~~final ~~market,~~maturity ~~legal,~~of ~~regulatory,~~the ~~tax~~holdings orin ~~other~~our ~~considerations~~investment ~~may~~portfolio ~~cause~~ranges ~~EOS’~~up ~~directors~~to 25 years, but the expected maturity is subject to ~~revoke~~change based ~~our~~on ~~REIT~~the ~~election~~actual and expected future prepayments of the underlying loans. The ~~tax~~estimated ~~law~~weighted ~~prohibits~~average usmonths ~~from~~to ~~electing~~maturity of ~~treatment~~the assecurities in the table below are based upon our prepayment expectations, which were estimated using a ~~REIT~~combination of assumptions, ~~for~~market ~~the~~data ~~four~~and ~~taxable~~internal ~~years~~models. ~~following~~As of December 31, 2011, the ~~year~~average weighted average life of ~~any~~all ~~such~~holdings ~~revocation~~in our investment portfolio was 2.3 years. The following table summarizes our securities at fair value, according to their estimated weighted average life classifications as of December 31, 2011 and 2010:

If we do not distribute 90% of our net taxable income, we may not qualify as a REIT.

	As of December 31, 2011							As of December 31, 2010
Weighted average life	Fair Value		Amortized Cost		Weighted Average Coupon			Fair Value		Amortized Cost		Weighted Average Coupon
	(in Thousands)							(in Thousands)

Less than or equal to one year	$	—	$	—		—	%	$	—	$	—		—	%
Greater than one year and less than or equal to two years		—		—		—			—		—		—
Greater than two years and less than or equal to three years		41,470		41,809		3.32			—		—		—
Greater than three years and less than or equal to five years		—		—		—			—		—		—
Greater than five years		—		—		—			—		—		—

Total	$	41,470	$	41,809		3.32	%	$	—	$	—		—	%

WeLoan generally are required each year to distribute to our stockholders at least 90% of our net taxable income, excluding net capital gains. We may retain the remainder of REIT taxable income or all or part of our net capital gain, but will be subject to tax at regular corporate rates on such income. In addition, we are subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions considered as paid with respect to any calendar year are less than the sum of (1) 85% of our ordinary income for the calendar year, (2) 95% of our capital gains net income for the calendar year, and (3) 100% of any undistributed income from prior periods. In order to qualify as a REIT, distributions must be declared by September 15th of the following fiscal year and paid by December 31st. Portfolio

~~Restrictions~~The onloan ~~our~~portfolio ~~ability~~is tosummarized ~~declare and pay dividends contained in the Order could result in EOS failing to qualify~~ as a REIT. Futhermore, to the extent our REIT taxable income may exceed the actual cash received for a particular period, we may not have sufficient liquidity to make distributions necessary to retain our REIT qualification. follows:

If ownership of the stock of EOS becomes concentrated in a small number of individuals, EOS may fail to qualify as a REIT.

	December 31,
	2011					2010
	Carrying Value		Percentage of Total			Carrying Value		Percentage of Total
	(In Thousands)

Mortgage loans on real estate:
Commercial real estate	$	3,934		23.7	%	$	6,866		28.1	%
Multi-family residential		403		2.4			850		3.5
One-to-four family residential		12,270		73.9			16,724		68.4
Total	$	16,607		100.0	%	$	24,440		100.0	%

Not more than 50% in value of a company’s outstanding shares may be owned, directly or indirectly, by five or fewer individuals, as defined in the Internal Revenue Code to include certain entities, during the last half of each taxable year. We monitor EOS’ ownership, however, it is possible that the ownership of our preferred stock might become sufficiently concentrated in the future such that five or fewer individuals would be treated as having constructive ownership of more than 50% of the value of our stock. Also, difficulty monitoring the ownership and constructive ownership of our outstanding shares could evolve and, therefore, there can be no assurance that we will continue to meet the share ownership requirement. 21

IfNon-accrual weloans, donet ~~not~~of ~~meet~~discount, ~~certain~~totaled $123,000 ~~gross~~at ~~income~~December ~~tests~~31, we2011 ~~may~~representing ~~not~~three ~~qualify~~loans asand athree ~~REIT~~borrowers. Non-accrual loans, net of discount, totaled $916,000 at December 31, 2010 representing eight loans and eight borrowers.

WeCash are required to satisfy two gross income tests for each taxable year. At least 75% of our gross income must be derived directly or indirectly from rents from real property, investments in real estate and/or real estate mortgages, dividends paid by another REIT, and from some types of temporary investments. Additionally at least 95% of our gross income must be derived from any combination of income qualifying under the 75% test and dividends, non-real estate mortgage interest, and gain from the sale or disposition of stock or securities. If we fail to Flows

	Years Ended December 31,
	2011			2010			2009
	(In Thousands)
Net cash provided by operating activities	$	6,511		$	11,295		$	2,472
Net cash (used in) provided by investing activities		(39,367	)		1,827			7,225
Net cash used in financing activities		(2,534	)		(2,376	)		(1,631	)
Net change in cash and cash equivalents	$	(35,390	)	$	10,746		$	8,066

~~Table~~Cash ofprovided ~~Contents~~by operating activities decreased by $4.8 million for 2011 as compared to 2010, primarily attributable to a decrease in loan repayments. Cash provided by operating activities increased by $8.8 million for 2010 as compared to 2009, primarily attributable to loan repayments partially offset by lower interest income.

~~satisfy~~Cash ~~one~~provided orby ~~both~~investing activities ofwas ~~the~~$1.8 ~~gross~~million ~~income~~in ~~tests~~2010 ~~for~~as ~~any~~compared ~~taxable~~to ~~year,~~cash weused ~~may~~in ~~nevertheless qualify~~investing asactivities of $39.4 million in 2011, a ~~REIT~~change of $41.2 million for ~~the~~2011 ~~year~~as ifcompared weto ~~are~~2010 ~~entitled~~primarily due to ~~relief~~the ~~under~~purchase ~~certain~~of ~~provision~~our ofinvestments ~~the~~in ~~Internal~~2011, partially offset ~~Revenue~~by ~~Code.~~proceeds Infrom ~~this~~repayments ~~case,~~of ainvestments ~~penalty~~and ~~tax~~higher ~~would~~loan ~~still~~repayments. beCash ~~applicable~~provided by investing activities decreased by $5.4 million for 2010 as compared to 2009 due to loan repayments from loans held for sale included in operating activities.

IfCash weused doin ~~not~~financing ~~meet~~activities ~~certain~~increased $158,000 ~~asset~~for ~~tests~~2011 as compared to 2010 due to higher payments of preferred stock dividends, weoffset ~~may~~by ~~not~~lower ~~qualify~~payments of common stock dividends. Cash used in financing activities increased $745,000 for 2010 as acompared ~~REIT~~to 2009 due to increases in dividends paid.

We are required to meet four asset tests at the close of each quarter of our taxable year. First, at least 75% of the value of our total assets must be represented by real estate assets (which include other real estate investment trusts) and certain cash related items. Second, not more than 25% of the value of our total assets may be represented by securities other than those in the 75% asset class. Third, except for securities included in the first test, we may not own more than 5% of the value of our total assets in any one equity investment in other REITs, qualified REIT subsidiary, or taxable REIT subsidiary and we may not own securities representing more than 10% of the voting power or value in any of those investments. Fourth, not more than 25% of the value of our total assets may be represented by securities of one or more taxable REIT subsidiaries. There are certain exceptions to these tests. If we fail to satisfy the 5% or 10% asset tests described after a 30Off-~~day cure period provided by the Internal Revenue Code and the non~~Balance-~~qualifying~~Sheet asset is the lesser of less than 1% of the total value of our assets at the end of the applicable quarter or $10,000,000 and we dispose of the non-qualifying assets within six months after the last day of the applicable quarter in which the failure to satisfy the asset test is discovered, we will be deemed to have meet such tests. For violations due to reasonable cause and not willful neglect, we may avoid disqualification as a REIT by disposing of sufficient assets to meet the asset test within such six month period, paying a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the non-qualifying assets and disclosing certain information to the Internal Revenue Service. If we cannot avail ourselves of these relief provisions, or if we fail to timely cure any noncompliance with the asset tests, we would cease to qualify as a REIT. Arrangements

20 We do not have any off-balance sheet arrangements.

~~Table~~Interest ofRate ~~Contents~~Risk

~~Risks~~As ~~Related~~of December 31, 2011, we held financial assets which were sensitive to ~~future~~changes ~~dividends~~in ~~and~~interest ~~the~~rates ~~Potential~~and ~~for~~were ~~Exchange~~subject orto ~~Redemption~~the offollowing ~~Preferred~~interest ~~Stock~~ rate risks.

~~Bank~~Our ~~regulators~~investment ~~may~~portfolio ~~continue~~consisted toof ~~limit~~non-agency residential MBS of which approximately 76% of the ~~ability~~fair value as of ~~EOS~~December to31, ~~declare~~2011 was held in securities with a fixed coupon rate of 3.50% and ~~pay~~the ~~dividends~~remaining 24% was held in securities with a variable coupon rate. These MBS were comprised of residential adjustable rate mortgage loans with contractual interest rates that are affected by changes in market interest rates. The secondary market price of a MBS will sometimes rise less than a typical bond when interest rates decline, but may drop more when interest rates rise. These MBS were subject to greater interest rate risk than with other bonds.

~~Because~~The ~~EOS~~majority isof anour ~~operating~~loan ~~subsidiary~~portfolio consisted of ~~Aurora~~variable ~~Bank,~~rate ~~the~~loans ~~OTS~~with ~~and~~contractual ~~FDIC~~interest ~~have~~rates ~~the~~that ~~right~~were ~~to examine~~affected ~~EOS~~by ~~and~~changes ~~our~~in ~~activities~~market ~~and~~interest torates. ~~impose~~In ~~restrictions~~addition, ~~on Aurora Bank or EOS which impacts our~~falling ~~ability~~interest torates ~~conduct~~would ~~business~~tend ~~according~~ to ~~our~~reduce ~~business objectives, which could materially adversely affect~~ the ~~financial~~amount ~~condition~~of ~~and~~interest ~~results~~earned ofon ~~operations~~our ofinterest-bearing ~~EOS~~cash deposits.

~~Following~~Significant ~~execution~~Concentration of ~~the~~Credit Settlement Agreement, on November 30, 2010, the OTS issued the Amended Order, which amended the Original Order. However, the provisions in the Original Order that require Aurora Bank to ensure that each of its subsidiaries, including EOS, comply with the Original Order were not amended. These operating restrictions, amount other things, restrict transactions with affiliates, capital distributions to shareholders, (including redemptions), contracts outside the ordinary course of business, and changes in senior executive officers, board members or their employment arrangements without prior written notice to the OTS. Risk

~~Under~~We ~~the~~had ~~Order,~~cash ~~EOS~~and ~~must~~cash ~~continue~~equivalents toof ~~seek~~$27.2 ~~and~~million as ~~receive~~of ~~approval~~December or31, ~~non-objection~~2011. ~~from~~These ~~the~~funds ~~OTS for~~were ~~the~~held ~~declaration,~~in ~~payment,~~interest-bearing and ~~distribution~~non-interest-bearing ofaccounts ~~dividends~~with toAurora ~~our~~Bank. ~~preferred~~The ~~and common~~FDIC-provided ~~shareholders.~~coverage ~~There~~on isthese noaccounts ~~assurance~~as ~~that~~of ~~the~~December ~~OTS~~31, ~~will~~2011 ~~approve~~was ~~any~~limited to ~~request~~$250,000. ~~for~~Cash ~~the~~in ~~declaration~~excess ~~or payment~~ of ~~dividends~~FDIC coverage limitations is subject to credit risk.

~~Furthermore, any future dividends on the Series D preferred stock will be payable only when, as and if declared by the Board of Directors.~~ 22

~~Changes~~Our investment portfolio consisted of investments in ~~the~~specific ~~performance~~tranches of ~~Aurora~~larger ~~Bank~~securitization ~~may~~trusts. ~~result~~Each intranche has unique credit characteristics and the ~~Series D~~securitization ~~preferred~~trusts ~~stock~~have ~~being~~defined ~~subject~~seniority levels for each tranche within their trust for the allocation of loan repayments and losses, commonly referred to ~~automatic~~as ~~exchange~~the ~~into~~waterfall. ~~preferred~~Credit ~~shares~~risk ofarises relative to our position within the waterfall. Aurora Bank monitors atthe ~~any~~credit ~~time~~condition of the collateral underlying our MBS investments.

~~The~~Concentration ~~returns~~of ~~from~~credit risk anwas ~~investment~~present infor ~~the~~our ~~Series D~~investment ~~preferred~~and ~~stock~~loan ~~will~~portfolios ~~depend~~with respect to ageographical distribution. A significant portion of the ~~extent~~collateral onunderlying the ~~performance~~holdings in our investment portfolio and ~~capital~~our loan portfolio was primarily real property located in California. As of ~~Aurora~~December ~~Bank~~31, 2011, this geographical concentration was 41.3% Ifof ~~(i) Aurora~~the ~~Bank~~weighted isaverage ~~undercapitalized,~~carrying ~~(ii)~~value of our investment portfolio orand if45.0% of the ~~OTS~~carrying ~~anticipates~~value ~~that~~of ~~Aurora~~our ~~Bank~~loan ~~will~~portfolio, ~~become~~respectively. ~~undercapitalized,~~These ~~(iii) or~~assets ifmay ~~Aurora~~experience ~~Bank~~a ishigher default rate in the event ~~placed~~of ~~into~~adverse ~~bankruptcy~~economic, ~~reorganization,~~political ~~conservatorship~~or business developments or ~~receivership,~~natural ~~the~~hazards ~~OTS~~in California that may ~~direct~~affect the ability of property ~~automatic~~owners ~~exchange~~to make payments of principal and interest on the ~~preferred~~underlying ~~shares~~mortgages. ofThe ~~EOS~~housing ~~for~~and ~~preferred~~real ~~shares~~estate ofsectors ~~Aurora~~in ~~Bank~~California have been particularly impacted by the recession with higher overall foreclosure rates than the national average. If California experiences further adverse economic, ~~which~~political or business conditions, or natural hazards, we would potentially experience loss ~~represent~~of aninterest and principal on our investment inportfolio ~~Aurora~~and ~~Bank~~higher rates of loss and ~~not~~delinquency inon ~~EOS.~~our ~~Under~~mortgage ~~these~~loans ~~circumstances:~~than if the underlying loans were more geographically diverse.

• a holder of Series D preferred stock would be a preferred stockholder of Aurora Bank if Aurora Bank becomes undercapitalized, if Aurora Bank is placed into bankruptcy, reorganization, conservatorship, or receivership, or if the OTS, in its sole discretion, anticipates Aurora Bank becoming undercapitalized. The conversion ratio is one Series D preferred share for one-hundredth of one preferred share of Aurora Bank. An investment in Aurora Bank is also subject to risks that are distinct from the risks associated with an investment in EOS. For example, an investment in Aurora Bank would involve risks relating to the capital levels of, and other federal regulatory requirements applicable to, Aurora Bank and the performance of Aurora Bank’s loan portfolio, other assets, and other business lines. Aurora Bank stock is not listed. Aurora Bank also has significantly greater liabilities than does EOS; • if a liquidation of Aurora Bank occurs, the claims of depositors and creditors of Aurora Bank and/or the OTS would have priority over the claims of holders of the preferred shares of Aurora Bank, and therefore, a holder of Series D preferred stock likely would receive, if anything, substantially less than such holder would receive had the Series D preferred stock not been exchanged for preferred shares of Aurora Bank; and • the exchange of the Series D preferred stock for preferred shares of Aurora Bank would be a taxable event to a holder of Series D preferred stock under the Internal Revenue Code, and such holder would incur a gain or a loss, as the case may be, measured by the difference between such holder’s basis in the Series D preferred stock and the fair market value of Aurora Bank preferred shares received in the exchange.23

21 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Table~~Market risk is the risk of ~~Contents~~loss from adverse changes in market prices and interest rates. Interest rate risk is highly sensitive to many factors, including domestic and international economic influences, governmental, monetary and tax policies, political considerations and other factors that may be beyond our control. We are subject to interest rate risk in connection with our assets.

~~General~~Our ~~Business~~market ~~Risks~~risk arises primarily from interest rate risk inherent in holding financial assets including investment securities, loans and interest-earning deposits, held for other than trading purposes, as applicable.

~~Our~~• ~~business~~The carrying value of our investment portfolio as of December 31, 2011 was $41.5 million and ~~financial~~was ~~results~~comprised of residential MBS which are ~~significantly~~sensitive to interest rate risk as the underlying variable rate mortgage loans respond to changes in interest rates which can impact the contractual interest rates and prepayment speeds. • The carrying value of our loan portfolio as of December 31, 2011 was $16.7 million and the majority of our loans were variable rate with contractual interest rates that can be affected by ~~general~~changes ~~business~~in market interest rates. • Cash and ~~economic conditions~~interest-bearing deposits with Aurora Bank were $27. 2 million at December 31, 2011 and had original maturities of ninety days or less. Most cash is held in a money market account that bears interest at rates determined by Aurora Bank, which generally follow federal funds rates, and is subject to change at any time.

~~Since 2007~~Generally, ~~the~~a ~~U.S.~~period ~~economy~~of ~~has~~rising ~~experienced~~interest arates would ~~severe~~tend ~~economic~~to ~~downturn.~~result ~~Business~~in ~~activity across~~an aincrease ~~wide~~in ~~range~~net ofinterest ~~industries~~income and ~~regions~~conversely, ~~has~~a ~~suffered~~period ~~significant~~of ~~declines~~falling ~~with~~interest ~~many~~rates ~~showing reduced~~would ~~earnings~~tend ~~or,~~to inadversely affect ~~some~~net ~~cases,~~interest ~~losses~~income. ~~The~~Whereas ~~U.S.~~this ~~economy~~holds ~~has~~true ~~seen~~for ~~increased~~interest ~~levels~~income ~~of commercial~~generated ~~and~~from ~~consumer~~our ~~delinquencies~~interest-bearing ~~and~~cash ~~defaults~~deposits, ~~lack~~interest income from the variable rate mortgage loans that underlie all of ~~consumer~~the ~~confidence~~holdings in our investment portfolio and ~~spending,~~a majority of our loan portfolio would respond differently to fluctuations in interest rates. Lower interest rates may result in reduced ~~availability~~interest income ofas ~~commercial~~prepayments ~~credit,~~may ~~and~~increase. ~~increased~~Higher ~~unemployment~~interest rates can also result in reduced interest income from increases in defaults and ~~underemployment~~losses.

WeAs doof ~~not~~December ~~expect~~31, ~~that~~2011, ~~these~~EOS ~~difficult~~had ~~conditions~~assets ~~are~~subject to ~~likely~~interest torate ~~improve~~risk, ~~significantly~~however, inEOS ~~the near~~did ~~future.~~not Autilize ~~worsening~~hedges ofor ~~these~~other ~~conditions~~instruments ~~would~~to ~~likely~~offset ~~exacerbate~~interest ~~the~~rate ~~adverse~~risk. ~~effects~~As of ~~these difficult~~December ~~market conditions and lead to additional foreclosures~~31, ~~delinquencies~~ 2011, ~~and~~EOS ~~bankruptcies, which~~did ~~could~~not have aany ~~negative~~interest-bearing ~~impact on our financial condition and results of operations~~liabilities.

~~Our~~Effect ~~results~~on ~~will~~Fair beValue ~~affected~~and byNet ~~factors~~Income ~~beyond our control.~~

~~Our~~As ~~mortgage~~of ~~loan~~December ~~portfolio~~31, is2011, ~~subject~~we performed a sensitivity analysis to ~~local~~determine ~~economic~~the ~~conditions~~impact ~~which~~on ~~could~~interest ~~affect~~income ~~the~~ and asset value of ~~the~~our ~~real~~interest ~~estate~~sensitive assets ~~underlying~~from ~~our~~various ~~loans~~changes ~~and~~in ~~therefore~~interest rates. ~~our~~The ~~results~~analysis showed that the largest portion of ~~operations~~the ~~will be~~impact ~~affected~~on a percentage basis was driven by ~~various~~our ~~conditions~~interest-bearing cash deposits. With our cash deposits, a change in the ~~real~~interest ~~estate~~rate ~~market~~has a direct impact on the entire balance. Although there is no impact on the fair value itself, ~~all~~the impact on our interest income can be relatively large as every dollar of ~~which~~the ~~are~~holding ~~beyond~~is affected. As of December 31, 2011, our ~~control~~estimated interest income changed by approximately $68, ~~such~~000 ~~as:~~or 33% for each change of 25 basis points in the interest rate.

•For ~~local~~our ~~and~~investment ~~other~~portfolio, ~~economic~~as ~~conditions affecting real estate values; • the continued financial stability~~ of aDecember 31, ~~borrower~~2011, ~~and~~ the ~~borrower’s~~change ~~ability~~in toour ~~make~~estimated ~~mortgage~~interest ~~payments;~~income •ranged ~~the~~from ~~ability~~approximately of$15,000 ~~tenants~~ to ~~make~~$20,000 ~~lease~~(a ~~payments;~~change ~~• the ability~~ of aless ~~property~~than to2%) ~~attract~~for each ~~and~~change ~~retain tenants, which may in turn be affected by local conditions, such as oversupply~~ of ~~space~~25 orbasis apoints ~~reduction~~ in ~~demand for rental space in~~ the ~~area; • regional experiences of adverse business conditions or natural disasters; •~~ interest rate. ~~levels~~The ~~and~~change ~~the~~in ~~availability~~estimated ofasset ~~credit~~value toranged ~~refinance~~from ~~mortgage~~approximately ~~loans~~$40,000 ~~at or prior~~ to ~~maturity; and • increased operating costs~~$60,000 (a ~~including~~change ~~energy~~of ~~costs,~~less ~~real~~than ~~estate~~2%) ~~taxes~~for ~~and~~each ~~costs~~change of ~~compliance~~25 ~~with~~basis ~~environmental~~points ~~controls~~in ~~and~~the ~~regulations~~interest rate.

~~The relationship between EOS and Aurora Bank may create conflicts of interest.~~ 24

~~Aurora~~Table ~~Bank and its affiliates may have interests which are not identical to those~~ of ~~EOS and conflicts of interest have arisen and may arise in the future with respect to transactions between us and Aurora Bank such as:~~ Contents

~~Acquisition~~ITEM ~~of mortgage assets~~8. ~~Subject~~FINANCIAL toSTATEMENTS ~~prior~~AND ~~approval~~SUPPLEMENTARY by the OTS, we may from time to time purchase additional mortgage assets. If we acquire any additional mortgage assets, it is anticipated that substantially all of such mortgage assets will be acquired from Aurora Bank on terms that are comparable to those that could be obtained by us if such mortgage assets were purchased from unrelated third parties. Although any purchases will be structured to take advantage of the underwriting procedures of Aurora Bank, and while we believe that any agreements and transactions between us and Aurora Bank and/or its affiliates, will be fair to all parties and consistent with market terms, neither EOS nor Aurora Bank are required to obtain a third-party valuation to confirm that we are paying fair market value. Additionally, through limiting our source of purchased mortgage assets solely to those originated or purchased by Aurora Bank, our portfolio will generally reflect the nature, scope, and risk of Aurora Bank’s portfolio rather than a more diverse portfolio composed of mortgage loans also purchased from other lenders.DATA

	Page
Reports of Independent Registered Public Accounting Firms	26
Balance Sheets	28
Statements of Operations	29
Statements of Changes in Stockholders’ Equity	30
Statements of Cash Flows	31
Notes to Financial Statements	32

~~Table of Contents~~25

~~Servicing~~Table of mortgage assets by Aurora Bank. Aurora Bank in its role as servicer under the terms of the MSA received an annual servicing fee on the gross average unpaid principal balances of loans serviced for the immediately preceding month. The MSA requires Aurora Bank to service the loan portfolio in a manner substantially the same as for similar work performed by Aurora Bank for transactions on its own behalf. While we believe that Aurora Bank will diligently pursue collection of any non-accrual loans, there can be no assurance that this will be the case. Our ability to make timely payments of dividends will depend in part upon Aurora Bank’s prompt collection efforts on behalf of EOS. Future dispositions of mortgage assets to Aurora Bank or its affiliates. The MSA provides that foreclosures and dispositions of the mortgage assets are to be performed in a manner substantially the same as for similar work performed by Aurora Bank on its own behalf. However, there can be no assurance that any such agreement or transaction will be on terms as favorable to it as would have been obtained from unaffiliated third parties. Aurora Bank may seek to exercise its influence on our affairs so as to cause the sale of the mortgage assets owned by EOS and their replacement by lesser quality loans purchased from Aurora Bank or elsewhere which could adversely affect our business and our ability to make timely payments of dividends.Contents

~~The~~ REPORT ~~controls~~OF ~~and~~INDEPENDENT ~~procedures~~REGISTERED ofPUBLIC ~~EOS~~ACCOUNTING ~~may fail or be circumvented.~~FIRM

~~Management~~The isBoard ~~responsible for our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system~~ of ~~controls,~~Directors ~~however well designed~~ and ~~operated,~~ ~~is based in part on certain assumptions and can provide only reasonable, not absolute,~~Stockholders ~~assurances that the objectives~~ of ~~the system are met. Any failure or circumvention of our controls~~ ~~and~~EOS ~~procedures~~Preferred ~~or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition.~~ Corporation:

~~The~~We ~~Board~~have audited the accompanying balance sheets of EOS ~~Directors~~Preferred ~~has~~Corporation ~~broad~~(a ~~discretion~~Massachusetts tocorporation) ~~revise~~(the “Company”) as of December 31, 2011 and 2010, and the related ~~strategies~~statements of ~~EOS~~operations, changes in stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

~~The~~We ~~Board~~conducted our audits in accordance with the standards of ~~Directors~~the ~~establishes~~Public ~~our~~Company ~~investment~~Accounting Oversight Board (United States). Those standards require that we plan and ~~operating~~perform ~~strategies~~the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. ~~These~~The ~~strategies~~Company is not required ~~may~~to behave, ~~revised~~nor ~~from~~were ~~time~~we engaged to ~~time~~perform atan ~~the~~audit ~~discretion~~of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the ~~Board~~circumstances, but not for the purpose of ~~Directors~~expressing ~~without~~an aopinion ~~vote~~on the effectiveness of the Company’s internal control over financial reporting. ~~EOS~~Accordingly, ~~stockholders~~we express no such opinion. ~~Changes~~An inaudit ~~our~~also ~~strategies~~includes ~~could~~examining, ~~have~~on a ~~negative~~test ~~effect~~basis, onevidence ~~shareholders~~supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~EOS~~In isour ~~subject~~opinion, the financial statements referred to above present fairly, in all material respects, the ~~risk~~financial position of ~~litigation~~EOS Preferred Corporation at December 31, 2011 and 2010, and the ~~outcome~~results of ~~proceedings~~its itoperations ~~may~~and ~~become~~its ~~involved~~cash flows for the years then ended in conformity with accounting principles generally ~~could~~accepted ~~materially~~in ~~adversely~~the ~~affect~~United ~~our~~States ~~business~~of America.

~~From~~The ~~time~~accompanying tofinancial ~~time,~~statements wehave ~~may~~been beprepared assuming ~~involved~~that inthe ~~litigation~~Company ~~incidental~~will tocontinue ~~our~~as ~~business~~a going concern; however, ~~including without~~as ~~limitation~~described in Note 1 to the financial statements, athe ~~variety~~Board of Directors of ~~legal~~EOS ~~proceedings~~Preferred ~~with~~Corporation ~~borrowers.~~approved ~~Although~~a weplan ~~intend~~of toliquidation ~~vigorously defend~~and ~~against~~dissolution ~~all~~on ~~potential~~March ~~actions~~12, ~~there~~2012 ~~can~~and bethe noCompany ~~assurance~~commenced liquidation ~~that~~shortly ~~the~~thereafter. ~~ultimate~~As ~~outcome~~a ofresult, ~~any actions~~the Company will ~~not~~change ~~cause~~its abasis ~~loss~~of oraccounting ~~materially~~for ~~adversely~~periods ~~affect~~subsequent ~~our~~to ~~business~~March or12, 2012 ~~results~~from ofthe ~~operations~~going-concern basis to liquidation basis.

~~ITEM~~/s/ ~~1B.~~Grant ~~UNRESOLVED~~Thornton ~~STAFF COMMENTS~~ LLP

~~None.~~ Dallas, Texas

~~ITEM~~April 2.13, ~~PROPERTIES~~ 2012

We conduct all of our business out of offices maintained by Aurora Bank. The mailing address is 1271 Avenue of the Americas, 46th Floor, New York, NY 10020. EOS does not directly reimburse Aurora Bank for the use of such space. 26

~~ITEM~~Table 3.of ~~LEGAL PROCEEDINGS~~ Contents

~~From~~REPORT ~~time~~OF toINDEPENDENT ~~time,~~REGISTERED wePUBLIC ~~may be involved in routine litigation incidental to our business,~~ACCOUNTING ~~including a variety of legal proceedings with borrowers, which could contribute to the Company’s expenses, including the costs of carrying non-accrual loans.~~ FIRM

23The Board of Directors and Stockholders of

~~Table~~EOS ofPreferred Corporation ~~Contents~~(formerly Capital Crossing Preferred Corporation):

~~ITEM~~We 4.have ~~(REMOVED~~audited ~~AND~~the ~~RESERVED~~accompanying statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2009 of EOS Preferred Corporation (the “Company”), formerly Capital Crossing Preferred Corporation. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

~~Not~~ We ~~applicable~~conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

~~PART~~In IIour opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of EOS Preferred Corporation for the year ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

~~ITEM~~The 5accompanying financial statements have been prepared assuming that EOS Preferred Corporation will continue as a going concern. ~~MARKET~~As ~~FOR~~more ~~REGISTRANT’~~fully described in Note 3, on September 15, 2008, Lehman Brothers Holdings Inc. (“Lehman Brothers”), indirect parent company to Aurora Bank FSB (“Aurora Bank”), and ultimate parent company of EOS Preferred Corporation, filed a voluntary petition under Chapter 11 of the U.S. ~~COMMON~~Bankruptcy Code. ~~EQUITY~~As further described in Note 3 to the financial statements, ~~RELATED~~Aurora ~~STOCKHOLDER~~Bank, ~~MATTERS~~the ~~AND~~sole ~~ISSUER~~owner ~~PURCHASES~~of OFthe ~~EQUITY~~common ~~SECURITIES~~stock of EOS Preferred Corporation, is subject to a Cease and Desist Order, dated January 26, 2009, and a Prompt Corrective Action Directive, dated February 4, 2009, issued by the Office of Thrift Supervision (the “OTS”), requiring Aurora Bank, among other matters, to submit a capital restoration plan and a liquidity management plan, and imposing restrictions on certain activities of Aurora Bank and EOS Preferred Corporation. The bankruptcy of Lehman Brothers and the ability of the Office of the Comptroller of the Currency (formerly the OTS) to regulate and restrict the business and operations of EOS Preferred Corporation, in light of the Cease and Desist Order and the Prompt Corrective Action Directive, raise substantial doubt about EOS Preferred Corporation’s ability to continue as a going concern. The 2009 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~Common~~/s/ ~~Stock~~ Ernst & Young LLP New York, New York March 31, 2010

In connection with our formation on March 20, 1998, we issued 100 shares of our common stock to Capital Crossing Bank. These shares of common stock were issued in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. There is no established public trading market for the common stock. As of March 31, 2011, there were 100 issued and outstanding shares of common stock, all of which were held by Aurora Bank. 27

OnTable ~~February 14, 2007, Capital Crossing Bank was acquired by Aurora Bank through a two step merger transaction. An interim thrift subsidiary~~ of Aurora Bank was merged into Capital Crossing Bank. Immediately following such merger, Capital Crossing Bank was merged into Aurora Bank. Under the terms of the agreement, Lehman Brothers paid $30.00 per share in cash in exchange for each outstanding share of Capital Crossing Bank. Effective as of April 27, 2009, Lehman Brothers Bank, FSB, the owner of all of our common stock, formally changed its name to Aurora Bank FSB. Contents

~~During~~EOS ~~2010,~~Preferred dividends of $2.4 million were declared to the common stockholder and no returns of capital were paid to the common stock holder. During 2009, no dividends or returns of capital were declared or paid to the common shareholder. During 2008, dividends of $2.8 million were declared to the common stockholder and returns of capital totaling $20.2 million were paid to the common stockholder. Corporation

~~Preferred~~Balance ~~Stock~~ Sheets

On(In ~~March 31~~Thousands, ~~1998,~~except ~~Capital~~per ~~Crossing~~share Bank capitalized EOS by transferring mortgage loans valued at $140.7 million in exchange for 1,000 shares of EOS’ 8% Cumulative Non-Convertible Preferred Stock, Series B, valued at $1.0 million and 100 shares of EOS’ common stock valued at $139.7 million. The carrying value of these loans approximated their fair values at the date of contribution. data)

On May 11, 2004, we closed our public offering of 1,500,000 shares of our 8.50% Non-cumulative exchangeable preferred stock, Series D. The net proceeds to EOS from the sale of Series D preferred stock was $35.3 million. The Series D preferred stock became redeemable at the option of EOS at a redemption price of $25.00 per share plus accrued and unpaid dividends, effective July 15, 2009, with the prior approval of the OTS and the FDIC. The Series D preferred stock has a liquidation amount of $25.00 per share plus any accrued and unpaid dividends for the quarter in which the liquidation occurs.

	December 31,
	2011			2010
Assets
Cash account with parent	$	—		$	184
Interest-bearing deposits with parent		27,179			62,385
Total cash and cash equivalents		27,179			62,569

Investments at fair value		41,470			—

Loans held for sale, at fair value		12,188			16,505
Loans held for sale, at lower of accreted cost or market value		4,419			7,935
Total Loans		16,607			24,440

Real estate acquired through foreclosure		91			—
Accrued interest receivable		228			213
Total assets	$	85,575		$	87,222

Liabilities and Stockholders’ Equity
Accrued expenses	$	47		$	159
Accounts payable to parent		63			87
Dividends payable		798			798
Dividends payable to parent		36			902
Total liabilities		944			1,946

Stockholders’ 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 issued and outstanding		15			15
Common stock, $.01 par value, 100 shares authorized, issued and outstanding		—			—
Additional paid-in capital		95,320			95,320
Accumulated deficit less dividends		(10,704	)		(10,059	)
Total stockholders’ equity		84,631			85,276
Total liabilities and stockholders’ equity	$	85,575		$	87,222

~~All~~See ~~shares~~accompanying ofnotes EOS’ 9.75% Non-cumulative exchangeable preferred stock, Series A, and 10.25% Non-cumulative exchangeable preferred stock, Series C, were redeemed on March 23, 2007. The Series B preferred stock and Series D preferred stock remain outstanding and subject to ~~their~~financial ~~existing terms and conditions, including the call feature with respect to the Series D preferred stock~~statements. At any time following the occurrence of certain changes in the tax laws or regulations concerning REITs, EOS will have the right to redeem the Series D preferred stock in whole, subject to the prior written approval of the OTS. We would have the right to redeem the Series D preferred stock if we received an opinion of counsel to the effect that, as a result of changes to the tax laws or regulations:

~~• dividends paid or to be paid by us with respect to our capital stock are not, or will not be, fully deductible by us for income tax purposes; or • we are otherwise unable to qualify as a REIT.~~28

24 Table of Contents

~~Table~~EOS ofPreferred ~~Contents~~Corporation

~~The~~Statements ~~occurrence~~ of ~~such changes in the tax laws or regulations will not, however, give the holders of the Series D preferred stock any right to have their shares redeemed.~~ Operations

~~In accordance with the Series~~ D registration statement, the OTS may direct in writing the automatic exchange of the Series D preferred stock for preferred shares of Aurora Bank at a ratio of one Series D preferred share for one hundredth of one preferred share of Aurora Bank if Aurora Bank becomes undercapitalized under prompt corrective action regulations, if Aurora Bank is placed into bankruptcy, reorganization, conservatorship or receivership, or if the OTS, in its sole discretion, anticipates Aurora Bank will become undercapitalized in the near term (~~“Exchange Event”~~In Thousands).

Dividend Policy

	Years Ended December 31,
	2011			2010		2009

Interest income:
Interest and fees on loans	$	1,286		$	2,022	$	3,057
Interest on investments		734			—		—
Interest on interest-bearing deposits		342			172		507
Total interest income		2,362			2,194		3,564

Realized and unrealized (losses) gains on loans held for sale		71			6,498		(16,263	)
Unrealized loss on repossessed asset		(82	)		—		—
Unrealized losses on investments		(339	)		—		—
Reduction in allowance for loan losses		—			—		915
Net revenue (loss)		2,012			8,692		(11,784	)

Operating expenses:
Loan servicing and advisory services		421			470		282
Other general and administrative		567			565		758
Total operating expenses		988			1,035		1,040
Net income (loss)		1,024			7,657		(12,824	)

Preferred stock dividends		1,669			1,725		816
Net (loss) income available to common stockholder	$	(645	)	$	5,932	$	(13,640	)

~~Until~~See ~~the~~accompanying ~~second~~notes ~~quarter of 2009, we historically paid an aggregate amount of dividends with respect~~ to ~~our~~financial ~~outstanding shares of capital stock equal to substantially all of our REIT taxable income~~statements. We, subject to directives of the OTS, intend to pay dividends on our preferred stock and common stock in amounts necessary to continue to preserve our status as a REIT under the Internal Revenue Code. In order to remain qualified as a REIT, we must distribute annually at least 90% of our REIT taxable income, excluding capital gains, to stockholders. Because in general it will be in our interest, and in the interests of our stockholders, to remain qualified as a REIT, this tax requirement creates a significant incentive to declare and pay dividends when we have sufficient resources and ability to do so. We anticipate that none of the dividends on outstanding preferred shares will constitute non-taxable returns of capital.

Dividends will be declared at the discretion of the Board of Directors after considering our distributable funds, financial requirements, tax considerations, regulatory, and other factors. Our distributable funds will consist primarily of interest and principal payments on the mortgage assets, interest on deposits, and we anticipate that a significant portion of such assets will earn interest at adjustable rates. Accordingly, if there is a decline in interest rates, we will experience a decrease in income available to be distributed to our stockholders. In a period of declining interest rates, we also may find it difficult to purchase additional mortgage assets bearing rates sufficient for us to be able to pay dividends on the Series D preferred stock. 29

~~The~~Table ~~Order requires Aurora Bank and each~~ of its subsidiaries, including EOS, to comply with the operating restrictions contained in the Order. These operating restrictions, among other things, restrict transactions with affiliates, capital distributions to shareholders (including redemptions), transfers or exchanges of assets, contracts outside the ordinary course of business, and changes in senior executive officers, board members or their employment arrangements without prior written notice to the OTS. Contents

~~The OTS has informed Aurora Bank that prior approval of the OTS is required for payment by~~ EOS of ~~dividends~~Preferred on the Series D preferred stock. There can be no assurance, that future dividends on the Series D preferred stock will receive approval from the OTS. Furthermore, any future dividends on the Series D preferred stock will be payable only when, as and if declared by the Board of Directors. Corporation

~~The~~Statements ~~OTS may direct in writing upon the occurrence~~ of anChanges Exchange Event the automatic exchange of the Series D preferred stock for preferred shares of Aurora Bank. If the OTS directs the automatic exchange of the Series D preferred stock for Aurora Bank preferred shares at this time, holders of the Series D preferred stock would become holders of Aurora Bank preferred stock at a time when Aurora Bank is subject to the Order. Thus, Aurora Bank would likely be prohibited from paying dividends on its preferred shares, including its preferred shares issued in ~~exchange for the EOS~~Stockholders’ ~~Series D preferred stock. Further, Aurora Bank’s ability to pay dividends on its preferred~~ shares following the automatic exchange also would be subject to various restrictions under OTS regulations and would be payable only when, as and if declared by Aurora Bank’s board of directors. Any such dividends would be paid out of Aurora Bank’s capital surplus. Equity

25 Years Ended December 31, 2011, 2010, and 2009

~~Table~~(In ofThousands, ~~Contents~~except per share data)

ITEM 6. SELECTED FINANCIAL DATA

	Preferred Stock Series B				Preferred Stock Series D				Common Stock				Additional Paid-in		Accumulated Deficit Less			Total Stockholders
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Dividends			Equity
Balance at December 31, 2008		1	$	—		1,500	$	15		—	$	—	$	95,121	$	—		$	95,136

Net loss		—		—		—		—		—		—		—		(12,824	)		(12,824	)
Cumulative dividends declared on preferred stock, Series B ($20.00 per share)		—		—		—		—		—		—		—		(19	)		(19	)
Dividends declared on preferred stock, Series D ($0.53125 per share)		—		—		—		—		—		—		—		(797	)		(797	)
Parent contribution		—		—		—		—		—		—		199		—			199
Balance at December 31, 2009		1		—		1,500		15		—		—		95,320		(13,640	)		81,695

Net income		—		—		—		—		—		—		—		7,657			7,657
Cumulative dividends declared on preferred stock, Series B ($140.00 per share)		—		—		—		—		—		—		—		(131	)		(131	)
Dividends declared on preferred stock, Series D ($1.0625 per share)		—		—		—		—		—		—		—		(1,594	)		(1,594	)
Dividends declared on common stock		—		—		—		—		—		—		—		(2,351	)		(2,351	)
Balance at December 31, 2010		1		—		1,500		15		—		—		95,320		(10,059	)		85,276

Net income		—		—		—		—		—		—		—		1,024			1,024
Cumulative dividends declared on preferred stock, Series B ($80.00 per share)		—		—		—		—		—		—		—		(75	)		(75	)
Dividends declared on preferred stock, Series D ($1.0625 per share)		—		—		—		—		—		—		—		(1,594	)		(1,594	)
Dividends declared on common stock		—		—		—		—		—		—		—		—			—

Balance at December 31, 2011		1	$	—		1,500	$	15		—	$	—	$	95,320	$	(10,704	)	$	84,631

	As of and for the Year Ended December 31,
	2010			2009			2008			2007			2006
				(Dollars In Thousands)
Financial condition data:
Total assets	$	87,222		$	82,039		$	96,067		$	116,358		$	173,903
Loans held for sale, at fair value		16,505			22,531			—			—			—
Loans held for sale, at lower of accreted cost or market value		7,935			7,292			—			—			—
Loans held for investment, net		—			—			53,025			66,686			90,957
Allowance for loan losses		—			—			(915	)		(1,180	)		(1,519	)
Deferred loan fees		—			—			(27	)		(32	)		(47	)
Loans, net	$	24,440		$	29,823		$	52,083		$	65,474		$	89,391
Cash and cash equivalents	$	62,569		$	51,823		$	43,757		$	50,581		$	83,900
Stockholders’ equity		85,276			81,695			95,136			115,369			172,687
Non-accrual loans, net		916			318			1,596			—			416
Operations data:
Total interest income	$	2,194		$	3,564		$	6,175		$	8,133		$	10,920
Reduction in allowance for loan losses		—			915			265			339			406
Gain (loss) on loans held for sale		6,498			(16,263	)		—			—			—
Other income		—			—			—			76			1,120
Operating expenses		(1,035	)		(1,040	)		(410	)		(299	)		(326	)
Net income (loss)		7,657			(12,824	)		6,030			8,249			12,120
Preferred stock dividends declared		(1,725	)		(816	)		(3,262	)		(4,006	)		(6,529	)
Net income (loss) available to common shareholder	$	5,932		$	(13,640	)	$	2,768		$	4,243		$	5,591
Ratio of earnings to fixed charges and preferred stock dividends		4.44X			N/A			1.85X			2.06X			1.86X
Selected other information:
Non-accrual loans, net, as a percent of total assets (1)		1.05	%		0.39	%		1.66	%		0.00	%		0.24	%
Non-accrual loans, net, as a percentage of loans, net of discount and deferred loan income (1)		3.75			1.07			3.01			0.00			0.46
Allowance for loan losses as a percent of total loans, net of discount and deferred loan fees (2)		—			—			1.73			1.77			1.67
Allowance for loan losses as a percent of non-accrual loans, net (2)		—			—			57.33			0.00			365.14

See accompanying notes to financial statements.

(1)		The calculated percentage was impacted by the change in the composition of our portfolio of loans resulting from the exchange with Aurora Bank during 2009.
(2)		Concurrent with the February Asset Exchange Agreement for the exchange of loans with Aurora Bank, during the first quarter of 2009, we reclassified all of our loan assets as held for sale and recorded a valuation allowance to reflect these loan assets at the lower of their accreted cost or market value. Additionally, concurrent with the November Asset Exchange, loan assets were acquired that are recorded at their fair value.

26 Table of Contents

~~Table~~EOS ofPreferred ~~Contents~~Corporation

~~ITEM~~Statements 7.of ~~MANAGEMENT’S~~Cash ~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~ Flows

This report contains certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “believes,” “estimates” and other similar expressions or future or conditional verbs such as “will,” “should,” “would,” and “could” are intended to identify such forward-looking statements. These statements are not historical facts, but instead represent the Company’s current expectations, plans or forecasts of its future results, growth opportunities, business outlook, loan growth, credit losses, liquidity position, and other similar matters, including, but not limited to, the requirement that Aurora Bank be sold or dissolved as an asset purchased by its parent company within defined time frames, the ability to pay dividends with respect to the Series D preferred stock, future bank regulatory actions that may impact the Company and the effect of the bankruptcy of LBHI on the Company. These statements are not guarantees of future results or performance and involve certain risks, uncertainties, and assumptions that are difficult to predict and often are beyond the Company’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, the Company’s forward-looking statements. You should not place undue reliance on any forward-looking statement and should consider all uncertainties and risks, including, among other things, the risks set forth under Item 1A “Risk Factors,” as well as those discussed in any of the Company’s other subsequent Securities and Exchange Commission filings. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

	Years Ended December 31,
	2011			2010			2009
	(In Thousands)
Cash flows from operating activities:
Net income (loss)	$	1,024		$	7,657		$	(12,824	)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Unrealized losses on investments		339			—			—
Realized and unrealized losses (gains) on loans		(71	)		(6,498	)		16,263
Unrealized loss on repossessed asset		82			—			—
Realized gain on sale of repossessed asset		(94	)		—			—
Decrease (increase) in accrued interest and other receivables		(15	)		180			(280	)
(Decrease) increase in accrued expenses and accounts payable to parent		(137	)		(98	)		228
Loan repayments for loans held for sale at fair value		5,383			10,054			—
Provision for loan losses		—			—			(915	)
Net cash provided by operating activities		6,511			11,295			2,472

Cash flows from investing activities:
Purchase of investments at fair value		(46,901	)		—			—
Proceeds from repayments of investments		5,092			—			—
Loan repayments from loans at lower of accreted cost or market value		2,228			1,827			7,225
Proceeds from sale of repossessed asset		214			—			—
Net cash (used in) provided by investing activities		(39,367	)		1,827			7,225

Cash flows from financing activities:
Payment of preferred stock dividends		(1,650	)		(909	)		(1,631	)
Payment of common stock dividends		(884	)		(1,467	)		—
Net cash used in financing activities		(2,534	)		(2,376	)		(1,631	)

Net change in cash and cash equivalents		(35,390	)		10,746			8,066
Cash and cash equivalents at beginning of year		62,569			51,823			43,757
Cash and cash equivalents at end of year	$	27,179		$	62,569		$	51,823

Supplemental cash flow information:
Repossessed assets acquired through foreclosure	$	293		$	—		$	—
Capital contribution from Aurora Bank		—			—			199

~~Possible~~See ~~events~~accompanying ornotes ~~factors could cause results or performance~~ to differ materially from what is expressed in our forward-looking statements. These possible events or factors include, but are not limited to, those risk factors discussed under Item 1A “Risk Factors” in this report and the following: limitations by regulatory authorities on the Company’s ability to implement its business plan and restrictions on its ability to pay dividends; further regulatory limitations on the business of Aurora Bank that are applicable to the Company; the requirement that Aurora Bank be sold or dissolved within defined time frames; negative economic conditions that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the credit quality of our loan portfolios (the degree of the impact of which is dependent upon the duration and severity of these conditions); the level and volatility of interest rates; changes in consumer, investor and counterparty confidence in, and the related impact on, financial markets and institutions; legislative and regulatory actions which may adversely affect the Company’s business and economic conditions as a whole; the impact of litigation and regulatory investigations; various monetary and fiscal policies and regulations; changes in accounting standards, rules and interpretations and the impact on the Company’s financial statements~~; and changes in the nature and quality of the types of loans held by the Company~~.

~~Executive Level Overview~~ 31

~~Aurora~~Table ~~Bank, an indirect wholly-owned subsidiary~~ of LBHI, owns all of our common stock. Capital Crossing Bank was the sole common stockholder of EOS until February 14, 2007. The Series B preferred stock and Series D preferred stock remain outstanding and remain subject to their existing terms and conditions, including the call feature with respect to the Series D preferred stock. Contents

~~All~~EOS ofPreferred the mortgage assets in our loan portfolio at December 31, 2010 were acquired from Capital Crossing Bank or Aurora Bank and it is anticipated that substantially all additional mortgage assets, if any are acquired in the future, will be acquired from Aurora Bank. As of December 31, 2010, we held loans acquired from Capital Crossing Bank and Aurora Bank with a carrying value of $24.4 million and an unpaid principal balance of $32.9 million. Corporation

~~Residential~~Notes loans constituted approximately 72% of the total loans in our loan portfolio at December 31, 2010. Commercial mortgage loans constituted approximately 28% of the total loans in our loan portfolio at December 31, 2010. Commercial mortgage loans are generally subject to greater risks than other types of loans. Our commercial mortgage loans, like most commercial mortgage loans, generally lack standardized terms, tend to have shorter maturities than other mortgage loans and may not be fully amortizing. As of December 31, 2010, 96.2% of the ~~carrying~~Financial ~~value of all loans was classified as accrual.~~ Statements

27Years Ended December 31, 2011, 2010 and 2009

~~Table~~1. ~~of Contents~~Organization

~~Properties~~EOS ~~underlying~~Preferred ~~our~~Corporation ~~current~~(referred ~~mortgage~~to ~~assets are concentrated primarily in California and~~hereafter ~~comprised~~as ~~approximately 40% of~~ the ~~total~~“Company”, ~~carrying value of~~ “the ~~loan~~Corporation”, ~~portfolio as of December 31~~“EOS”, ~~2010.~~ ~~Beginning in 2007 and through the present time~~“we”, ~~the~~“us” ~~housing~~or ~~and~~“our”) is ~~real~~a ~~estate~~Massachusetts ~~sectors~~corporation ~~in California~~organized ~~were~~on ~~hit~~March 20, ~~particularly~~1998. ~~hard~~Aurora byBank, ~~the~~FSB ~~recession~~(“Aurora ~~with~~Bank”), ~~higher~~an ~~overall~~indirect ~~foreclosure rates than~~wholly ~~the~~owned ~~national~~subsidiary ~~average.~~of IfLehman ~~California~~Brothers ~~experiences~~Holdings ~~continued~~Inc. or(“LBHI”; ~~further~~LBHI ~~adverse~~with ~~economic,~~its ~~political or business conditions~~subsidiaries, or“Lehman ~~natural hazards~~Brothers”), owns weall ~~will likely experience higher rates~~ of ~~loss and delinquency on~~ our ~~mortgage~~common ~~loans than if our loans were more geographically diverse~~stock.

~~Decisions~~On ~~regarding~~March 12, 2012, the ~~utilization~~Board of ~~our~~Directors ~~cash~~of EOS ~~are~~(the ~~based~~“Board of Directors”) approved a Plan of Liquidation and Dissolution. Our Series D preferred stock, inpreviously listed ~~large~~on ~~part~~the NASDAQ Stock Market, Inc. (“NASDAQ”) under the ticker symbol “EOSPN”, formally ceased trading on ~~our~~March ~~future~~28, 2012. On April 9, 2012, the Series B and Series D shareholders were liquidated and were paid their liquidation preference. ~~commitments~~These shareholders no longer have any rights as against the Corporation. A notice to ~~pay~~delist ~~dividends~~from the NASDAQ-OMX exchange was filed on March 29, 2012. ~~Future~~That ~~decisions~~delisting ~~regarding~~was ~~mortgage~~effective ~~asset~~April ~~acquisitions~~9, ~~and~~2012. ~~returns~~Management expects to file Articles of Dissolution with the Secretary ~~capital~~of ~~will~~State beof ~~based~~the Commonwealth of Massachusetts on April 16, 2012. Management is coordinating the ~~level~~sale of ~~preferred~~our ~~stock~~remaining ~~dividends~~assets, at the wind ~~time~~down of our corporate affairs and the ~~required~~liquidation ~~level~~ of ~~income~~the ~~necessary~~common toshares ~~generate~~and ~~adequate~~expects ~~dividend~~to ~~coverage~~be ~~and~~concluded ~~other~~during ~~factors~~2012. ~~determined~~Refer to bethe ~~relevant~~subsequent atevents ~~the~~section ~~time~~of Note 2.

~~Net~~Prior ~~income (loss) available~~ to ~~common~~the ~~shareholder~~merger ~~increased~~with ~~$19.5 million~~Aurora toBank, ~~net income of~~which ~~$5.9 million~~is infurther ~~2010~~discussed ~~compared~~below, towe ~~$13.6 million~~were ina ~~net~~subsidiary ~~loss~~of inCapital ~~2009.~~Crossing ~~The~~Bank ~~increase~~(“Capital inCrossing”), ~~2010~~a ~~over~~federally ~~2009~~insured ~~was~~Massachusetts ~~primarily~~trust ~~the~~company ~~result~~and ofour ~~the~~corporate ~~increase~~name inwas ~~the~~Capital ~~gain~~Crossing ~~(loss) on~~Preferred ~~loans~~Corporation ~~held~~and ~~for~~Capital ~~sale~~Crossing ofowned ~~$22.8 million,~~all ~~partially offset by decreases~~ of our $1common stock.~~4 million~~ inEffective ~~interest~~June ~~income~~21, ~~decreases~~2010, ofwe ~~$0.9 million~~changed ~~reduction~~our incorporate ~~allowance~~name ~~for~~to ~~loan~~EOS ~~losses~~Preferred ~~and $0~~Corporation.~~9 million in increases of declared dividends to preferred stockholders.~~

~~Net~~At ~~income~~the ~~(loss) available~~time toof ~~common~~the merger ~~shareholder~~Aurora ~~decreased~~Bank ~~$16.4 million~~and toits asubsidiaries ~~net~~were ~~loss~~regulated ~~of $13.6 million~~by inthe ~~2009~~Office ~~compared~~of toThrift ~~$2.8 million~~Supervision ~~in net income in 2008~~(“OTS”). ~~The~~Effective ~~decrease from 2008 to~~July ~~2009~~21, ~~was~~2011, ~~primarily~~ the ~~result~~OTS ofwas ~~the~~dissolved ~~$16.3 million~~in ~~fair~~accordance ~~value~~with ~~adjustment established upon reclassifying~~ the ~~loans~~Dodd-Frank toWall ~~held~~Street ~~for~~Reform ~~sale~~ and ~~recording~~Consumer ~~these~~Protection ~~loans at fair value~~Act. ~~Fair~~All ~~value~~duties atpreviously ~~December 31,~~performed ~~2009~~by ~~was 30.0% below~~ the ~~net~~OTS ~~investment~~were ~~balance~~transferred ofto ~~these loans and reflects~~ the ~~impact that~~Office ~~adverse~~of ~~economic conditions have had on~~ the ~~fair~~Comptroller ~~value~~ of ~~these~~the ~~loans.~~Currency ~~Additionally,~~(“OCC”) ~~total interest income decreased $2.6 million~~ and ~~operating~~the ~~expenses~~primary ~~increased $0.6 million offset by an~~regulator ~~increase~~of inAurora ~~the~~Bank ~~reduction~~became in the ~~allowance for loan losses of $0~~OCC.~~7 million and a reduction in preferred stock declared dividends of $2.5 million compared to 2008.~~

~~Aurora~~We ~~Bank~~have operated in a manner intended to allow us to be taxed as a real estate investment trust, or a “REIT,” under the Internal Revenue Code of 1986, as amended. As a REIT, EOS will not be required to pay federal or state income tax if we distribute our earnings to our shareholders and have met a number of other requirements.

~~Aurora~~On ~~Bank~~March 31, is1998, ~~involved~~Capital inCrossing ~~virtually every aspect of our operations and is able to approve~~Bank ~~unilaterally~~capitalized ~~almost~~the ~~all~~Company ~~corporate~~by ~~actions~~transferring ofmortgage ~~EOS~~loans asvalued ~~our~~at ~~sole common shareholder~~$140.7 million ~~EOS~~in ~~does~~exchange ~~not have any independent corporate infrastructure. The officers of EOS are also officers of Aurora Bank. EOS has retained Aurora Bank to be responsible~~ for ~~the~~1,000 shares ~~administration~~ of ~~the~~8% ~~day~~Cumulative Non-~~to-day~~Convertible ~~activities~~Preferred ~~of EOS~~Stock, inSeries B, ~~its~~valued ~~roles~~at as$1.0 million ~~servicer under the MSA~~ and as100 shares ~~advisor under the AA. Both~~ of ~~these~~our ~~agreements were~~common ~~amended~~stock ~~effective~~valued asat ~~of January~~$139.7 ~~1, 2010~~million. The AAcarrying ~~has~~value ~~a term~~ of ~~one~~these ~~year~~loans ~~with~~approximated antheir ~~automatic renewal~~fair ~~feature.~~values ~~The~~at ~~MSA~~the ~~does~~date ~~not have a defined term but is subject to termination upon thirty days notice. The MSA will automatically terminate if EOS ceases to be a subsidiary~~ of ~~Aurora Bank~~contribution.

~~Under~~On ~~the~~May 11, AA2004, ~~Aurora~~we ~~Bank~~closed isour ~~responsible for administering the day-to-day activities,~~public ~~including~~offering ~~monitoring~~ of ~~our loan portfolio’s credit quality and advising us with respect to the acquisition~~1, ~~management~~500,000 shares ~~financing, and disposition~~ of ~~mortgage assets and our operations generally~~8.50% ~~Under~~Non-Cumulative ~~the~~Exchangeable ~~MSA~~Preferred Stock, ~~Aurora~~Series D. ~~Bank~~Our ~~services~~net ~~our~~proceeds ~~held~~from ~~for sale loans and oversees~~ the ~~servicing~~ sale of ~~the~~Series D ~~residential~~preferred ~~loan~~stock ~~portfolio~~were ~~acquired in the November Asset Exchange~~$35.3 million. ~~Aurora~~As ~~Bank may subcontract all or a portion~~ of ~~its~~July 15, ~~obligations under the AA to its affiliates or~~2009, ~~with~~ the ~~approval~~ ofSeries aD ~~majority~~became ofredeemable ~~the~~at ~~Board of Directors including a majority of~~ our ~~independent directors,~~ ~~subcontract~~option ~~its obligations under the AA to unrelated third parties. Aurora Bank will not, in connection~~ with the ~~subcontracting~~prior ofconsent ~~any~~ of ~~its~~OCC ~~obligations~~and/or ~~under~~ the ~~AA,~~Federal beDeposit ~~discharged~~Insurance ~~or relieved~~Corporation ~~from its obligations under~~ (the AA“FDIC”).

~~The~~On ~~amended~~February 14, AA2007, ~~changes~~Capital ~~the~~Crossing was ~~fees~~acquired ~~paid~~ by ~~EOS. Through December 31, 2009,~~ Aurora Bank ~~was~~through ~~paid an~~a ~~annual~~two-step ~~advisory~~merger ~~fee~~transaction. ~~equal~~An tointerim ~~0.05%,~~thrift ~~payable~~subsidiary ~~monthly,~~ of ~~the~~Aurora ~~gross~~Bank ~~average~~was ~~unpaid~~merged ~~principal~~into ~~balances~~Capital ofCrossing. ~~our~~Immediately ~~loans~~following ~~for~~such ~~the immediately preceding month~~merger, ~~plus~~Capital ~~reimbursement~~Crossing ~~for~~was ~~certain~~merged ~~expenses incurred~~into by Aurora Bank. asUnder ~~advisor.~~the ~~During~~terms ~~2010,~~of the ~~amended~~ agreement, ~~among other things, changed~~ ~~the~~Lehman ~~management~~Brothers ~~fee~~paid to $~~25,000~~30.00 per ~~month.~~share ~~For~~in ~~the~~cash ~~years~~in ~~ended~~exchange ~~December 31,~~for ~~2010,~~each ~~2009,~~outstanding ~~and~~share ~~2008,~~of ~~we incurred~~Capital ~~$300,000, $25,000, and $34,000, respectively, in advisory fees~~Crossing.

Our loan portfolio is serviced by Aurora Bank pursuant to the terms of the MSA. The amended MSA changed the fees paid by EOS to reflect the fees payable to each sub-servicer. Through December 31, 2009, Aurora Bank in its role as servicer under the terms of the MSA received an annual servicing fee equal to 0.20%, payable 32

28 Table of Contents

~~Table~~EOS ofPreferred ~~Contents~~Corporation

~~monthly,~~Notes onto the ~~gross~~Financial average unpaid principal balances of loans serviced for the immediately preceding month. For the years ended December 31, 2010, 2009, and 2008, we incurred $170,000, $102,000, and $158,000, respectively, in servicing fees. Additionally, loan servicing expense includes third party expenses associated with the collection of certain non-accrual loans. Statements

InYears ~~2008,~~Ended ~~there was a return of capital to Aurora Bank of $20.2~~December ~~million.~~31, ~~There~~2011, ~~were no returns~~2010 ofand ~~capital to Aurora Bank in 2010 or~~ 2009.

~~Dividends~~ Business

OnOur ~~June 26~~principal business objective was to hold mortgage assets to generate net income for distribution to our stockholders. As of December 31, ~~2009~~2011, ~~the~~our mortgage ~~OTS~~assets ~~notified~~included non-agency residential mortgage-backed securities (“MBS) and loans collateralized by residential, multi-family and commercial properties. Our mortgage assets were primarily collateralized by properties located in California. All mortgage assets in our investment portfolio at December 31, 2011 were acquired from Aurora Bank. ~~that~~All mortgage assets in our loan portfolio at December 31, 2011 were acquired from Capital Crossing Bank or Aurora Bank. Aurora Bank administers our day to-day activities in its roles as aservicer ~~result~~under ofthe Master Service Agreement (“MSA”) entered into between Aurora Bank and EOS and as advisor under the ~~Original~~Advisory ~~Order~~Agreement (“AA”) entered into between Aurora Bank and EOS. Both the AA and the ~~PCA~~MSA were amended effective as of January 1, 2010. The amended AA and the ~~approval~~amended ofMSA change the ~~OTS~~fees ~~would~~paid beby ~~required~~EOS. ~~prior~~During 2010, the amended agreement, among other things, changed the management fee to ~~declaration~~$25,000 ~~and~~per ~~payment~~month. ofThe ~~dividends~~amended byMSA changed the fees paid by EOS to reflect the fees payable to each sub-servicer. ~~The~~Through ~~OTS~~December ~~required~~31, 2009, we paid Aurora Bank an annual servicing fee equal to ~~submit~~0.20%, apayable ~~formal~~monthly, ~~request~~and ~~for~~an ~~non-objection~~annual ~~determination~~advisory fee equal to ~~permit~~ ~~the~~0.05%, ~~payment~~also payable monthly, of ~~dividends.~~the Agross ~~formal~~average ~~request~~unpaid principal ~~was~~balances ~~submitted~~of toloans in the ~~OTS~~loan onportfolio ~~July 28,~~it ~~2009~~services for the immediately preceding month.

As a result of the notice from the OTS, our Board of Directors did not declare or pay the Series B and Series D preferred stock dividends that would have been payable for the second, third and fourth quarters of 2009 and the first and second quarters of 20102. ~~The~~Summary ~~Board~~ of ~~Directors~~Significant ~~also did~~Accounting ~~not declare or pay dividends on the common stock that would have been payable for fiscal 2009.~~ Policies

OnBasis ~~September 9, 2010, the OTS provided a non-objection determination for the declaration~~ of ~~dividends~~ by September 14, 2010 and the payment of these dividends between December 15, 2010 and December 31, 2010 in an amount sufficient to maintain qualification as a REIT for the 2009 tax year. The Board of Directors of EOS declared such dividends on September 13, 2010, for the quarter ended September 30, 2010, consistent with the OTS non-objection determination. The dividends were payable to shareholders of record as of October 29, 2010 and include cumulative dividends on the Series B preferred stock of $120.00 per share, non-cumulative dividends on the Series D preferred stock of $0.53125 per share and dividends on our common stock of $1,467,000 per share. presentation

AnOur ~~additional~~financial ~~formal~~statements ~~request~~are toprepared ~~declare~~in ~~dividends was submitted to the OTS on December 17,~~conformity ~~2010~~with ~~and~~accounting onprinciples ~~December 30,~~generally ~~2010,~~accepted ~~the~~in ~~OTS provided a non-objection determination for~~ the ~~declaration of~~United ~~dividends~~States in(“GAAP”) anwhich ~~amount~~require ~~sufficient~~management to ~~maintain~~make ~~qualification as a REIT~~ estimates and ~~avoid~~assumptions ~~excise~~that ~~tax~~affect ~~for~~ the ~~2010~~amounts ~~tax~~reported ~~year.~~on ~~The non-objection determination did not provide any restriction as to~~ the ~~timing of~~financial ~~declaration~~statements orand ~~payment~~accompanying notes. The ~~Board~~following ofis ~~Directors~~a description of ~~EOS~~the ~~declared~~more ~~such~~significant ~~dividends~~accounting onpolicies ~~December 31, 2010,~~which ~~for~~we ~~the~~follow ~~quarter~~in ~~ended~~preparing ~~December 31,~~and ~~2010,~~presenting ~~consistent~~our ~~with~~financial ~~the OTS non-objection determination~~statements. ~~The~~ ~~dividends~~Due ~~are payable~~ to ~~shareholders of record as of December 31, 2010 and include dividends on~~ the ~~Series B preferred stock~~ approval of ~~$20.00 per share, non-cumulative dividends on~~ the ~~Series D preferred~~Plan ~~stock~~ of ~~$0.53125~~Liquidation ~~per share~~ and ~~dividends~~Dissolution onby our ~~common~~Board ~~stock in the amount~~ of ~~$884~~Directors,~~000. These~~ ~~dividends~~EOS ~~were~~is ~~paid in 2011. At December 31, 2010, there were~~ no ~~dividends~~longer inconsidered ~~arrears related~~ to ~~our~~be ~~Series B~~a ~~preferred~~going ~~stock~~concern. ~~Dividends on the Series D preferred stock are non-cumulative and as such, there were no dividends in arrears.~~

~~The~~Use OTS has not approved any further dividend distributions. There can be no assurance that such approval will be received from the OTS or when or if such OTS approval requirement will be removed. In the prior formal requests, Aurora Bank and EOS informed the OTS that failure to permit the distribution of sufficient dividends in future years will cause EOS to fail to qualify as a REIT. If EOS no longer qualifies as a REIT, we will be subject to federal and state income taxes in the tax year when loss of REIT status occurs and in years thereafter. Furthermore, even if approval is received from the OTS, any future dividends on the preferred stock will be payable only when, as and if declared by the Board of Directors. Aurora Bank and EOS will continue to work with the OTS regarding the resumption of normal payment of dividends. There can be no assurance that the OTS will grant any future dividend declaration request, nor can there be any assurance that any further dividends will be paid or that EOS will continue to qualify as a REIT. estimates

29In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the fair value of loans held for sale. For a more detailed discussion of the basis for the estimates of the fair value of our loan portfolio, see Loans Held for Sale, below, and Note 6, Fair Value of Financial Instruments. Prior to February 5, 2009, material estimates also included the determination of the allowance for losses on loans, the allocation of purchase discount on loans between accretable and nonaccretable portions, and the rate at which the discount is accreted into interest income.

~~Table~~Cash ofand ~~Contents~~Cash Equivalents

~~The~~Cash ~~following~~and ~~table~~cash ~~summarizes~~equivalents include cash and interest-bearing deposits held at Aurora Bank with original maturities of ninety days or less. The majority of the ~~dividends~~cash ~~which~~is ~~were~~held in ~~declared~~a ~~and~~money ~~paid~~market account that bears interest at rates determined by ~~class:~~Aurora Bank which generally follow federal funds rates. The money market account has a limitation on the number of monthly withdrawals, but there is no limit on the amount of the withdrawals either individually or in the aggregate.

			Total Amount				Amount to Parent
	Year		Declared		Paid		Declared		Paid
	(Dollars In Thousands)
Series B		2010	$	131	$	112	$	126	$	108
Series D		2010		1,594		797		—		—
Common Stock		2010		2,351		1,467		2,351		1,467
Series B		2009		19		38		18		36
Series D		2009		797		1,593		—		—
Common Stock		2009		—		—		—		—
Series B		2008		75		75		72		72
Series D		2008		3,187		3,187		—		—
Common Stock		2008		2,768		2,768		2,768		2,768

Investments at fair value

~~Impact~~We ofhold ~~Economic~~investments ~~Downturn~~in non-agency residential mortgage-backed securities (“MBS”). These investments were acquired at the then current fair value in July 2011 from Aurora Bank.

The ~~U.S.~~investments ~~economy has been~~ in our anportfolio ~~economic~~are ~~downturn~~comprised ~~since~~of ~~2007~~non-agency ~~which~~residential ~~has~~MBS. ~~dramatically~~The ~~impacted the~~investment ~~housing~~portfolio ~~market~~is ~~with~~a ~~falling~~component ~~home~~of ~~prices~~the ~~and~~asset/liability ~~increasing foreclosures. Combined with high levels~~management process of ~~unemployment~~Aurora ~~and~~Bank ~~underemployment,~~who manages these ~~economic~~investments ~~forces~~to ~~have~~maximize ~~negatively~~portfolio ~~impacted~~yield ~~the~~within ~~credit performance~~capital ofrisk ~~mortgage~~limits ~~loans~~approved ~~and~~by ~~resulted~~Aurora Bank’s inBoard ~~significant write-downs~~ of ~~asset~~Directors ~~values~~as monitored by ~~financial institutions,~~the ~~including~~Asset ~~government-sponsored~~/ ~~entities~~Liability asManagement ~~well~~Committee asof ~~major~~Aurora ~~commercial and investment banks~~Bank.

~~Reflecting~~We ~~concern~~have ~~about~~elected the fair ~~strength~~value ofoption ~~counterparties,~~for ~~many~~our ~~lenders~~investments ~~and~~which ~~institutional investors~~are ~~have~~determined ~~reduced~~primarily orbased ~~ceased~~on ~~providing~~quotes ~~funding~~received tofrom ~~borrowers,~~third ~~including~~parties toand other ~~financial~~information ~~institutions.~~available ~~This~~from ~~market~~primary ~~turmoil~~ and ~~tightening~~secondary ofmarkets. ~~credit~~We ~~have~~recognize ~~led~~unrealized togains anand ~~increased~~losses ~~level~~from ~~of delinquencies,~~changes ~~decreased~~in ~~consumer~~fair ~~spending,~~value. ~~lack~~We ofrecognize realized ~~confidence,~~gains ~~increased market volatility,~~ and ~~widespread~~ ~~reduction~~losses ofon ~~business~~the ~~activity~~sale ~~generally.~~or ~~The~~maturity ~~resulting~~of ~~economic~~these ~~pressure~~securities onusing ~~borrowers, negatively~~the ~~impacted~~specific ~~the~~identification ~~credit~~method. ~~quality~~We ofreport ~~our~~both realized ~~commercial~~and ~~loan~~unrealized ~~portfolio~~gains and ~~our~~losses ~~residential~~on ~~loan~~investments ~~portfolio.~~in ~~The~~the ~~depth~~Statements ~~and breadth~~ of ~~the~~Operations. ~~downturn~~Unamortized aspremiums ~~well~~and asdiscounts ~~the~~are ~~resulting~~recognized ~~impacts~~in Interest on investments in the ~~credit~~Statements ~~quality~~ of ~~both~~Operations ~~our~~using ~~commercial~~the ~~and~~effective ~~residential~~interest ~~loan~~method ~~portfolios~~over ~~remain~~the ~~unclear.~~contractual Welife ~~expect,~~of ~~however~~the security, ~~continued~~ ~~market~~as ~~turbulence~~adjusted ~~and~~for ~~economic~~expected ~~uncertainty~~prepayments. See toNotes ~~continue~~4 ~~well~~and ~~into~~6 ~~2011~~for more information.

~~Bankruptcy of LBHI~~ 33

OnTable ~~September 15, 2008, LBHI, the indirect parent company~~ of Aurora Bank, filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. The bankruptcy filing of LBHI has led to increased regulatory constraints being placed on Aurora Bank by its bank regulatory authorities, primarily the OTS. Certain of these constraints apply to Aurora Bank’s subsidiaries, including EOS. Contents

~~Pursuant~~EOS toPreferred the CMA executed on November 30, 2010, LBHI agreed that it will seek to sell Aurora Bank within eighteen (18) months from Execution Date. If after a period of fifteen (15) months following the Execution Date, the OTS concludes that a sale of Aurora Bank will not be consummated by the end of the eighteen (18) month period, Aurora Bank will prepare and submit to the OTS a plan for dissolution. The bankruptcy court will have the final review and approval of any proposed agreement for the sale of Aurora Bank. Corporation

~~There~~Notes can be no assurance that the sale of Aurora Bank will be consummated within the defined time frame. There can be no assurance that a potential buyer of Aurora Bank will come forward and tender an offer acceptable to the ~~bankruptcy~~Financial court, that the bankruptcy court will approve such offer, that a potential buyer will have or be able to raise financing for the purchase, and meet all other conditions necessary to consummate the purchase. Statements

~~Further,~~Years ~~there~~Ended isDecember 31, ~~complete~~2011, ~~uncertainty with regards to any~~ 2010 and ~~all aspects of a potential sale. The business strategies of the new owner may not include continued operation of EOS or other business lines of Aurora Bank.~~ 2009

30 Loans Held for Sale

~~Table~~On February 5, 2009, EOS and Aurora Bank entered into an Asset Exchange Agreement (the “February Asset Exchange”) pursuant to which we agreed to transfer the entire loan portfolio secured primarily by commercial real estate and multi-family residential real estate to Aurora Bank in exchange for loans secured primarily by residential real estate. As a result, during the first quarter of ~~Contents~~2009, we reclassified all of our loan assets as held for sale, recorded a fair value adjustment and reported these loans at the lower of the their accreted cost or market value. The February Asset Exchange was terminated prior to its consummation.

~~Further~~Effective November 1, ~~there~~2009, isEOS ~~complete~~and ~~uncertainty~~Aurora Bank ~~with~~entered ~~regards~~into and consummated the November Asset Exchange pursuant to ~~any~~which ~~and~~we ~~all~~agreed ~~aspects~~to an exchange of aloans ~~potential~~with Aurora Bank, ~~sale~~though with a lesser quantity of loans than the February Asset Exchange. ~~The~~We ~~business~~continue ~~strategies~~to report the portion of the ~~new~~loan ~~owner~~assets ~~may~~that were ~~not~~retained ~~include~~after ~~continued~~the ~~operation~~November Asset Exchange at the lower of ~~EOS~~their accreted cost or ~~other~~market value. For these retained loans, ~~business~~the ~~lines~~fair value of ~~Aurora~~the ~~Bank~~loans would be recognized only up to the cost on the date they were classified as held for sale. We have elected the fair value option for the loans that were received from the November Asset Exchange. For these acquired loans, the carrying value of the loans would be equivalent to fair value which may reflect an unrealized gain or loss relative to the cost of the loans. Such recognition is included in the determination of net income in the period in which the change occurred.

~~Both~~The ~~the~~fair ~~bankruptcy~~value ~~filing~~ of ~~LBHI~~our ~~and~~loan portfolio is estimated based upon information, to the ~~increased~~extent ~~regulatory~~available, ~~constraints~~about ~~placed~~then oncurrent ~~Aurora Bank~~sale ~~have~~prices, ~~negatively~~bids, ~~impacted~~credit ~~the~~quality, ~~ability~~liquidity, ofand ~~EOS~~other toavailable information ~~conduct~~for ~~business~~loans ~~according~~with tosimilar characteristics as our ~~business objectives~~loan portfolio. ~~Following~~The geographical location and geographical concentration of the ~~execution~~loans in our portfolio is considered in the analysis. The valuation of the ~~Settlement~~loan ~~Agreement~~portfolio involves some level of management estimation and judgment, the ~~OTS~~degree ~~modified,~~of ~~but~~which ~~did~~is ~~not remove~~dependent ~~all~~on the terms of the ~~regulatory~~loans, ~~constraints~~and onthe ~~Aurora~~availability ~~Bank.~~of market prices and inputs.

~~Asset~~Loans ~~Exchange~~are generally placed on non-accrual status and the accrual of interest is generally discontinued when the collectability of principal and interest is not probable or estimable which generally occurs when the loan is ninety days or more past due as to either principal or interest. Unpaid interest income previously accrued on such loans is reversed against current period interest income. Interest payments received on non-accrual loans are recorded as interest income. A loan is returned to accrual status when it is brought current and the borrower has sustained repayment performance for a reasonable period of time. Loans are charged off when they are determined to be uncollectible.

OnDiscounts ~~November 18,~~on ~~2009,~~Acquired ~~EOS~~Loans and, ~~Aurora~~Allowance ~~Bank, entered into the November Asset Exchange pursuant to which Aurora Bank agreed to assign various single family residential mortgage loans to EOS in exchange~~ for ~~EOS~~Loan assigning certain commercial and multi-family mortgage loans to Aurora Bank. The November Asset Exchange was effective on November 1, 2009, which resulted in EOS receiving residential mortgage loans, including jumbo mortgage loans, with a closing value of $199,000 greater than the value of the commercial and multi-family mortgage loans transferred to Aurora Bank. The November Asset Exchange altered the loan portfolio of EOS to consist primarily of residential mortgage assets. Losses

~~Regulatory~~Prior ~~Actions~~to ~~Involving~~February ~~Aurora~~5, ~~Bank~~2009, our loan assets were considered held for investment and recorded at accreted cost which accounts for the amortization of any purchase discount and deferred fees less an allowance for loan losses. We reviewed acquired loans for differences between contractual cash flows and cash flows expected to be collected from our initial investment in the acquired loans to determine if those differences were attributable, at least in part, to credit quality. If those differences were attributable to credit quality, the loan’s contractually required payments receivable in excess of the amount of its cash flows expected at acquisition, or nonaccretable discount, was not accreted into income. The allowance for loan losses was increased or decreased through a provision for loan losses or a reduction in the allowance for loan losses included in earnings. Any remaining discount relating to our purchase of the loans is not amortized as interest income during the period the loans are classified as held for sale. Deferred income associated with loans held for sale is deferred until the related loan is paid in full or sold. There was judgment involved in estimating the amount of our future cash flows on acquired loans and the amount and timing of actual cash flows could differ materially from management’s estimates Subsequent to February 5, 2009, the loan assets were considered held for sale and were carried at fair value.

On January 26, 2009, the OTS entered a cease and desist order against Aurora Bank. The Original Order requires Aurora Bank to ensure that each of its subsidiaries, including EOS, was in compliance with the Original Order, including the operating restrictions contained therein. 34

~~Following~~Table ~~execution~~ of the Settlement Agreement, on November 30, 2010, Aurora Bank entered into a Stipulation and Consent to Issuance of the Amended Order. The Amended Order amended certain requirements for Aurora Bank contained in the Original Order. The provisions in the Original Order that require Aurora Bank to ensure that each of its subsidiaries, including EOS, comply with the Original Order were not amended. These operating restrictions, amount other things, restrict transactions with affiliates, capital distributions to shareholders (including redemptions), contracts outside the ordinary course of business, and changes in senior executive officers, board members or their employment arrangements without prior written notice to the OTS. Contents

~~Under the Order,~~ EOS ~~must~~Preferred continue to seek and receive approval from the OTS for the declaration and payment of dividends to our preferred and common shareholders. There is no assurance that the OTS will approve any request for the declaration or payment of dividends. As an operating subsidiary of Aurora Bank, EOS remains subject to all of the terms and conditions of the Order which apply to such operating subsidiaries. Corporation

OnNotes ~~November 30,~~to ~~2010, and effective on~~ the ~~same~~Financial ~~date, the OTS issued an order terminating the PCA. The Original Order and Amended Order were still effective as of the date of issuance of this annual report.~~ Statements

~~More~~Years ~~detailed~~Ended ~~information can be found in the Original Order~~December 31, ~~the Amended Order~~2011, ~~the PCA, and~~2010 ~~the~~and ~~termination of the PCA themselves, copies of which are available on the OTS’ website (www.ots.treas.gov).~~ 2009

~~Application~~Real ofestate ~~Critical~~acquired ~~Accounting~~through ~~Policies and Estimates~~ foreclosure

~~Our~~Real ~~discussion~~estate ~~and~~acquired ~~analysis~~as ofa ~~financial~~result ~~condition and results~~ of ~~operations are based upon~~foreclosure ~~our~~or ~~financial~~by ~~statements,~~deed ~~which have been prepared~~ in ~~accordance~~lieu ~~with~~of ~~U.S.~~foreclosure ~~generally~~is ~~accepted accounting~~classified ~~principles,~~separately oruntil ~~GAAP~~sold. ~~The~~Such ~~preparation~~property ofis ~~these~~initially ~~financial~~recorded ~~statements~~at inmarket ~~conformity~~value ~~with~~less ~~GAAP~~estimated ~~requires~~costs us to ~~make~~sell ~~estimates~~ and ~~assumptions~~then ~~that~~carried ~~affect the reported amounts of assets and liabilities~~ at the ~~date~~lower of ~~the~~cost ~~financial~~or ~~statements~~market ~~and~~value ~~the~~less ~~reported~~estimated ~~amount~~costs ofto ~~revenues and expenses in the reporting period~~sell. ~~Our~~The ~~actual~~market ~~results~~value ~~may differ from these estimates. We have~~of ~~provided~~our arepossessed ~~summary~~residential ofand ~~our~~commercial ~~significant~~assets ~~accounting~~was ~~policies~~estimated inbased ~~Note~~upon 2real toestate ~~our~~appraisals ~~financial~~or ~~statements included~~broker ~~elsewhere~~price inopinions ~~this report~~(“BPO”). Once Wea ~~describe~~property ~~below~~has ~~those~~gone ~~accounting~~through ~~policies~~foreclosure, ~~that~~an ~~require material~~appraisal ~~subjective~~ or ~~complex~~BPO ~~judgments~~is ~~and~~ordered ~~that have the most significant impact on our financial condition~~ and ~~results~~periodically ~~of operations~~updated. ~~Our~~During ~~management~~the ~~evaluates~~year ~~these~~ended ~~estimates~~December 31, ~~on an ongoing basis~~2011, ~~based~~ ~~upon~~one ~~information~~commercial ~~currently~~loan ~~available~~ and onone ~~various~~residential ~~assumptions~~loan ~~management~~were ~~believes~~foreclosed. ~~are reasonable~~The asresidential offoreclosure ~~the~~was ~~date~~sold onduring ~~the front cover of this report~~2011.

31 Transfer of financial assets

~~Table~~Transfers of ~~Contents~~financial assets are accounted for as sales when control over the assets is surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets are isolated from EOS, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) we do not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

~~Loans~~Revenue Held for Sale. On February 5, 2009, EOS and Aurora Bank entered into the February Asset Exchange pursuant to which EOS agreed to transfer the entire loan portfolio secured primarily by commercial real estate and multi-family residential real estate to Aurora Bank in exchange for loans secured primarily by residential real estate. As a result, during the first quarter of 2009 we reclassified all of our loan assets as held for sale and recorded a fair value adjustment. On July 20, 2009, EOS and Aurora Bank mutually agreed to terminate the February Asset. We continue to carry these loan assets at the lower of their accreted cost or market value. On November 18, 2009, EOS and Aurora Bank entered into the November Asset Exchange pursuant to which Aurora Bank agreed to assign various single family residential mortgage loans to EOS in exchange for EOS assigning certain commercial and multi-family mortgage loans to Aurora Bank. The residential mortgage loans received were recorded at their value and currently are presented at fair value. Recognition

~~Fair~~We ~~value~~recognize isinterest income ~~defined~~on loans as ~~the~~revenue ~~price~~as atit ~~which~~is anearned. ~~asset~~This orrevenue ~~liability~~is ~~could~~included ~~be exchanged~~ in ~~a current~~Interest ~~transaction~~and ~~between~~fees ~~knowledgeable,~~on ~~willing~~loans ~~parties.~~on ~~Where~~the ~~available,~~Statements ~~fair~~of ~~value is based on~~Operations. ~~observable~~Any ~~market~~remaining ~~prices~~discount orrelating ~~parameters~~to orthe ~~derived~~purchase ~~from~~of ~~such~~the ~~prices~~loans orby ~~parameters.~~us ~~Where~~is ~~observable prices~~not oraccreted ~~inputs~~as ~~are~~interest ~~not~~income ~~available,~~during ~~valuation~~the ~~models~~period the loans are ~~applied.~~classified ~~Fair~~as ~~value~~held offor ~~our~~sale ~~loan~~but ~~portfolio was~~is ~~estimated~~recognized ~~based~~when ~~upon~~the ~~cash~~related ~~flow~~loan ~~models~~is topaid ~~derive~~in ~~its~~full ~~fair~~or ~~value estimates~~sold. ~~These models~~Accrual ~~consider~~status ~~significant~~loans ~~inputs~~include ~~such as~~ any loan ~~type,~~which ~~loan~~returns ~~age, loan~~ to ~~value~~performing ~~ratio,~~status ~~payment history,~~from ~~and~~non-accrual ~~property~~status. ~~location,~~We asrecognize ~~well~~interest asincome ~~significant~~on ~~assumptions~~investments ~~such~~ as ~~estimated~~revenue ~~rates~~as ofit ~~loan~~is ~~delinquency, potential recovery, discount rate, and the impact of interest rate reset~~earned. ~~Recent~~This ~~trade quotes~~revenue oris ~~prices~~included ~~are identified~~ in ~~estimating~~Interest ~~the~~and ~~amount~~fees aton ~~which~~investments aon ~~third party might purchase~~ the ~~loans~~ ~~and~~Statements ~~their~~of ~~yield requirements~~Operations. ~~Management~~Unamortized ~~also~~premiums ~~considers market information~~ and ~~quotes~~ ~~received~~discounts ~~from~~are ~~third~~recognized ~~parties,~~in ~~when~~Interest ~~available.~~on ~~The~~investments ~~valuation~~on of the ~~loan~~Statements ~~portfolio involves management’s use~~ of ~~estimates~~Operations ~~and~~using ~~judgment,~~ the ~~degree~~effective ofinterest ~~which~~method isover ~~dependent on~~ the contractual ~~terms~~life of the ~~loans~~ ~~and~~security, ~~the~~as ~~availability~~adjusted offor ~~market~~expected ~~prices and inputs~~prepayments.

The amount by which the carrying value of our loan assets changes as a result of an updated valuation is recorded as an unrealized gain or loss and is included in the determination of net income in the period in which the change occurs. Taxes

~~Discounts~~We onhave ~~Acquired Loans. Prior to February 5~~elected, ~~2009 (when we reclassified the loans as held~~ for ~~sale),~~federal ~~our~~income ~~loan~~tax ~~assets were considered held for investment and we reviewed acquired loans~~purposes, ~~for~~to ~~differences~~be ~~between~~treated ~~contractual~~as ~~cash~~a ~~flows~~REIT and ~~cash~~believe ~~flows~~that ~~expected~~we tohave becomplied ~~collected~~with ~~from~~the ~~our initial~~provisions ~~investment~~of in the ~~acquired~~Internal ~~loans~~Revenue toCode ~~determine~~(the ~~if those differences were attributable, at~~“IRC”). ~~least in part~~Accordingly, towe ~~credit~~will ~~quality.~~not Ifbe ~~those~~subject ~~differences~~to ~~were~~corporate ~~attributable~~income taxes to ~~credit quality,~~ the ~~loan’s~~ ~~contractually~~extent ~~required~~we ~~payments~~distribute ~~receivable~~at inleast ~~excess~~90% of ~~the~~our ~~amount~~REIT oftaxable ~~its~~income to ~~cash~~stockholders ~~flows expected~~and atas ~~acquisition,~~long oras ~~nonaccretable~~certain ~~discount~~assets, ~~was not accreted into~~ income., Wedistribution, ~~recognized~~and ~~the excess~~stock ofownership ~~all~~tests ~~cash~~are ~~flows~~met ~~expected~~in ataccordance ~~acquisition~~with ~~over~~the ~~our~~IRC. As ~~initial~~such, ~~investment~~no inprovision ~~the~~for ~~loan as interest~~ income ~~using~~taxes ~~the~~was ~~interest~~included ~~method~~in ~~over~~ the ~~term~~accompanying offinancial ~~the loan~~statements.

~~There~~As ~~was~~of ~~judgment~~December ~~involved~~31, in2011, ~~estimating~~management evaluated the ~~amount~~quantitative ofand ~~our~~qualitative ~~future~~requirements ~~cash~~for ~~flows~~REIT onstatus ~~acquired~~and believes that we qualify as a REIT for federal and state income ~~loans~~tax purposes. ~~The~~Accordingly, ~~amount~~we ~~and~~have ~~timing~~not ofrecorded ~~actual~~any ~~cash~~uncertain ~~flows~~tax ~~could~~positions. ~~differ~~As ~~materially~~of ~~from~~December ~~management’s estimates~~31, ~~which~~2011, ~~could~~we did not have ~~materially~~any ~~affect~~unrecognized tax ~~our~~benefits. ~~financial~~We ~~condition~~do ~~and~~not ~~results~~anticipate ofany ~~operations~~material changes in existing unrecognized tax benefits during the next 12 months. The Company ~~Depending~~is onsubject to examination by the ~~timing~~respective oftaxing anauthorities ~~acquisition~~for ofthe ~~loans,~~tax ayears ~~preliminary~~2008 ~~allocation~~to ~~may~~2010. ~~have~~Our ~~been~~policy ~~utilized~~is to include interest ~~until~~and apenalties ~~final~~related ~~allocation~~to ~~was~~income ~~established.~~taxes ~~Generally,~~in ~~the~~Other ~~allocation~~general ~~was~~and ~~finalized~~administrative noexpense ~~later~~if ~~than ninety~~applicable; ~~days~~there ~~from~~were ~~the~~no ~~date~~such ofexpenses ~~purchase.~~for 2011, 2010, or 2009.

~~Subsequent~~For tothe ~~acquisition,~~year ifended ~~cash~~December ~~flow~~31, ~~projections improved~~2009, ~~and~~we itaccrued an ~~was~~excise ~~determined~~tax ~~that~~liability ~~the amount~~of ~~and~~$60,000 ~~timing~~which ofis ~~the~~included ~~cash~~in ~~flows~~Other ~~related~~general toand ~~the~~administrative ~~nonaccretable~~expenses. ~~discount~~We were ~~reasonably~~subject ~~estimable and~~to ~~collection~~excise ~~was~~tax equal ~~probable,~~to ~~the~~4% ~~corresponding~~of ~~decrease in~~ the ~~nonaccretable~~undistributed ~~discount~~portion ~~was transferred~~of toadjusted ~~the~~ordinary ~~accretable~~income. ~~discount~~The ~~and~~excise ~~was~~tax ~~accreted~~liability ~~into~~resulted ~~interest~~from ~~income~~us ~~over~~not ~~the remaining~~distributing ~~life~~85% of ~~the~~our ~~loan~~ordinary onincome ~~the~~from ~~interest method~~2009. IfThere ~~cash~~was ~~flow~~no ~~projections~~excise ~~deteriorated~~tax ~~subsequent~~due ~~to acquisition,~~for the ~~decline~~years ~~was~~ended ~~accounted~~December ~~for~~31, ~~through~~2011 aor ~~provision for loan losses included in earnings~~2010.

~~Allowance~~Concentration ~~for Loan Losses. Prior to February 5, 2009, our loan assets were considered held for investment and recorded at accreted cost, which accounts for the amortization~~ of ~~any~~Credit purchase discount and deferred fees, less an allowance for loan losses. Since the loan portfolio is now classified as held for sale, we no longer maintain an allowance for loan losses. In prior periods, arriving at an appropriate level of allowance for loan losses required a high degree of judgment. The allowance for loan losses was increased or decreased through a provision for loan losses. Risk

32We had cash and cash equivalents of $27.2 million as of December 31, 2011. These funds were held in interest-bearing and non-interest-bearing accounts with Aurora Bank. The FDIC provides coverage on these accounts which as of December 31, 2011 was limited to $250,000. Cash in excess of FDIC coverage limitations is subject to credit risk.

~~Table of Contents~~35

InTable ~~determining the adequacy~~ of the allowance for loan losses, management made significant judgments. We reviewed our loan portfolio to identify loans for which specific allocations were considered prudent. Specific allocations included the results of measuring impaired loans. Next, management considered the level of loan allowances deemed appropriate for loans determined not to be impaired. The allowance for these loans was determined by a formula whereby the portfolio was stratified by type and internal risk rating categories. Loss factors were then applied to each strata based on various considerations including collateral type, loss experience, delinquency trends, current economic conditions, and industry standards. The allowance for loan losses was management’s estimate of the probable loan losses incurred as of the balance sheet date. Contents

~~The~~EOS ~~determination~~Preferred of the allowance for loan losses required our use of significant estimates and judgments. In making this determination, we considered known information relative to specific loans, as well as collateral type, loss experience, delinquency trends, current economic conditions, and industry trends, generally. Based on these factors, we estimated the probable loan losses incurred as of the reporting date and increased or decreased the allowance through a change in the provision for loan losses. Loan losses were charged against the allowance when we believed the net investment of the loan, or a portion thereof, was uncollectible. Subsequent recoveries, if any, were credited to the allowance when cash payments were received. Corporation

~~Gains~~Notes ~~and losses on sales of loans are determined using the specific identification method. The excess (deficiency) of any cash received as compared~~ to the ~~net~~Financial ~~investment is recorded as gain (loss) on sales of loans.~~ Statements

~~Recent~~Years ~~Accounting~~Ended ~~Pronouncements. There were no recent accounting pronouncements issued as of~~ December 31, ~~2010 that will have a significant impact to our financial statements or disclosures for the year ended December 31~~2011, ~~2011.~~2010 and

~~Results~~Our investment portfolio consists of ~~Operations~~investments in specific tranches of larger securitization trusts. Each tranche has unique credit characteristics and the securitization trusts have defined seniority levels for each tranche within their trust for the ~~Years~~allocation ~~Ended~~of ~~December 31,~~loan ~~2010,~~repayments ~~2009~~and losses, ~~and~~commonly ~~2008~~referred to as the waterfall. Credit risk is evaluated relative to our position within the waterfall. Aurora Bank actively monitors the credit condition of the collateral underlying our MBS investments.

~~Interest~~Concentration ~~income~~of credit risk generally arises with respect to our loan portfolio when a number of borrowers engage in similar business activities, or activities in the same geographical region.

A significant portion of the collateral underlying the holdings in our investment portfolio and our loan portfolio is primarily real property located in California. As of December 31, 2011, this geographical concentration was 41.3% of the weighted average carrying value of our investment portfolio and 45.0% of the carrying value of our loan portfolio, respectively. These assets may experience a higher default rate in the event of adverse economic, political or business developments or natural hazards in California that may affect the ability of property owners to make payments of principal and interest on the underlying mortgages. The ~~yields~~housing and real estate sectors in California have been particularly impacted by the recession with higher overall foreclosure rates than the national average. If California experiences further adverse economic, political or business conditions, or natural hazards, we would potentially experience loss of interest and principal on our ~~interest-earning~~investment ~~assets~~portfolio ~~are~~and ~~summarized~~higher asrates ~~follows:~~of loss and delinquency on our mortgage loans than if the underlying loans were more geographically diverse.

	Years Ended December 31,
	2010							2009							2008
	Average							Average							Average
	Balance		Interest		Yield			Balance		Interest		Yield			Balance		Interest		Yield
								(Dollars In Thousands)
Loans, net(1)	$	37,774	$	2,022		5.35	%	$	46,167	$	3,057		6.62	%	$	58,937	$	5,152		8.74	%
Interest-bearing deposits		57,620		172		.30			47,455		507		1.07			58,438		1,023		1.75
Total interest-earning assets	$	95,394	$	2,194		2.30	%	$	93,622	$	3,564		3.81	%	$	117,375	$	6,175		5.26	%

Subsequent Events

~~(1)~~We ~~For~~assessed ~~purposes~~events ofthat ~~providing~~occurred asubsequent to ~~meaningful~~December ~~yield comparison~~31, ~~the~~2011 ~~foregoing~~for ~~table~~potential ~~reflects~~disclosure ~~the~~and ~~average~~recognition ~~accreted~~on ~~cost of~~ the ~~loans,~~financial ~~net~~statements. ofBeyond ~~discounts, or alternatively,~~ the ~~unpaid~~items ~~principal~~listed ~~balance for loans acquired in the November Asset Exchange~~below, ~~and~~no ~~not~~additional events ~~the~~have ~~fair~~occurred ~~value~~that ofwould ~~the~~require ~~loan~~disclosure ~~portfolio.~~in ~~Non-accrual~~or ~~loans~~adjustment ~~are~~to ~~excluded~~our ~~from~~financial ~~average balance calculations~~statements.

The decrease in interest income from 2010 to 2009 is a result of a decrease in the average balance of loans and a decrease in the yield of loans. The average balance of our loans for 2010 (as defined above) totaled $37.8 million compared to $46.2 million for 2009. This decrease is primarily attributable to loan payments. For the year ended December 31, 2010, the yield on our loan portfolio decreased to 5.35% compared to 6.62% for 2009. For the year ended December 31, 2010, interest and fee income recognized on loan payoffs decreased $171,000, or 50%, to $173,000 from $344,000 for 2009. The level of interest and fee income recognized on loan payoffs varies for numerous reasons, as further discussed below. The yield from regularly scheduled interest and accretion income decreased to 4.89% for the year ended December 31, 2010 from 5.87% for the same period in 2009 primarily due to a reduction in average balances.

•		On February 28, 2012, EOS executed an asset sale agreement with an unrelated third party for the sale of all of our commercial loans and assets acquired through foreclosure with a carrying value at December 31, 2011 of $4.4 million. A competitive bid process was utilized and bids were received from multiple counterparties. The sales price was an indicator of fair value which we utilized in our valuation methodologies to determine the appropriate fair value adjustments at December 31, 2011 and we recorded a reduction to the carrying value of these assets at December 31, 2011 of $1.9 million. The transaction closed on March 30, 2012.

•		The following subsequent events are associated with the Plan of Liquidation and Dissolution approved by the Board of Directors of EOS on March 12, 2012 and approved by the Board of Directors of Aurora Bank, the sole common shareholder of EOS, on March 13, 2012:

~~The~~o ~~average~~Our ~~balance~~Series ofD ~~our~~preferred ~~interest-bearing~~stock, ~~deposits~~previously ~~increased~~listed ~~$10.1 million~~on orthe ~~21.4%~~NASDAQ toStock ~~$57~~Market, Inc.~~6 million~~ ~~for~~(“NASDAQ”) under the ~~year~~ticker ~~ended~~symbol ~~December 31~~“EOSPN”, ~~2010~~formally ceased trading on March 28, ~~compared~~2012. o A notice to ~~$47.5 million~~delist ~~for~~from ~~2009~~the NASDAQ-OMX exchange was filed on March 29, 2012. The ~~changes~~delisting ~~in the~~became ~~average~~effective ~~balances~~April of9, ~~interest-bearing~~2012. ~~deposits~~Management ~~are~~expects to file Articles of Dissolution with the ~~result~~Secretary of ~~dividend~~State ~~payments~~of ~~offset~~the ~~by cash~~Commonwealth ~~flows~~of ~~from~~Massachusetts ~~loan~~on ~~repayments~~April 16, 2012. ~~The~~o ~~rate~~On ~~earned~~April on4, ~~interest-bearing~~2012, ~~deposits~~we ~~has~~executed ~~remained~~an ~~unchanged~~Asset ~~since~~Sale ~~its~~Agreement ~~decrease~~with inAurora ~~July 2009~~Bank ~~from~~for ~~1.75%~~the ~~to 0.30%,~~sale ~~resulting~~of inthe ainvestment ~~decrease~~portfolio inof ~~interest~~EOS ~~income~~at ~~and~~the ~~yield~~fair ~~for~~market values of the ~~year~~investments ~~ended~~as ~~December 31~~of March 30, ~~2010~~2012 which was $39. 4 million.

33 36

Table of Contents

~~The~~EOS ~~decline~~Preferred in interest income from 2008 to 2009 is a result of a decrease in the average balance of loans and a decrease in the yield on loans. The average balance of the loans for 2009 (as defined above) totaled $46.2 million compared to $58.9 million for 2008. This decrease is primarily attributable to loan payments. For the year ended December 31, 2009, the yield on the loan portfolio decreased to 6.62% compared to 8.74% for 2008. For the year ended December 31, 2009, interest and fee income recognized on loan payoffs decreased $536,000, or 61%, to $344,000 from $880,000 for 2008. The level of interest and fee income recognized on loan payoffs varies for numerous reasons, as further discussed below. The yield from regularly scheduled interest and accretion income decreased to 5.87% for the year ended December 31, 2009 from 7.25% for the same period in 2008 primarily due to a $739,000 reduction in interest income resulting from the discontinuance of the amortization of purchase discount and fees on loans as a result of the loans being reclassified to held for sale during the first quarter of 2009, a reduction in average balances and decreases in market interest rates. Corporation

~~The~~Notes ~~average balance of our interest-bearing deposits decreased $10.9 million or 18.6%~~ to ~~$47.5 million for~~ the ~~year~~Financial ended December 31, 2009, compared to $58.4 million for 2008. The changes in the average balances of interest-bearing deposits are the result of dividend payments and returns of capital partially offset by cash flows from loan repayments. In July 2009, the rate earned on interest-bearing deposits decreased from 1.75% to 0.30%, resulting in a decrease in interest income and yield for the year ended December 31, 2009. Statements

~~Prior~~Years toEnded ~~February~~December 531, ~~2009~~2011, ~~when a loan was paid off, the excess of any cash received over the~~2010 net investment was recorded as interest income. In addition to the amount of purchase discount that was recognized at that time, income may also have included interest owed by the borrower prior to our acquisition of the loan, interest collected if on non-accrual status, prepayment fees and other loan fees. For periods after February 5, 2009, when a loan is paid off, the excess of any cash received over the net investment is considered in the assessment of the valuation allowance. The following table sets forth, for the periods indicated, the components of interest and fees on loans. There can be no assurance regarding future interest income, including the yields and related level of such income, or the relative portion attributable to loan payoffs as compared to other sources.

	Years Ended December 31,
o	On April 9, 2012, the shares of Series B and Series D preferred stock were liquidated and we made liquidation payments in the aggregate amount of $39.3 million to such holders. Liquidation payments to the Series B and Series D preferred shareholders were $1,000.00 and $25.00 per share, respectively. Payments of accrued and unpaid dividends to the Series B and Series D preferred shareholders were $22.00 per share and $0.584375 per share, respectively.
	2010					2009					2008
o	Management is actively marketing for sale the residential loan portfolio of EOS. Once the sale of this group of loans is completed, management will facilitate the wind down of the remaining corporate affairs of EOS and the liquidation of the common shares and expects to be concluded during 2012.
	Interest					Interest					Interest
	Income		Yield			Income		Yield			Income		Yield
						(Dollars In Thousands)
Regularly scheduled interest and accretion income	$	1,849		4.89	%	$	2,713		5.87	%	$	4,272		7.25	%
Interest and fee income recognized on loan pay-offs:
Accretable discount		173		0.46			309		0.67			818		1.39
Other interest and fee income		—		—			35		0.08			62		0.10
		173		0.46			344		0.75			880		1.49
Total interest from loans	$	2,022		5.35	%	$	3,057		6.62	%	$	5,152		8.74	%

~~The~~Recent ~~amount~~Accounting of loan pay-offs and related discount income is influenced by several factors, including the interest rate environment, the real estate market in particular areas, the timing of transactions, and circumstances related to individual borrowers and loans. The amount of individual loan payoffs is often a result of negotiations between us and the borrower. Based upon credit risk analysis and other factors, we will, in certain instances, accept less than the full amount contractually due in accordance with the loan terms. Pronouncements

~~Allowance~~In January 2010, the FASB issued a standards update on improving disclosures about fair value measurements. The update required expanded disclosures including the techniques and inputs used to measure fair value, transfers in and out of Levels 1 and 2, both effective for ~~loan~~our ~~losses~~annual reporting period ended December 31, 2009, and disaggregation of components within the reconciliation of Level 3 fair value measurements, effective for our annual reporting period ended December 31, 2011. The now fully adopted update to the standards did not impact our financial statements, as it only impacts the footnote disclosures. Comparative disclosures are not required in the period of initial adoption. We have included the applicable disclosures in Note 14, Fair Value Measurements.

~~Following~~In April 2011, the ~~reclassification~~FASB ofissued ~~the~~a ~~loan~~standards update ~~portfolio~~on astroubled ~~held~~debt ~~for~~restructurings. ~~sale~~The instandards ~~February 2009,~~update weclarified ~~no longer~~guidance ~~maintain~~on ana ~~allowance~~creditor’s ~~for~~evaluation ~~loan~~of ~~losses.~~whether We(1) it has ~~recorded~~granted ~~reductions~~a inconcession ~~the~~and ~~allowance~~(2) a ~~for~~debtor ~~loan losses~~is ofexperiencing ~~$915,000~~financial ~~and~~difficulties. ~~$265,000,~~This update is effective for the ~~years~~first ~~ended~~interim or ~~December~~annual period beginning on or after June 3115, ~~2009~~2011, and ~~2008,~~should ~~respectively,~~be applied retrospectively to ~~reflect~~ the ~~reclassification~~beginning of ~~loans~~the ~~held~~annual period ~~for~~of ~~sale~~adoption. inThis ~~2009~~standards ~~and,~~update inis ~~prior~~not ~~years,~~applicable to ~~reverse~~EOS ~~unused loss~~as ~~reserves~~our ~~related~~loan toportfolio ~~loans~~is ~~that~~recorded ~~had~~either ~~been~~at ~~paid~~fair ~~off.~~value ~~The~~or ~~allowance~~the lower ~~for~~of ~~loan~~accreted ~~losses~~cost ~~was~~or ~~based~~market ~~on the~~value. ~~size~~This ofnew ~~the~~guidance ~~portfolio~~had ~~and~~no ~~its~~impact ~~historical~~on ~~performance.~~our ~~The~~results ~~determination~~ of ~~the~~operations ~~allowance required~~or ~~management’s~~financial ~~use~~position. None of ~~estimates~~the ~~and~~loans ~~assumptions~~in ~~regarding~~our ~~the~~portfolio ~~risks~~had ~~inherent~~their ~~in individual~~terms ~~loans~~modified ~~and~~during the ~~loan~~year ~~portfolio~~ended inDecember ~~its~~31, ~~entirety~~2011.

34In May 2011, the FASB issued a standards update to achieve common fair value measurement and disclosure requirements between GAAP and International Financial Reporting Standards (“IFRS”). The standards update modifies the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. It also clarifies the existing fair value measurement requirements. The standards update expands disclosures about fair value measurements, including additional disclosures regarding the valuation process for fair value measurements categorized as Level 3 of the fair value hierarchy, the use of a nonfinancial asset in a way that differs from the asset’s best use when that asset is measured at fair value, and the categorization by level of the fair value hierarchy for items that are not measured at fair value on the balance sheet but for which the fair value is required to be disclosed. This update to the standards is effective for our interim period ending March 31, 2012. We are evaluating the impact of this update on our annual financial statement disclosures.

~~Table~~3. Bankruptcy of ~~Contents~~LBHI and Regulatory Actions Involving Aurora Bank

~~Operating~~Bankruptcy ~~expenses~~ of Lehman Brothers Holding Inc.

~~Loan~~Bankruptcy of ~~servicing~~Lehman ~~and~~Brothers ~~advisory~~Holdings ~~expenses~~Inc. ~~increased~~On ~~$188~~September 15,~~000~~ 2008, ~~or 66.7%~~LBHI, tothe ~~$470,000~~indirect inparent ~~2010~~company ~~from $282,000~~of inAurora ~~2009~~Bank, ~~and~~filed ~~increased~~a ~~$53,000,~~voluntary petition orunder ~~23.1%,~~Chapter 11 ~~from~~of ~~$229,000~~the inU.S. Bankruptcy ~~2008~~Code. The ~~increase~~bankruptcy infiling ~~2010~~has ~~was primarily~~led ~~due~~ to ~~the~~increased ~~Amended~~regulatory ~~MSA~~constraints being ~~and~~placed ~~the~~on ~~Amended AA with~~ Aurora Bank ~~which~~by ~~changed~~its ~~the~~bank ~~fee structure.~~regulatory ~~The~~authorities, ~~increase in 2009 was~~ primarily ~~due~~the toOCC. ~~legal~~Certain ~~fees~~of ~~incurred~~these inconstraints ~~collection~~apply ~~efforts~~to onAurora ~~loans~~Bank’s ~~serviced~~subsidiaries, including EOS.

~~Other~~Pursuant to ~~general~~the ~~and~~CMA ~~administrative~~executed ~~expenses~~on ~~decreased~~November ~~$193~~30,~~000~~ 2010, orAurora ~~25.5%~~Bank, LBHI, LB Bancorp, and the OTS, as regulatory predecessor to ~~$565~~the OCC,~~000~~ entered into a Capital Maintenance Agreement (“CMA”) in ~~2010 from~~which, ~~$758~~among other things,~~000~~ inLBHI, ~~2009~~LB Bancorp and ~~increased~~Aurora ~~318.8%~~Bank ~~from~~agreed that ~~$181,000~~it inwould ~~2008~~seek to sell Aurora Bank or all of its non-cash assets for sale with the closing to occur within eighteen (18) months from Execution Date. ~~The~~If ~~decrease~~after ina ~~2010~~period of fifteen (15) months following the Execution Date, the OCC concluded that it was unlikely ~~primarily~~that ~~attributable~~a tosale ~~decreases~~of inAurora ~~legal~~Bank ~~fees~~would ~~and~~be ~~external~~consummated ~~audit~~by ~~expenses.~~the ~~The~~end ~~increase~~of inthe ~~2009~~eighteen (18) month period, Aurora Bank would have been required ~~was~~to ~~primarily~~prepare ~~attributable~~and submit to anthe ~~increase~~OCC ina ~~legal~~plan ~~fees,~~for ~~excise~~dissolution. ~~tax,~~The ~~external~~OCC ~~audit~~granted ~~expenses~~approval ~~and~~to Aurora Bank for various asset sales on April ~~printing~~5, ~~costs~~2012.

~~Preferred stock dividends declared~~ 37

~~Preferred~~Table ~~stock dividends declared were $1,725,000 for the year ended December 31, 2010 compared to $816,000 in 2009. On September 9, 2010, the OTS provided non-objection for the declaration and payment~~ of dividends in an amount sufficient to maintain qualification as a REIT for the 2009 tax year. The Board of Directors of EOS declared such dividends on September 13, 2010, for the quarter ended September 30, 2010, consistent with the OTS non-objection determination. The dividends included dividends on the Series B and Series D preferred stock for the third quarter of 2010 and 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. Contents

AtNotes ~~December 31, 2010, there were no dividends in arrears related~~ to ~~our Series B preferred stock. Dividends on~~ the ~~Series D~~Financial preferred stock are non-cumulative and as such, there were no dividends in arrears. The OTS has not approved any further dividend distributions. Additionally, any future dividends on the preferred stock will be payable only when, as and if declared by the Board of Directors. Statements

~~Preferred~~Years ~~stock~~Ended ~~dividends declared decreased in 2009 compared to 2008 because the dividends that would have been payable on July~~December 1531, ~~and October 15~~2011, ~~2009 were not declared or paid as noted~~2010 ~~earlier.~~ and

~~Financial Condition~~Regulatory Actions Involving Aurora Bank

~~Interest~~Aurora Bank -~~bearing~~ ~~Deposits~~Regulatory Actions and Capital Levels. On January 26, 2009, the OTS entered a cease and desist order against Aurora Bank (the “Original Order”). The Original Order required Aurora Bank to ensure that each of its subsidiaries, including EOS, was in compliance with ~~Parent~~the Original Order, including the operating restrictions contained therein. In addition, on February 4, 2009, the OTS issued a prompt corrective action directive to Aurora Bank (the “PCA”). The PCA required Aurora Bank to, among other things; raise its capital ratios such that it would be deemed to be “adequately capitalized” and placed additional constraints on Aurora Bank and its subsidiaries, including EOS.

~~Interest-bearing~~Following execution ~~deposits~~of the Settlement Agreement, on November 30, 2010, Aurora Bank entered into a Stipulation and Consent to Issuance of Amended Order to Cease and Desist with ~~parent~~the ~~consist~~OTS ~~entirely~~whereby Aurora Bank consented to the issuance of ~~money~~an ~~market~~Amended ~~accounts.~~Order ~~The~~to ~~balance~~Cease and Desist of(the ~~interest-bearing~~“Amended ~~deposits~~Order”) ~~increased~~issued ~~$10.8 million~~by tothe ~~$62~~OTS, which amended the Original Order.~~4 million~~ atThe ~~December 31,~~Amended ~~2010~~Order ~~compared~~amended certain requirements tofor ~~$51.6 million~~Aurora atBank ~~December 31,~~contained ~~2009~~in the Original Order. The ~~increase~~provisions in the ~~balance~~Original Order that require Aurora Bank to ensure that each of ~~interest-bearing~~its ~~deposits~~subsidiaries, isincluding EOS, comply with the Original Order were not amended. These operating restrictions, among other things, restrict transactions with affiliates, capital distributions to shareholders (including redemptions), contracts outside the ~~result~~ordinary course of ~~cash~~business, ~~flows~~and ~~from~~changes ~~loan~~in ~~repayments~~senior ~~offset~~executive byofficers, ~~preferred~~board ~~stock~~members ~~and~~or ~~common~~their ~~stock~~employment ~~dividend~~arrangements without ~~payments~~prior written notice to the OCC.

35On November 30, 2010, and effective on the same date, the OTS issued an order terminating the PCA.

~~Table~~ Copies of ~~Contents~~regulatory actions against Aurora Bank can be found on the OTS’ website (www.ots.treas.gov).

~~Loan~~As of ~~Portfolio~~December 31, 2011 and 2010, as set forth in a public filing with the OCC, Aurora Bank’s capital ratios were above the thresholds required under the CMA.

~~The~~Dividend Payments. ~~loan~~On ~~portfolio~~June is26, ~~summarized~~2009, the OTS notified Aurora Bank that, as ~~follows:~~a result of the Original Order and the PCA, the approval or non-objection of the OTS would be required prior to declaration and payment of dividends by EOS. As a result of the notice from the OTS, our Board of Directors did not declare or pay the Series B and Series D preferred stock dividends that would have been payable for the second, third and fourth quarters of 2009 and the first and second quarters of 2010. The Board of Directors also did not declare or pay dividends on the common stock that would have been payable for fiscal 2009.

	December 31,
	2010					2009
	Carrying		Percentage			Carrying		Percentage
	Value		of Total			Value		of Total
	(Dollars In Thousands)
Mortgage loans on real estate:
Commercial real estate	$	6,866		28.09	%	$	6,380		21.40	%
Multi-family residential		850		3.48			693		2.32
One-to-four family residential		16,724		68.43			22,750		76.28
Total	$	24,440		100.00	%	$	29,823		100.00	%

On September 9, 2010, the OTS provided a non-objection determination for the declaration of dividends by September 14, 2010 and the payment of these dividends between December 15, 2010 and December 31, 2010 in an amount sufficient to maintain qualification as a REIT for the 2009 tax year. The Board of Directors of EOS declared such dividends on September 13, 2010, for the quarter ended September 30, 2010, consistent with the OTS non-objection determination. The dividends were payable to shareholders of record as of October 29, 2010 and include cumulative dividends on the Series B preferred stock of $120.00 per share, non-cumulative dividends on the Series D preferred stock of $0.53125 per share and dividends on our common stock of $1,467,000.

WeAn additional ~~have~~formal ~~historically~~request ~~acquired~~to ~~primarily~~declare ~~commercial~~dividends ~~real~~was ~~estate~~submitted ~~and~~to ~~multi-family~~the ~~residential mortgage~~OTS ~~loans~~on inDecember ~~accrual~~17, ~~status.~~2010 Onand ~~November 18~~on December 30, ~~2009~~2010, wethe ~~and~~OTS provided ~~our~~a ~~parent,~~non-objection ~~Aurora~~determination ~~Bank,~~for ~~entered~~the declaration of dividends in an amount sufficient to maintain qualification as a ~~into~~REIT and avoid excise tax for the ~~November~~2010 ~~Asset~~tax ~~Exchange~~year. ~~pursuant~~The tonon-objection ~~which~~determination ~~Aurora~~did ~~Bank~~not ~~agreed~~provide toany ~~assign~~restriction ~~various~~as ~~single~~to the timing ~~family~~of ~~residential~~declaration ~~mortgage~~or ~~loans~~payment. toThe ~~EOS~~Board inof ~~exchange~~Directors ~~for~~of EOS ~~assigning~~declared ~~certain~~such ~~commercial~~dividends ~~and~~on December 31, 2010, for the quarter ended December ~~multi-family~~31, ~~mortgage~~2010, ~~loans~~consistent towith ~~Aurora~~the ~~Bank~~OTS non-objection determination. The ~~November~~dividends ~~Asset~~are ~~Exchange~~payable ~~has~~to ~~altered~~shareholders of record as of December 31, 2010 and include dividends on the ~~loan~~Series B preferred stock of $20.00 per share, non-cumulative dividends on the Series D preferred ~~portfolio~~stock of ~~EOS~~$0.53125 toper ~~consist~~share ~~primarily~~and dividends on our common stock in the amount of ~~residential~~$884,000. ~~mortgage~~These ~~assets~~dividends were paid in 2011. ~~During~~At December ~~2008~~31, ~~EOS~~2010, ~~did~~there ~~not acquire~~were ~~any~~no ~~loans~~dividends ~~from~~in ~~Capital~~arrears ~~Crossing~~related ~~Bank~~to orour ~~Aurora~~Series ~~Bank~~B preferred stock. Dividends on the Series D preferred stock are non-cumulative and as such, there were no dividends in arrears.

Non-accrual loans, net of discount, totaled $916,000 at December 31, 2010 representing eight loans and eight borrowers. Non-accrual loans, net of discount, totaled $318,000 at December 31, 2009 representing seven loans and five borrowers. Loans generally are placed on non-accrual status and the accrual of interest is generally discontinued when the collectability of principal and interest is not probable or estimable and generally occurs when the loan is ninety days or more past due as to either principal or interest. Unpaid interest income previously accrued on such loans is reversed against current period interest income. Interest payments received on non-accrual loans are recorded as interest income. A loan is returned to accrual status when it is brought current. Loans are charged off when they are determined to be uncollectible. 38

~~Cash~~Table ~~Flows~~ of Contents

	Years Ended December 31,
	2010			2009			2008
	(Dollars In Thousands)
Net cash provided by operating activities	$	11,295		$	2,472		$	5,783
Net cash provided by investing activities		1,827			7,225			13,656
Net cash used in financing activities		(2,376	)		(1,631	)		(26,263	)
Net change in cash and cash equivalents	$	10,746		$	8,066		$	(6,824	)

EOS Preferred Corporation

~~Cash~~Notes ~~provided by operating activities increased by $8.8 million for 2010 as compared~~ to ~~2009, primarily attributable to~~ the ~~loan~~Financial repayments held for sale at fair value including in operating activities partially offset by lower interest income. Cash provided by operating activities decreased by $3.3 million for 2009 as compared to 2008, primarily attributable to lower interest income. Statements

~~Cash~~Years ~~provided~~Ended ~~by investing activities decreased by $5.4~~December ~~million~~31, ~~for~~2011, 2010 ~~as compared to 2009~~ due to loan repayments from loans held for sale included in operating activities. Conversely, cash provided by investing activities decreased by $6.4 million for 2009 as compared to 2008 due to lower loan repayments. and

~~Cash~~During the ~~used~~first inquarter ~~financing~~of ~~activities~~2011, ~~increased~~we ~~$745,000~~submitted ~~for~~a ~~2010~~formal asrequest ~~compared~~for non-objection to ~~2009~~the ~~due~~OTS to ~~increases~~ indeclare dividends ~~paid~~. ~~Cash~~The ~~used~~OTS inhad ~~financing~~not ~~activities~~issued a ~~decreased~~ruling ~~$24.6 million~~on ~~for~~our ~~2009~~request ~~as compared~~prior to ~~2008~~the ~~primarily attributable~~filing toof ~~transactions~~our ~~that~~quarterly ~~occurred~~report inon ~~2008~~Form ~~that~~10-Q ~~did~~for the period ended March 31, 2011, and as a result, dividends were not ~~occur~~declared infor ~~2009~~the first quarter of 2011. On July 12, ~~namely~~2011, the OTS granted a non-objection determination ~~return~~for the declaration of ~~capital~~preferred tostock ~~common~~dividends. ~~stockholder~~On July 13, 2011, the Board of Directors declared dividends for the second quarter of 2011 which were comprised of cumulative dividends on the Series B preferred stock of $2040.~~2 million~~00 ~~and~~per ~~common~~share ~~stock~~and non-cumulative dividends on the Series D preferred stock of $20.~~8 million~~53125 per share. Dividends were not declared on our common stock.

36During the third quarter of 2011, federal regulatory oversight of Aurora Bank and EOS transitioned from the OTS to the OCC. As part of the transition of primary regulators, the OCC, as successor to the OTS, is charged with undertaking a review of various matters impacting Aurora Bank and EOS which included the payment of dividends to our preferred and common shareholders. The OCC’s review of matters relating to Aurora Bank and EOS continued throughout the transition period. Accordingly, our Board of Directors did not declare or pay a dividend on the Series D preferred stock or the Series B preferred stock, that would have been payable on October 17, 2011.

~~Table~~On December 20, 2011, the OCC provided authorization for the declaration of ~~Contents~~dividends in an amount sufficient to maintain qualification as a REIT and avoid excise tax for the 2011 tax year provided such dividends were declared by December 31, 2011 and these dividends were paid by January 31, 2012. The Board of Directors of EOS declared such dividends on December 21, 2011, for the fourth quarter of 2011, consistent with the OCC authorization. The dividends were payable to shareholders of record as of January 5, 2012 and included cumulative dividends on the Series B preferred stock of $40.00 per share, non-cumulative dividends on the Series D preferred stock of $0.53125 per share. No dividends were declared on our common stock. Notwithstanding the lack of dividends paid on our common stock, EOS satisfied the income distribution requirements in 2011 to retain its status as a REIT.

~~Off-Balance-Sheet~~As of ~~Arrangements~~December 31, 2011, there were no dividends in arrears related to our cumulative Series B preferred stock. Dividends on the Series D preferred stock are non-cumulative and as such, there were no dividends in arrears.

We4. doInvestments ~~not~~at ~~have~~Fair any off-balance-sheet arrangements, other than those currently disclosed that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, results of operations, liquidity, or capital resources that are material to investors. Value

~~Interest~~On ~~Rate~~July ~~Risk~~19, 2011, we executed an Asset Sale Agreement with Aurora Bank to purchase certain MBS from Aurora Bank. In accordance with the terms of this agreement, we purchased $46.9 million in MBS at the then current fair value (and the carrying value of Aurora Bank) with cash that was held in our interest-bearing account. Underlying the holdings in our investment portfolio are pooled residential mortgage loans which are all 30 year adjustable rate mortgages originated in 2006 and 2007. We believe the securities purchased meet REIT eligibility requirements under the IRC. Regulatory approval was not required for this transaction.

The majority of our loan portfolio consists of variable rate loans with contractual interest rates that are affected by changes in market interest rates. In addition, falling interest rates would tend to reduce the amount of interest earned on our interest bearing cash deposits, which could negatively impact the amount of cash available to pay dividends on preferred stock and common stock. We are not able to precisely quantify the potential impact on our operating results or funds available for distribution to stockholders from material changes in interest rates. 39

~~Significant~~Table ~~Concentration~~ of ~~Credit Risk~~ Contents

WeEOS ~~have~~Preferred cash and cash equivalents of $62.6 million as of December 31, 2010. These funds were held in interest bearing and non-interest bearing accounts with Aurora Bank. The FDIC provides coverage on these accounts which as of December 31, 2010 was limited to $250,000. Cash in excess of FDIC coverage limitations is subject to credit risk. Corporation

~~Concentration~~Notes ~~of credit risk primarily arises with respect~~ to the ~~geographical~~Financial distribution of our loan portfolio. Our balance sheet exposure to geographic concentrations directly affects the credit risk of the loans within our loan portfolio. At December 31, 2010, 40% of the carrying value of our mortgage loans consisted of loans collateralized by properties located in California. Consequently, the portfolio may experience a higher default rate in the event of adverse economic, political or business developments or natural hazards in California that may affect the ability of property owners to make payments of principal and interest on the underlying mortgages. The housing and real estate sectors in California have been particularly impacted by the economic downturn with higher overall foreclosure rates than the national average. If California experiences further adverse economic, political or business conditions, or natural hazards, we will likely experience higher rates of loss and delinquency on our mortgage loans than if our loans were more geographically diverse. Statements

~~Liquidity~~Years ~~Risk~~Ended ~~Management~~December 31, 2011, 2010 and

The following ~~objective~~table ofprovides ~~liquidity~~the ~~management~~cost, isless tocumulative ~~ensure~~repayments, ~~the~~and ~~availability~~fair ofvalue ~~sufficient~~for ~~cash~~the ~~flows to~~category ~~meet~~of ~~all~~MBS ofin our ~~financial~~portfolio ~~commitments.~~at ~~In managing liquidity risk~~December 31, we2011. ~~take~~The ~~into~~net ~~account~~unrealized ~~various legal~~gains ~~limitations~~and ~~placed~~losses onare areported ~~REIT.~~in ~~Our~~Unrealized ~~principal~~losses ~~liquidity~~on ~~need~~investments ~~is to pay dividends~~ on ~~our preferred~~the ~~shares~~Statements ~~and common shares; however, our payment~~ of ~~dividends is currently subject to OTS approval~~Operations.

If and to the extent that any additional assets are acquired in the future, such acquisitions are intended to be funded primarily through repayment of unpaid principal balances of mortgage assets by individual borrowers and cash on hand. We do not have and does not anticipate having any material capital expenditures. To the extent that the Board of Directors determines that additional funding is required, we may raise such funds through additional equity offerings, debt financing or retention of cash flow (after consideration of provisions of the Internal Revenue Code requiring the distribution by a REIT of at least 90% of its REIT taxable income and taking into account taxes that would be imposed on undistributed income), or a combination of these methods. We do not currently intend to incur any indebtedness. The organizational documents of EOS limit the amount of indebtedness which it is permitted to incur without the approval of the Series D preferred stockholders to no more than 100% of the total stockholders’ equity of EOS. Any such debt may include intercompany advances made by Aurora Bank to EOS.

	Cost less Cumulative Repayments		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)
Residential mortgage-backed securities	$	41,809	$	—	$	(339	)	$	41,470

~~We may also issue additional series of preferred stock, subject to OTS approval. However, we~~The ~~may~~unrealized ~~not~~gains ~~issue~~and ~~additional~~losses ~~shares~~associated ofwith ~~preferred~~non-agency ~~stock~~residential ~~ranking~~MBS ~~senior~~are toprimarily ~~the~~driven ~~Series D~~by ~~preferred~~collateral ~~stock without~~losses ~~the~~that ~~consent~~are ofdifferent ~~holders~~than oforiginally atprojected, ~~least~~wider ~~two-thirds~~credit ofspreads, ~~the~~and ~~Series D~~changes ~~preferred~~in ~~stock~~interest ~~outstanding at that time~~rates. ~~Although~~ ~~EOS’~~The ~~charter~~net ~~does~~unrealized ~~not~~gains ~~prohibit or otherwise restrict Aurora Bank or its affiliates from holding~~ and ~~voting~~losses ~~shares~~are ~~of Series D preferred stock, to our knowledge, there were no shares of~~reported ~~Series D~~in ~~preferred~~Unrealized ~~stock~~losses ~~held~~on byinvestments ~~Aurora~~on ~~Bank~~the orStatements ~~its affiliates as~~ of Operations.

37There were no investments sold during the year ended December 31, 2011, therefore there were no realized gains and losses on the investments for the year ended December 31, 2011.

~~Table~~MBS are comprised of ~~Contents~~securities not due at a single maturity date and generally have a shorter life than the stated maturity. The actual maturity of a MBS is expected to be less than its stated maturity due to prepayments of the underlying mortgages. Payments that are faster than anticipated may shorten the life of the security and may affect the actual yield based upon any premiums or discounts included in the initial purchase price. The weighted-average yield is computed using the contractual coupon of each security weighted based on the fair value of each security and was 3.32% at December 31, 2011.

~~December 31, 2010~~5. ~~Additional shares of preferred stock ranking on parity with the Series D preferred stock may not be issued without the approval of a majority of our independent directors.~~ Loans

~~There~~As ~~are~~of noboth ~~known~~December ~~material~~31, ~~trends~~2011 and 2010, ~~demands~~the loan portfolio was comprised primarily of loans secured by one-to-four family residential real estate loans, ~~commitments~~the majority of which were located in California. On November 18, ~~events~~2009, orEOS ~~uncertainties~~and atAurora Bank entered into and consummated the November Asset Exchange ~~present~~pursuant ~~time~~to ~~that~~which ~~are~~EOS ~~reasonably~~agreed ~~likely~~to transfer 93 loans secured primarily by commercial real estate and multi-family residential real estate to ~~result~~Aurora Bank in ~~our~~exchange ~~liquidity~~for ~~increasing~~74 orloans ~~decreasing~~secured inprimarily ~~any material~~by ~~way~~residential real estate. There were no acquisitions, sales or exchanges of loans during 2011 or 2010.

~~Impact~~We use the term “carrying value” to reflect loans valued at the lower of ~~Inflation~~their ~~and~~accreted ~~Changing~~cost ~~Prices~~or market value, or at their fair value, as applicable to the individual loans’ valuation method as selected by us in accordance with accounting standards.

Our asset and liability structure is substantially different from that of an industrial company in that virtually all of our assets are monetary in nature. Management believes the impact of inflation on financial results depends upon our ability to react to changes in interest rates and by such reaction, reduce the inflationary impact on performance. Interest rates do not necessarily move in the same direction, or at the same magnitude, as the prices of other goods and services. 40

~~Various~~Table information shown elsewhere in this annual report will assist the reader in understanding how EOS is positioned to react to changing interest rates and inflationary trends. In particular, the discussion of ~~market risk and other maturity and repricing information of our assets is contained in Item 7A, Quantitative and Qualitative Disclosure About Market Risk, of this annual report.~~ Contents

38 EOS Preferred Corporation

~~Table~~Notes ofto ~~Contents~~the Financial Statements

~~ITEM~~Years ~~7A.~~Ended ~~QUANTITATIVE~~December 31, ~~AND~~2011, ~~QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~2010 and

~~Market~~A ~~risk~~summary isof the ~~risk~~carrying ofvalue ~~loss from adverse changes in market prices~~ and ~~interest rates. It~~unpaid isprincipal ~~our~~balance ~~objective~~(“UPB”) ~~to attempt to manage risks associated with interest rate movements. Negative fluctuations in interest rates could reduce the amount~~ of ~~interest~~loans ~~paid~~held onfor ~~our~~sale ~~interest~~by ~~bearing cash~~valuation ~~deposits.~~method ~~Our market risk arises primarily from interest rate risk inherent in holding loans~~ and ~~interest-earning deposits. A period of rising interest rates would tend to result~~ in ~~an increase~~total inis ~~net~~as ~~interest income and conversely, a period of falling interest rates would tend to adversely affect net interest income.~~ follows:

Aurora Bank actively monitors our interest rate risk exposure pursuant to the AA. Aurora Bank reviews, among other things, the sensitivity of our assets to interest rate changes, the book and market values of assets, any purchase and sale activity, and anticipated loan pay-offs. Aurora Bank’s senior management also approves and establishes pricing and funding decisions with respect to our overall asset and liability composition.

	December 31,
	2011				2010
	Carrying Value		Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance
	(In Thousands)
Commercial real estate	$	3,934	$	7,238	$	6,866	$	9,504
Multi-family residential		403		753		850		1,034
One-to-four family residential		82		164		219		272
Subtotal mortgage loans at lower of accreted cost or market value (1)		4,419		8,155		7,935		10,810
One-to-four family residential, at fair value		12,188		16,416		16,505		22,048
Total	$	16,607	$	24,571	$	24,440	$	32,858

~~Our~~(1) ~~methods~~Though ~~for~~the ~~evaluating~~table ~~interest~~compares ~~rate~~the ~~risk~~carrying ~~include~~value anof ~~analysis~~these ofloans ~~our~~against ~~interest-earning assets~~UPB, ~~maturing~~these loans are carried at the lower of accreted cost or ~~repricing~~market ~~within~~value aand ~~given~~the ~~time~~carrying ~~period.~~value Ascannot ofexceed ~~December 31,~~the ~~2010,~~cost ~~only interest-earning~~of ~~assets~~these ~~were~~loans ~~evaluated~~which asfor weall ~~have~~loans nois ~~interest-bearing~~less ~~liabilities~~than UPB.

~~The~~A ~~following~~summary ~~table~~of ~~sets forth our interest-rate-sensitive assets categorized by repricing dates and weighted average yields at December 31, 2010. For fixed rate instruments,~~ the ~~repricing date~~loans ison ~~the maturity date. For adjustable~~non-~~rate~~accrual ~~instruments,~~status ~~the repricing date~~ is ~~deemed~~as ~~to be the earliest possible interest rate adjustment date. Assets that are subject to immediate repricing are placed in the overnight column.~~ follows:

	December 31, 2010
	December 31,
							Over One			Over Two			Over Three			Over Four
	2011						2010
				Within			to Two			to Three			to Four			to Five			Over Five
	Carrying Value			Unpaid Principal Balance			Carrying Value			Unpaid Principal Balance
	Overnight			One Year			Years			Years			Years			Years			Years			Total		Fair Value
	(In Thousands)
	(Dollars In Thousands)
Mortgage loans on real estate on non-accrual status:
Interest-bearing deposits	$	62,385		$	—		$	—		$	—		$	—		$	—		$	—		$	62,385	$	62,385
Commercial real estate	$	123		$	549		$	692		$	802
Weighted average yield		.30	%
Multi-family residential		—			—			—			—
Fixed-rate loans(1)		—			1,193			628			839			616			634			5,848			9,758		7,064
One-to-four family residential		—			—			224			337
Weighted average yield					6.18	%		4.57	%		4.96	%		5.11	%		5.43	%		4.39	%
Total loans on non-accrual status	$	123		$	549		$	916		$	1,139
Adjustable-rate loans(1)		—			21,962			—			—			—			—			—			21,962		16,460
Weighted average yield					4.97	%
Total rate-sensitive assets	$	62,385		$	23,155		$	628		$	839		$	616		$	634		$	5,848		$	94,105	$	85,909

(1) Loans are presented at unpaid principal balance and exclude non-accrual loans.

	Years Ended December 31,
	2011		2010		2009
	(In Thousands)
Average carrying value of non-accrual loans	$	586	$	738	$	1,532
Number of non-accrual loans		3		8		7
Number of borrowers with non-accrual loans		3		8		5

AtActivity ~~December 31, 2010, the fair value of our loans~~ in ~~accrual status was $23.5 million with an unpaid principal balance of $32.9 million and approximately 70% of~~ the ~~fair~~allowance ~~value~~for ofloan ~~loans~~losses in accrual status our portfolio were floating rate loans with contractual interest rates that may fluctuate based on changes in market interest rates. Based on our experience, management applies the assumption that, on average, approximately 33.3% and 6.9% of residential and commercial loans, respectively, will prepay annually. The fair value of interest-bearing deposits approximates carrying value. follows:

	Years Ended December 31,
	2011		2010		2009
	(In Thousands)
Balance at beginning of year	$	—	$	—	$	915
Reversal of allowance		—		—		(915	)
Balance at end of year	$	—	$	—	$	—

~~Table~~Prior ofto ~~Contents~~February 5, 2009, when we classified our loans as held for sale, there was no interest income recognized on impaired loans or interest income recognized on a cash basis on impaired loans for the year ended December 31, 2009.

~~ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~ 41

	Page
Reports of Independent Registered Public Accounting Firms		41
Balance Sheets		43
Statements of Operations		44
Statements of Changes in Stockholders’ Equity		45
Statements of Cash Flows		46
Notes to Financial Statements		47

Table of Contents

40 EOS Preferred Corporation

~~Table~~Notes ofto ~~Contents~~the Financial Statements

~~REPORT~~Years OFEnded ~~INDEPENDENT~~December 31, ~~REGISTERED~~2011, ~~PUBLIC ACCOUNTING FIRM~~2010 and

~~Board~~6. ofFair ~~Directors~~Value ~~and Shareholders~~ of ~~EOS~~ ~~Preferred~~Financial ~~Corporation~~ Instruments

WeFair ~~have~~Value audited the accompanying balance sheet of EOS Preferred Corporation (a Massachusetts corporation) (the “Company”) as of December 31, 2010, and the related statement of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. Measurements

WeAccounting ~~conducted our audit in accordance with the~~ standards ofdefine ~~the~~fair ~~Public~~value ~~Company Accounting Oversight~~and ~~Board~~establish ~~(United~~a ~~States).~~fair ~~Those~~value ~~standards~~hierarchy ~~require~~ that weprioritizes ~~plan and perform~~ the ~~audit~~inputs to ~~obtain reasonable~~valuation ~~assurance~~techniques ~~about~~used ~~whether~~to ~~the~~measure ~~financial~~fair ~~statements are free of material misstatement~~value. The ~~Company~~ fair value is ~~not~~the ~~required~~price toat ~~have,~~which ~~nor were we engaged to perform~~ an ~~audit~~asset ofor ~~its~~liability ~~internal~~could ~~control over~~be ~~financial~~exchanged ~~reporting.~~in ~~Our audit included consideration of internal control over financial reporting as~~ a ~~basis~~current ~~for~~transaction ~~designing~~between ~~audit~~knowledgeable, ~~procedures~~willing ~~that are appropriate~~ parties in ~~the circumstances, but not for the purpose of expressing~~ an ~~opinion~~orderly ~~on the effectiveness of the Company’s internal control over financial reporting~~market. ~~Accordingly~~Where available, wefair ~~express~~value nois ~~such~~based ~~opinion. An audit also includes examining,~~ on aobservable ~~test~~market ~~basis,~~prices ~~evidence~~or ~~supporting~~inputs ~~the~~or ~~amounts~~derived ~~and~~from ~~disclosures~~such inprices ~~the financial~~or ~~statements,~~inputs. ~~assessing~~Where ~~the~~observable ~~accounting~~prices ~~principles~~or ~~used~~inputs ~~and~~are ~~significant~~not ~~estimates made by management~~available, as ~~well~~other asvaluation ~~evaluating~~methodologies ~~the~~are ~~overall financial statement presentation~~applied. ~~We believe that our audit provides a reasonable basis for our opinion.~~

InAccounting ~~our~~standards ~~opinion,~~require the categorization of financial ~~statements~~assets ~~referred~~and toliabilities ~~above~~based ~~present~~on ~~fairly,~~a inhierarchy ~~all~~of ~~material respects,~~ the ~~financial~~inputs ~~position~~to ofthe ~~EOS~~valuation ~~Preferred~~techniques ~~Corporation~~used atto ~~December 31,~~measure ~~2010,~~fair ~~and~~value. The hierarchy gives the ~~results of~~highest ~~its~~priority ~~operations~~to ~~and~~quoted ~~its~~prices ~~cash~~in ~~flows~~active markets for identical assets or liabilities (Level 1) and the lowest ~~year~~priority ~~ended~~to ~~December 31,~~valuation ~~2010~~methods inusing ~~conformity~~unobservable ~~with~~inputs U(Level 3).~~S. generally~~ ~~accepted~~The ~~accounting~~three ~~principles.~~ levels are described below:

AsLevel ~~discussed~~1 in– ~~Note~~Inputs 3are ~~to the financial statements~~unadjusted, ~~on September 15, 2008, Lehman Brothers Holdings~~ ~~Inc.~~quoted ~~(“Lehman~~prices Brothers”), indirect parent company of the Aurora Bank FSB (“the Bank”), and ultimate parent company of the Company, filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. On January 6, 2009, the Bank filed a Proof of Claim in ~~the~~active ~~Lehman~~markets ~~Brothers~~for ~~Chapter 11 proceedings~~identical inassets ~~the~~or ~~amount~~liabilities ofat ~~$2.2 billion relating to Lehman Brother’s default on amounts due to~~ the ~~Bank.~~measurement ~~On November 30, 2010 the Bank settled these claims~~date. Also, as described in Note 3 to the financial statements, the Bank is subject to an Amended Order to Cease and Desist, dated November 30, 2010, issued by the Office of Thrift Supervision, which imposes restrictions on certain activities of the Bank and the Company.

~~/s/~~Level ~~GRANT~~2 ~~THORNTON~~– ~~LLP~~Inputs are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

~~Dallas,~~Level ~~Texas~~3 – Inputs reflect ~~March 31,~~management’s ~~2011~~best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

~~Table~~The categorization within the fair value hierarchy is based on the lowest level of ~~Contents~~significant input to its valuation.

~~REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM~~ Investments

The ~~Board~~fair value of ~~Directors~~our investment portfolio was determined primarily based upon quotes received from third parties and ~~Stockholders~~other ofinformation available from primary and secondary ~~EOS~~markets. ~~Preferred~~Management ~~Corporation~~also ~~(formerly~~considered ~~Capital~~calculations ~~Crossing~~prepared ~~Preferred~~using ~~Corporation):~~a pricing model with inputs that included observable market data and inputs that can be derived principally from or corroborated by observable market data. Market information used in the pricing model included benchmark yields, prepayment speeds, spreads, and volatility of similar securities.

WeIn ~~have audited~~ the ~~accompanying~~fair ~~balance~~value ~~sheet~~determination ofat ~~EOS Preferred Corporation (the “Company”), formerly Capital Crossing Preferred Corporation, as of~~ December 31, ~~2009~~2011, ~~and~~all ~~the related statements~~ of ~~operations,~~our ~~stockholders’~~investments ~~equity,~~were ~~and~~categorized ~~cash~~as ~~flows~~Level ~~for the years ended December 31, 2009 and 2008~~2. ~~These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.~~

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Loans

InPrior ~~our~~to ~~opinion~~February 5, ~~the~~2009, ~~financial~~our ~~statements~~loan ~~referred~~assets were toclassified ~~above~~as ~~present~~held ~~fairly~~for investment and recorded at accreted cost, inand ~~all~~we ~~material respects~~amortized any purchase discount and deferred fees, less a provision to the ~~financial~~allowance ~~position~~for loan losses. As a result of ~~EOS~~entering ~~Preferred~~into ~~Corporation~~the atFebruary ~~December 31,~~Asset ~~2009~~Exchange, ~~and~~our ~~the~~loans ~~results~~were reclassified ofas ~~its~~held ~~operations~~for sale and ~~its~~were ~~cash~~reported ~~flows~~at ~~for~~ the ~~years~~lower ~~ended~~of ~~December 31,~~their ~~2009~~accreted ~~and~~cost ~~2008,~~or inmarket ~~conformity~~value. A valuation allowance was recorded to recognize ~~with~~the Uexcess of accreted cost over fair value.S. ~~generally~~The ~~accepted~~February ~~accounting~~Asset ~~principles~~Exchange was terminated prior to consummation.

~~The~~Effective ~~accompanying~~November ~~financial~~1, ~~statements~~2009, EOS ~~have~~and ~~been~~Aurora ~~prepared~~Bank ~~assuming~~entered ~~that~~into ~~EOS~~and ~~Preferred Corporation~~consummated ~~will~~the ~~continue~~November asAsset aExchange ~~going~~pursuant ~~concern.~~to Aswhich ~~more~~we ~~fully~~agreed ~~described~~to inan ~~Note~~exchange 3,of ~~on September 15,~~loans ~~2008,~~with ~~Lehman~~Aurora ~~Brothers Holdings Inc. (“Lehman Brothers”)~~Bank, ~~indirect~~though ~~parent~~with ~~company~~a tolesser ~~Aurora~~quantity ~~Bank~~of ~~FSB (“Aurora~~loans ~~Bank”),~~than ~~and~~the ~~ultimate~~February ~~parent~~Asset ~~company~~Exchange. ofWe ~~EOS~~continue ~~Preferred~~to ~~Corporation,~~report ~~filed~~the aportion ~~voluntary~~of ~~petition~~the ~~under~~loan ~~Chapter 11~~assets ofthat ~~the~~were ~~U.S.~~retained ~~Bankruptcy~~after ~~Code.~~the AsNovember ~~further~~Asset ~~described~~Exchange inat ~~Note~~the 3lower toof ~~the financial~~their ~~statements,~~accreted ~~Aurora~~cost ~~Bank,~~or ~~the~~market ~~sole~~value ~~owner~~and ofthese loans ~~the~~are ~~common~~reflected ~~stock~~in ofLoans ~~EOS~~held ~~Preferred~~for ~~Corporation~~sale, is ~~subject~~at tolower aof ~~Cease~~accreted ~~and~~cost ~~Desist~~or ~~Order,~~market ~~dated~~value ~~January 26,~~on ~~2009,~~the ~~and~~Balance aSheet. ~~Prompt~~For ~~Corrective~~these ~~Action~~retained ~~Directive~~loans, ~~dated~~the ~~February 4,~~carrying ~~2009,~~value ~~issued~~of by the ~~Office~~loans ofwould ~~Thrift~~be ~~Supervision~~recognized ~~(the~~only ~~“OTS”), requiring~~up ~~Aurora~~to ~~Bank,~~the ~~among~~cost ~~other~~on ~~matters,~~the todate ~~submit~~they awere ~~capital~~classified ~~restoration~~as ~~plan~~held ~~and~~for ~~a liquidity~~sale. ~~management~~We ~~plan,~~have ~~and~~elected ~~imposing~~the ~~restrictions~~fair onvalue ~~certain~~option ~~activities~~for ofthe ~~Aurora~~loans ~~Bank~~that ~~and~~were ~~EOS~~received ~~Preferred Corporation.~~from ~~The~~the ~~bankruptcy~~November ofAsset ~~Lehman~~Exchange ~~Brothers~~ and ~~the~~these ~~ability~~loans ofare ~~the~~reflected in ~~OTS~~Loans toheld ~~regulate~~for ~~and~~sale, ~~restrict the~~at ~~business~~fair ~~and~~value ~~operations~~on ofthe ~~EOS~~Balance ~~Preferred~~Sheet. ~~Corporation~~For these acquired loans, inthe ~~light~~carrying value of the ~~Cease~~loans ~~and~~would ~~Desist Order~~be ~~and~~equivalent ~~the~~to ~~Prompt~~fair ~~Corrective~~value ~~Action~~which ~~Directive,~~may ~~raise~~reflect ~~substantial~~an ~~doubt~~unrealized ~~about~~gain ~~EOS~~or ~~Preferred Corporation’s~~loss ~~ability~~relative to ~~continue~~the ascost aof ~~going~~the ~~concern~~loans. ~~The~~Such ~~2009~~recognition ~~financial~~is ~~statements~~included in dothe ~~not~~determination ~~include any~~of ~~adjustments~~net ~~that~~income ~~might~~in ~~result~~the ~~from~~period ~~the~~in ~~outcome~~which ofthe ~~this~~change ~~uncertainty~~occurred.

~~/s/ Ernst & Young LLP~~ 42

~~New~~Table ~~York,~~of ~~New York March 31, 2010~~ Contents

~~Table~~EOS ofPreferred ~~Contents~~Corporation

~~EOS~~Notes ~~PREFERRED~~to ~~CORPORATION (f/k/a~~the ~~Capital~~Financial ~~Crossing Preferred Corporation)~~ Statements

~~BALANCE~~Years ~~SHEETS~~Ended December 31, 2011, 2010 and

~~(Dollars~~Accounting Instandards ~~Thousands~~define fair value and establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value is the price at which an asset or liability could be exchanged in a current transaction between knowledgeable, ~~except~~willing ~~share~~parties in ~~data)~~an orderly market. Where available, fair value is based on observable market prices or inputs or derived from such prices or inputs. Where observable prices or inputs are not available, other valuation methodologies are applied.

	December 31,
	2010			2009
ASSETS
Cash account with parent	$	184		$	184
Interest-bearing deposits with parent		62,385			51,639
Total cash and cash equivalents		62,569			51,823
Loans held for sale, at fair value		16,505			22,531
Loans held for sale, at lower of accreted cost or market value		7,935			7,292
Loans		24,440			29,823
Accrued interest receivable		213			393
Total assets	$	87,222		$	82,039
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accrued expenses	$	159		$	275
Accounts payable to parent		87			69
Dividends payable		798			—
Dividends payable to parent		902			—
Total liabilities		1,946			344
Stockholders’ 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 issued and outstanding		15			15
Common stock, $.01 par value, 100 shares authorized, issued and outstanding		—			—
Additional paid-in capital		95,320			95,320
Accumulated deficit less dividends		(10,059	)		(13,640	)
Total stockholders’ equity		85,276			81,695
Total liabilities and stockholders’ equity	$	87,222		$	82,039

The fair value of our loan portfolio was estimated based upon estimates provided by a third party valuation specialist using various proprietary cash flow models to price the portfolio. These models consider significant inputs such as loan type loan age, loan to value ratio, payment history, and property location, as well as significant assumptions such as estimated rates of loan delinquency, potential recovery, discount rate, and the impact of interest rate reset. Recent trade quotes or prices are identified in estimating the amount at which a third party might purchase the loans and their yield requirements. In addition to the estimates from the third party valuation specialist, management also considers market information and quotes received from third parties, when available. The valuation of the loan portfolio involves management’s use of estimates and judgment, the degree of which is dependent on the terms of the loans and the availability of market prices and inputs.

~~See~~In ~~accompanying~~the ~~notes~~fair tovalue ~~financial~~determination ~~statements.~~at December 31, 2011 and 2010, all of our loans were categorized as Level 3.

43The table presented below summarizes the change in balance sheet carrying value during the years ended December 31, 2011, 2010 and 2009 for Level 3 assets measured at fair value on a recurring basis.

	Balance December 31, 2010		Net Transfers In / Out⁽¹⁾		Payments			Settlements ⁽⁴⁾			Net Gains (Losses) ⁽²⁾			Balance December 31, 2011
			(In Thousands)
Loans Held for Sale:
Commercial real estate	$	6,866	$	—	$	(1,839	)	$	(173	)	$	(920	)	$	3,934
Multi-family residential		850		—		(253	)		—			(194	)		403
One-to-four family residential		16,724		—		(5,519	)		(120	)		1,185			12,270
Total	$	24,440	$	—	$	(7,611	)	$	(293	)	$	71		$	16,607

EOS PREFERRED CORPORATION (f/k/a Capital Crossing Preferred Corporation)

	Balance December 31, 2009		Net Transfers In / Out⁽¹⁾		Payments			Settlements ⁽⁴⁾		Net Gains (Losses) ⁽²⁾		Balance December 31, 2010
			(In Thousands)
Loans Held for Sale:
Commercial real estate	$	6,380	$	—	$	(1,551	)	$	—	$	2,037	$	6,866
Multi-family residential		693		—		(168	)		—		325		850
One-to-four family residential		22,750		—		(10,162	)		—		4,136		16,724
Total	$	29,823	$	—	$	(11,881	)	$	—	$	6,498	$	24,440

~~STATEMENTS OF OPERATIONS~~ 43

	Years Ended December 31,
	2010		2009			2008
	(Dollars In Thousands)
Interest income:
Interest and fees on loans	$	2,022	$	3,057		$	5,152
Interest on interest-bearing deposits		172		507			1,023
Total interest income		2,194		3,564			6,175
Gain (loss) on loans held for sale		6,498		(16,263	)		—
Reduction in allowance for loan losses		—		915			265
Net revenue (loss)		8,692		(11,784	)		6,440
Operating expenses:
Loan servicing and advisory services		470		282			229
Other general and administrative		565		758			181
Total operating expenses		1,035		1,040			410
Net income (loss)		7,657		(12,824	)		6,030
Preferred stock dividends		1,725		816			3,262
Net income (loss) available to common stockholder	$	5,932	$	(13,640	)	$	2,768

Table of Contents

~~See~~EOS ~~accompanying~~Preferred ~~notes to financial statements.~~ Corporation

44 Notes to the Financial Statements

~~Table~~Years ofEnded ~~Contents~~December 31, 2011, 2010 and

EOS PREFERRED CORPORATION (f/k/a Capital Crossing Preferred Corporation)

	Balance December 31, 2008		Net Transfers In / Out⁽¹⁾		Payments			November Asset Exchange, net ⁽³⁾			Settlements ⁽⁴⁾		Net Gains (Losses) ⁽²⁾			Balance December 31, 2009
			(In Thousands)
Loans Held for Sale:
Commercial real estate	$	—	$	29,775	$	(3,291	)	$	(11,235	)	$	—	$	(8,869	)	$	6,380
Multi-family residential		—		19,982		(1,334	)		(10,776	)		—		(7,179	)		693
One-to-four family residential		—		970		(303	)		22,298			—		(215	)		22,750
Total	$	—	$	50,727	$	(4,928	)	$	287		$	—	$	(16,263	)	$	29,823

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(1)		Transfers are recognized on the actual date of the event or change in circumstances that caused the transfer.

(2)		Net Gains and Losses are included in Realized and unrealized gains (losses) on loans held for sale on the Statements of Operations. This includes gains and losses from changes in fair value of loans along with gains from the sale of repossessed assets.

(3)		The Exchange also entailed the transfer of accrued interest receivable of $88, resulting in a net capital contribution of $199 from the transaction.

(4)		Settlements include loans which were foreclosed.

~~Years~~Fair ~~Ended~~Value ~~December 31,~~of ~~2010,~~Financial ~~2009, and 2008~~ Instruments

~~(Dollars~~Accounting standards require disclosure of estimated fair values of all financial instruments where it is practicable to estimate such values. In determining ~~Thousands~~the fair value measurements for financial assets and liabilities, ~~except~~we ~~per~~utilize ~~share~~quoted ~~data)~~prices, when available. If quoted prices are not available, we estimate fair value using present value or other valuation techniques that utilize inputs that are observable for the asset or liability, either directly or indirectly, when available. When observable inputs are not available, inputs may be used that are unobservable and, therefore, reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

	Preferred Stock				Preferred Stock								Additional			Accumulated			Total
	Series B				Series D				Common Stock				Paid-in			Deficit Less			Stockholders
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Dividends			Equity
Balance at December 31, 2007		1	$	—		1,500	$	15		—	$	—	$	115,354		$	—		$	115,369
Net Income		—		—		—		—		—		—		—			6,030			6,030
Cumulative dividends declared on preferred stock, Series B ($80.00 per share)		—		—		—		—		—		—		—			(75	)		(75	)
Dividends declared on preferred stock, Series D ($2.1225 per share)		—		—		—		—		—		—		—			(3,187	)		(3,187	)
Return of capital to common stockholder		—		—		—		—		—		—		(20,233	)		—			(20,233	)
Dividends declared on common stock		—		—		—		—		—		—		—			(2,768	)		(2,768	)
Balance at December 31, 2008		1		—		1,500		15		—		—		95,121			—			95,136
Net loss		—		—		—		—		—		—		—			(12,824	)		(12,824	)
Cumulative dividends declared on preferred stock, Series B ($20.00 per share)		—		—		—		—		—		—		—			(19	)		(19	)
Dividends declared on preferred stock, Series D ($0.53125 per share)		—		—		—		—		—		—		—			(797	)		(797	)
Parent contribution		—		—		—		—		—		—		199			—			199
Balance at December 31, 2009		1		—		1,500		15		—		—		95,320			(13,640	)		81,695
Net loss		—		—		—		—		—		—		—			7,657			7,657
Cumulative dividends declared on preferred stock, Series B ($140.00 per share)		—		—		—		—		—		—		—			(131	)		(131	)
Dividends declared on preferred stock, Series D ($1.0625 per share)		—		—		—		—		—		—		—			(1,594	)		(1,594	)
Dividends declared on common stock		—		—		—		—		—		—		—			(2,351	)		(2,351	)
Balance at December 31, 2010		1	$	—		1,500	$	15		—	$	—	$	95,320		$	(10,059	)	$	85,276

Accounting standards exclude certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not represent the underlying value of the entire company.

~~See~~In ~~accompanying~~addition ~~notes~~ to ~~financial~~the fair ~~statements.~~value of our investments and loans, as discussed above, the following methods and assumptions were used by us in estimating fair value of our other financial assets:

45Cash and cash equivalents: The carrying value of cash and interest-bearing deposits approximate fair value because of the short-term maturity of these instruments.

~~Table~~The estimated fair values, and related carrying value, of ~~Contents~~our financial instruments are as follows:

EOS PREFERRED CORPORATION (f/k/a Capital Crossing Preferred Corporation)

	December 31,
	2011				2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(In Thousands)
Cash and cash equivalents	$	27,179	$	27,179	$	62,569	$	62,569
Investments		41,470		41,470		—		—
Loans, net		16,607		16,607		24,440		24,440

~~STATEMENTS OF CASH FLOWS~~ 44

	Years Ended December 31,
	2010			2009			2008
	(Dollars In Thousands)
Cash flows from operating activities:
Net income (loss)	$	7,657		$	(12,824	)	$	6,030
Adjustments to reconcile net income (loss) to net cash from operating activities:
(Gain) loss on loans held for sale		(6,498	)		16,263			—
Decrease (increase) in accrued interest and other receivables		180			(280	)		76
(Decrease) increase in accrued expenses and accounts payable to parent		(98	)		228			(58	)
Loan repayments for loans held for sale at fair value		10,054			—			—
Provision for loan losses		—			(915	)		(265	)
Net cash provided by operating activities		11,295			2,472			5,783
Cash flows from investing activities:
Loan repayments from loans originally held to maturity		1,827			7,225			13,656
Net cash provided by investing activities		1,827			7,225			13,656
Cash flows from financing activities:
Payment of preferred stock dividends		(909	)		(1,631	)		(3,262	)
Payment of common stock dividends		(1,467	)		—			(2,768	)
Return of capital to common stockholder		—			—			(20,233	)
Net cash used in financing activities		(2,376	)		(1,631	)		(26,263	)
Net change in cash and cash equivalents		10,746			8,066			(6,824	)
Cash and cash equivalents at beginning of year		51,823			43,757			50,581
Cash and cash equivalents at end of year	$	62,569		$	51,823		$	43,757
Supplemental disclosure for non-cash activity:
Capital contribution from Aurora Bank	$	—		$	199		$	—

Table of Contents

~~See~~EOS ~~accompanying~~Preferred ~~notes to financial statements.~~ Corporation

46 Notes to the Financial Statements

~~Table~~Years ofEnded ~~Contents~~December 31, 2011, 2010 and

~~EOS~~7. ~~PREFERRED CORPORATION (f/k/a Capital Crossing~~ Preferred ~~Corporation)~~ Stock

~~NOTES~~On TOMarch 31, ~~FINANCIAL~~1998, ~~STATEMENTS~~we issued 1,000 shares of 8% Cumulative Non-Convertible Preferred Stock, Series B, to Capital Crossing. Holders of Series B preferred stock are entitled to receive, if declared by the Board of Directors, dividends at a rate of 8% of the average daily outstanding liquidation amount, as defined. Dividends accumulate at the completion of each completed period, as defined, and payment dates are determined by the Board of Directors.

~~Years~~Series B ~~Ended~~preferred ~~December 31~~stock has a liquidation amount of $1,000 ~~2010~~per share. In the event of a voluntary or involuntary dissolution or liquidation of EOS, ~~2009~~preferred stockholders are entitled to the total liquidation amount, as defined, plus any accrued and ~~2008~~ accumulated dividends.

On May 11, 2004, we completed a public offering of 1.5 ~~ORGANIZATION~~million shares of Non-Cumulative Exchangeable Preferred Stock, Series D, with a dividend rate of 8.50% and a liquidation preference of $25 per share, which raised net proceeds of $35.3 million, after related offering costs of $2,241,000. The liquidation preference for each Series D preferred share is $25.00, plus an accrued and unpaid dividend for the quarter in which the liquidation occurs.

~~EOS~~The Series ~~Preferred~~B ~~Corporation~~and ~~(referred to hereafter as~~ the ~~“Company”,~~Series ~~“EOS”,~~D ~~“we”,~~preferred ~~“us”~~stock orwere ~~“our”) is~~liquidated ~~a Massachusetts corporation organized~~ on ~~March 20,~~April ~~1998~~9, to2012 ~~acquire~~ and ~~hold~~on ~~real~~this ~~estate assets. Our principal business objective is to hold mortgage assets that will generate net income for distribution to stockholders.. Aurora Bank~~date, ~~FSB~~liquidating ~~(“Aurora~~distributions ~~Bank”),~~were ~~an indirect wholly owned~~paid ~~subsidiary of Lehman Brothers Holdings Inc. (“LBHI”; LBHI with its subsidiaries, “Lehman Brothers”), owns all of our common stock. Prior~~ to the ~~merger~~Series ~~with~~B ~~Aurora Bank, which is further discussed below, we were a subsidiary of Capital Crossing Bank (“Capital Crossing”), a federally insured Massachusetts trust company~~ and ~~our~~Series ~~corporate~~D ~~name~~shareholders ~~was~~in ~~Capital~~accordance ~~Crossing~~with ~~Preferred Corporation~~their ~~and~~respective ~~Capital Crossing owned all of our common stock~~terms. ~~Effective June 21, 2010, we changed our corporate name to EOS Preferred Corporation.~~

~~We operate in a manner intended to allow us to be taxed as a real estate investment trust, or a “REIT,” under the Internal Revenue Code of 1986, as amended~~8. AsRelated aParty ~~REIT, EOS will not be required to pay federal or state income tax if we distribute our earnings to our shareholders and continues to meet a number of other requirements.~~ Transactions

OnLoan March 31, 1998, Capital Crossing Bank capitalized the Company by transferring mortgage loans valued at $140.7 million in exchange for 1,000 shares of 8% Cumulative Non-Convertible Preferred Stock, Series B, valued at $1.0 million and 100 shares of our common stock valued at $139.7 million. The carrying value of these loans approximated their fair values at the date of contribution. Servicing

~~On May 11, 2004, we closed our public offering of 1,500,000 shares of 8.50% Non-Cumulative Exchangeable Preferred Stock, Series D.~~ Our ~~net proceeds from the sale of Series D preferred stock~~ ~~were~~loan ~~$35.3 million.~~portfolio Asis ofserviced ~~July 15,~~by ~~2009,~~Aurora ~~the~~Bank ~~Series D~~and ~~became~~sub-serviced ~~redeemable~~ at ~~our~~their ~~option~~direction ~~with~~pursuant ~~the prior~~to ~~consent of~~ the ~~Office~~terms of ~~Thrift Supervision (~~the ~~“OTS”) and/or the Federal Deposit Insurance Corporation (the “FDIC”)~~MSA.

OnThe MSA ~~February 14~~requires Aurora Bank to service, ~~2007~~or direct sub-servicing of, ~~Capital~~the ~~Crossing~~loan ~~was~~portfolio ~~acquired~~in a manner substantially the same as for similar work performed by Aurora Bank ~~through~~for transactions on its own behalf. Aurora Bank collects and remits principal and interest payments on at least a ~~two-step~~monthly ~~merger~~basis; maintains perfected collateral positions; submits and pursues insurance claims; and initiates and ~~transaction.~~supervises Anforeclosure ~~interim~~proceedings ~~thrift~~on ~~subsidiary~~the ofloan portfolio it services. Aurora Bank ~~was~~also ~~merged~~provides ~~into~~accounting ~~Capital~~and ~~Crossing.~~reporting services ~~Immediately~~for ~~following~~the ~~such~~loan ~~merger,~~portfolio ~~Capital~~as ~~Crossing~~required ~~was~~by ~~merged~~EOS. ~~into~~We may also direct Aurora Bank. ~~Under~~to ~~the~~dispose ~~terms~~of any loans placed on non-accrual status, or modified due to financial deterioration of the borrower. Aurora Bank may facilitate loan modifications and short sales where circumstances are so warranted. Aurora Bank may institute foreclosure proceedings and foreclose, manage and protect the ~~agreement~~mortgaged premises, ~~Lehman~~including ~~Brothers~~exercising ~~paid~~any ~~$30.00~~power ~~per~~of ~~share~~sale contained in ~~cash~~any mortgage or deed of trust, obtaining a deed-in-lieu-of-foreclosure, or ~~exchange~~otherwise ~~for~~acquiring ~~each~~title ~~outstanding~~to ~~share~~a mortgaged property underlying a mortgage loan by operation of law or otherwise in accordance with the terms of ~~Capital~~the ~~Crossing~~MSA.

The MSA ~~Series B~~may ~~preferred~~be ~~stock~~terminated ~~and~~on ~~Series D~~ninety ~~preferred~~days ~~stock~~notice ~~remain outstanding~~ and ~~remain subject~~other tocriteria ~~their~~pursuant ~~existing terms and conditions, including the call feature with respect~~ to the ~~Series D~~ ~~preferred stock~~agreement. The OTS may direct in writing the automatic exchange of the Series D preferred stock for preferred shares of Aurora Bank at a ratio of one Series D preferred share for one hundredth of one preferred share of Aurora Bank if Aurora Bank becomes undercapitalized under prompt corrective action regulations, if Aurora Bank is placed into bankruptcy, reorganization, conservatorship or receivership, or if the OTS, in its sole discretion, anticipates Aurora Bank will become undercapitalized in the near term (“Exchange Event”).

~~Business~~When any mortgaged property underlying a mortgage loan is conveyed by a mortgagor, Aurora Bank generally, upon notice of the conveyance, will enforce any due-on-sale clause contained in the mortgage loan, to the extent permitted under applicable law and governmental regulations. The terms of a particular mortgage loan or applicable law, however, may prohibit Aurora Bank from exercising the due-on-sale clause under certain circumstances related to the collateral underlying the mortgage loan and the borrowers’ ability to fulfill the obligations under the related mortgage note.

Our principal business objective is to hold mortgage assets that will generate net income for distribution to our stockholders. We hold mortgage assets in various cities in the United States with 40% of the carrying value of our mortgage loans secured by properties located in California. All of the mortgage assets in our loan portfolio at December 31, 2010 were acquired from Capital Crossing Bank or Aurora Bank and it is anticipated that substantially all additional mortgage assets, if any are acquired in the future, will be acquired from Aurora Bank. Aurora Bank administers our day-to-day activities in its roles as servicer under the Master Service Agreement (“MSA”) entered into between Aurora Bank and EOS and as advisor under the Advisory ~~Agreement (“AA”) entered into between Aurora Bank and EOS.~~ Services

47EOS has entered into the AA pursuant to which Aurora Bank administers our day-to-day operations. As advisor, Aurora Bank is responsible for:

~~Table of Contents~~45

~~EOS~~Table ~~PREFERRED~~of ~~CORPORATION (f/k/a Capital Crossing Preferred Corporation)~~ Contents

~~NOTES~~EOS TOPreferred ~~FINANCIAL STATEMENTS~~ Corporation

~~Years~~Notes ~~Ended~~to ~~December 31,~~the ~~2010,~~Financial ~~2009 and 2008~~ Statements

~~Both~~Years ~~the~~Ended AA and the MSA were amended effective as of January 1, 2010. The amended AA and the amended MSA change the fees paid by EOS. During 2010, the amended agreement, among other things, changed the management fee to $25,000 per month. The amended MSA changed the fees paid by EOS to reflect the fees payable to each sub-servicer. Through December 31, ~~2009~~2011, ~~we paid Aurora Bank an~~2010 ~~annual servicing fee equal to 0.20%, payable monthly,~~ and ~~an annual advisory fee equal to 0.05%, also payable monthly, of the gross average unpaid principal balances of loans in the loan portfolio it services for the immediately preceding month.~~

2.• ~~SUMMARY~~monitoring OFthe ~~SIGNIFICANT~~credit ~~ACCOUNTING~~quality ~~POLICIES~~ of our investment and loan portfolio; • advising us with respect to the acquisition, management, financing, and disposition of our investments, loans and other assets; and • maintaining our corporate and shareholder records.

~~Basis~~Aurora Bank may, from time to time, subcontract all or a portion of ~~presentation~~its obligations under the AA to one or more of its affiliates involved in the business of managing mortgage assets or, with the approval of a majority of Board of Directors as well as a majority of its independent directors, subcontract all or a portion of its obligations under the AA to unrelated third parties. Aurora Bank will not, in connection with the subcontracting of any of its obligations under the AA, be discharged or relieved in any respect from its obligations under the AA.

~~Our~~The AA ~~financial~~has ~~statements~~a ~~are~~term ~~prepared~~of inone ~~conformity~~year, ~~with~~renewable ~~accounting~~annually ~~principles~~for ~~generally accepted~~an inadditional ~~the~~one-year ~~United~~period ~~States~~unless ~~(“GAAP”)~~EOS ~~which~~delivers ~~require~~notice ~~management~~of nonrenewal to ~~make~~Aurora Bank. ~~estimates~~We ~~and~~may ~~assumptions that~~terminate ~~affect~~ the ~~amounts~~AA ~~reported~~at onany ~~the~~time ~~financial~~upon ~~statements~~ninety days’ ~~and~~prior ~~accompanying notes~~notice. ~~The~~Other ~~following is~~than athe ~~description~~servicing offee and the ~~more~~advisory fee, ~~significant~~Aurora ~~accounting~~Bank ~~policies~~is ~~which~~not weentitled ~~follow~~to ina ~~preparing~~fee for providing advisory and ~~presenting~~ ~~our~~management ~~financial~~services ~~statements~~to EOS.

~~Use~~Servicing and advisory fees for the years ended December 31, 2011, 2010, and 2009, totaled $421,000, $470,000, and $127,000, respectively, and were recorded in Loan Servicing and advisory services in the Statements of ~~estimates~~Operations. Amounts due to Aurora Bank as of December 31, 2011 and 2010 were $63,000 and $87,000, respectively and were recorded in Accounts payable to parent on the balance sheets.

InOur ~~preparing~~investment ~~financial~~portfolio ~~statements~~was inpurchased ~~conformity with GAAP, management is required to make~~from ~~estimates~~Aurora ~~and~~Bank ~~assumptions~~in ~~that~~July ~~affect~~2011 at the ~~reported~~then ~~amounts~~current offair ~~assets~~value (and ~~liabilities~~the ascarrying ofvalue ~~the date~~ of ~~the~~Aurora ~~balance~~Bank) ~~sheet and reported amounts~~ of ~~revenues~~$46.9 ~~and~~million ~~expenses~~with ~~during~~cash ~~the reporting period.~~that ~~Material~~was ~~estimates that are particularly susceptible to significant change~~ in ~~the~~our ~~near~~account ~~term~~with ~~relate to~~Aurora ~~the~~Bank. ~~determination~~The ~~of the~~ fair value of ~~loans held for sale. For a more detailed discussion of~~ the ~~basis~~investment ~~for the estimates of the fair value of our loan~~ portfolio, ~~please~~was ~~see Loans Held for Sale, below, and Note 5, Fair Value of Financial Instruments, below~~$41. ~~Prior to February~~ 5, ~~2009, material~~million ~~estimates~~at ~~also~~December ~~included the determination of the allowance for losses on loans~~31, ~~the allocation of purchase discount on loans between accretable and nonaccretable portions, and the rate at which the discount is accreted into interest income~~2011.

~~Cash~~All of the mortgage assets in our loan portfolio at December 31, 2011 were purchased from Capital Crossing or Aurora Bank. See November Asset Exchange in Note 2 for the transaction to exchange commercial and ~~Cash~~multi-family ~~Equivalents~~loans for residential loans during 2009. No loans were purchased or contributed from Aurora Bank in 2011 or 2010.

~~Cash and cash equivalents include cash and interest bearing deposits held at Aurora Bank with original maturities of ninety days or less.~~ The ~~majority~~following oftable ~~the~~summarizes ~~cash~~capital ~~is held in a money market~~transactions ~~account~~between ~~that~~us ~~bears~~and ~~interest at rates determined by~~ Aurora Bank ~~which generally follow federal funds rates. The money market account has a limitation on the number of monthly withdrawals~~, ~~but~~our ~~there~~sole ~~is no~~common ~~limit~~shareholder onand ~~the amount of the withdrawals either individually or in the aggregate.~~ parent:

Loans Held for Sale

	Years Ended December 31,
	2011		2010		2009
	(In Thousands)
Common stock dividends paid to parent	$	884	$	1,467	$	—
Series B preferred stock dividends paid to parent		54		108		18
Contribution of capital in the form of loans (“November Asset Exchange”)		—		—		199

~~On February 5~~Additionally, ~~2009,~~dividends ~~EOS~~were ~~and~~declared ~~Aurora~~on ~~Bank entered into an Asset Exchange Agreement (the~~December ~~“February~~31, ~~Asset~~2011. ~~Exchange”)~~Dividends ~~pursuant~~ to ~~which~~Aurora weBank ~~agreed~~included to$38,000 ~~transfer~~for the ~~entire~~Series ~~loan~~B ~~portfolio secured~~preferred ~~primarily~~stock ~~by commercial real estate~~ and ~~multi-family~~are ~~residential~~included ~~real estate to Aurora Bank~~ in ~~exchange~~Dividends ~~for~~payable ~~loans~~to ~~secured primarily by~~parent ~~residential~~as ~~real estate. As a result, during the first quarter~~ of ~~2009,~~December ~~we reclassified all of our loan assets as held for sale~~31, ~~recorded a fair value adjustment and reported these loans at the lower of the their accreted cost or market value~~2011. ~~The February Asset Exchange was terminated prior to its consummation.~~

~~Effective~~Our ~~November 1,~~cash ~~2009, EOS~~ and ~~Aurora~~cash ~~Bank~~equivalents ~~entered~~balances ~~into and consummated the November Asset Exchange pursuant to which we agreed to an exchange~~ of ~~loans with Aurora Bank, though with a~~$27.2 ~~lesser~~million ~~quantity~~and ~~of loans than the February Asset Exchange~~$62.6 Asmillion ofat December 31, ~~2010,~~2011 weand ~~continue to report the portion of the loan assets that were retained after the November Asset Exchange at the lower of their accreted cost or market value. For these retained loans~~2010, the carrying value of the loans will be recognized only up to the cost on the date they were classified as held for sale. We have elected the fair value option for the loans that were received from the November Asset Exchange. For these acquired loansrespectively, ~~the~~consist ~~carrying~~entirely ~~value~~ of ~~the~~deposits ~~loans~~with ~~will~~Aurora ~~be equivalent to fair value which may~~ Bank.

48 46

Table of Contents

~~EOS~~9. ~~PREFERRED~~Quarterly ~~CORPORATION (f/k/a~~Data ~~Capital Crossing Preferred Corporation~~(Unaudited)

~~NOTES~~Supplemental TOFinancial ~~FINANCIAL STATEMENTS~~ Information

Years Ended December 31, 2010, 2009 and 2008

	Years Ended December 31,
	2011										2010
	Fourth Quarter			Third Quarter			Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
	(In Thousands)
Interest income	$	729		$	777		$	448	$	408	$	529	$	465	$	524	$	676
Losses on investments held for sale		(331	)		(8	)		—		—		—		—		—		—
(Losses) gains on loans held for sale		(1,315	)		4			71		1,311		1,263		2,715		756		1,764
Loss on repossessed asset		(82	)		—			—		—		—		—		—		—
Operating expenses		249			182			289		268		247		265		249		274
Net income (loss)		(1,248	)		591			230		1,451		1,545		2,915		1,031		2,166
Preferred stock dividends declared		835			834			—		—		816		909		—		—
Net income (loss) available to common stockholder	$	(2,083	)	$	(243	)	$	230	$	1,451	$	729	$	2,006	$	1,031	$	2,166

~~reflect an unrealized gain or loss relative to the cost of the loans. Such recognition is included in the determination of net income in the period in which the change occurred.~~ 47

~~The~~Table ~~fair value~~ of our loan portfolio is estimated based upon information, to the extent available, about then current sale prices, bids, credit quality, liquidity, and other available information for loans with similar characteristics as our loan portfolio. The geographical location and geographical concentration of the loans in our portfolio is considered in the analysis. The valuation of the loan portfolio involves some level of management estimation and judgment, the degree of which is dependent on the terms of the loans, and the availability of market prices and inputs. Contents

~~Loans~~Schedule ~~are~~IV ~~generally~~– ~~placed~~Mortgage onLoans non-accrual status and the accrual of interest is generally discontinued when the collectability of principal and interest is not probable or estimable which generally occurs when the loan is ninety days or more past due as to either principal or interest. Unpaid interest income previously accrued on ~~such loans is reversed against current period interest~~Real income. Interest payments received on non-accrual loans are recorded as interest income. A loan is returned to accrual status when it is brought current. Loans are charged off when they are determined to be uncollectible. Estate

~~Discounts~~ December on31, ~~Acquired Loans~~ 2011

Prior to February 5, 2009, our loan assets were considered held for investment and recorded at accreted cost, which accounts for the amortization of any purchase discount and deferred fees, less an allowance for loan losses. We reviewed acquired loans for differences between contractual cash flows and cash flows expected to be collected from our initial investment in the acquired loans to determine if those differences were attributable, at least in part, to credit quality. If those differences were attributable to credit quality, the loan’s contractually required payments receivable in excess of the amount of its cash flows expected at acquisition, or nonaccretable discount, were not accreted into income. We recognized the excess of all cash flows expected at acquisition over our initial investment in the loan as interest income using the interest method over the term of the loan.

	Prior Liens		Location		Interest Rate		Carrying Amount of Mortgage		Unpaid Principal Balance		Principal Amount Subject to Delinquent Principal or Interest		Amount of Mortgage being Foreclosed		Interest Due and Accrued at End of Period		Interest Income Earned Applicable to Period
							(In Thousands)
Farms		—		—		—	$	—	$	—	$	—	$	—	$	—	$	—
Residential		—		Various U.S. Cities		3.0%		12,188		16,416		—		—		65		651
Apartments and businesses		—		Various U.S. Cities		3.0 - 14.5%		4,419		8,155		549		—		46		635
Unimproved		—		—		—		—		—		—		—		—		—
Total							$	16,607	$	24,571	$	549	$	—	$	111	$	1,286

There was judgment involved in estimating the amount of our future cash flows on acquired loans. The amount and timing of actual cash flows could differ materially from management’s estimates, which could materially affect our financial condition and results of operations. Depending on the timing of an acquisition of loans, a preliminary allocation may have been utilized until a final allocation was established. Generally, the allocation was finalized no later than ninety days from the date of purchase.

Balance at December 31, 2010	$	24,440
Additions during period:
Realized gains on loans held for sale		71
Deductions during period:
Loan repayments		(7,611	)
Net transfers in/(out)		(293	)
Balance at December 31, 2011	$	16,607

Subsequent to loan acquisition, if cash flow projections improved, and it was determined that the amount and timing of the cash flows related to the nonaccretable discount were reasonably estimable and collection was probable, the corresponding decrease in the nonaccretable discount was transferred to the accretable discount and was accreted into interest income over the remaining life of the loan using the interest method. If cash flow projections deteriorated subsequent to acquisition, the decline was accounted for through a provision for loan losses included in earnings. 48

~~Any~~Table ~~remaining discount relating to our purchase~~ of the loans is not amortized as interest income during the period the loans are classified as held for sale. Deferred income associated with loans held for sale is deferred until the related loan is paid in full or sold. Contents

~~Allowance~~ITEM ~~for~~9. ~~Loan~~CHANGES ~~Losses~~ IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

~~Prior~~On toSeptember ~~February 5~~17, ~~2009~~2010, we engaged the firm of Grant Thornton as our ~~loan~~independent ~~assets~~registered ~~were~~public ~~considered~~accounting ~~held~~firm ~~for~~to ~~investment~~audit ~~and~~our ~~recorded~~financial atstatements. The members of the Audit ~~accreted~~Committee ~~cost,~~of ~~which~~the ~~accounts~~Board ~~for~~of Directors approved the ~~amortization~~engagement of ~~any~~Grant ~~purchase~~Thornton. ~~discount~~Prior ~~and~~to ~~deferred~~the ~~fees~~engagement of Grant Thornton, ~~less~~neither anus ~~allowance~~nor ~~for~~any ~~loan~~person ~~losses.~~on ~~Since~~our ~~the~~behalf ~~loan~~consulted ~~portfolio~~with isGrant ~~now~~Thornton ~~classified~~regarding asthe ~~held~~application ~~for~~of ~~sale~~accounting ~~and recorded~~principles ~~either~~to ata ~~fair~~specified completed ~~value,~~or proposed transaction or the ~~lower~~type of ~~its~~audit ~~accreted~~opinion ~~cost~~that ormight atbe ~~fair~~rendered ~~value,~~on weour nofinancial ~~longer~~statements, and neither ~~maintain~~a anwritten ~~allowance~~report ~~for~~nor ~~loan~~oral ~~losses.~~advice Inwas ~~prior~~provided ~~periods,~~that ~~arriving~~Grant atThornton concluded was an important factor considered by us in reaching a decision as to the accounting, auditing, or financial reporting issue.

49On September 17, 2010, the Audit Committee of the Board of Directors approved the dismissal of Ernst & Young as our independent registered public accounting firm. No reports of Ernst & Young on our financial statements for the past fiscal years, specifically the fiscal year ended December 31, 2009, contained any adverse opinion or disclaimer of opinion or was qualified or modified as to uncertainty, audit scope, or accounting principles, except that the Ernst & Young audit report on the 2009 financial statements were modified for the uncertainty of our ability to continue as a going concern.

~~Table~~During the fiscal year ended December 31, 2011 there were no disagreements with Grant Thornton on any matter of ~~Contents~~accounting principles or practices, financial statement disclosure, or audit scope or procedure, which disagreement(s), if not resolved to the satisfaction of Grant Thornton, would have caused it to make reference thereto in any report and there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K).

~~EOS~~ITEM ~~PREFERRED~~9A. ~~CORPORATION (f/k/a~~CONTROLS ~~Capital~~AND ~~Crossing Preferred Corporation)~~ PROCEDURES

~~NOTES~~Evaluation TOof ~~FINANCIAL~~Disclosure ~~STATEMENTS~~ Controls and Procedures

~~Years~~EOS’ ~~Ended~~management, with the participation of our President and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, the “Exchange Act”) as of December 31, ~~2010~~2011. Based on this evaluation, ~~2009~~our President and ~~2008~~Chief Financial Officer concluded that, as of December 31, 2011, our disclosure controls and procedures were (1) designed to ensure that material information relating to EOS is made known to the President and Chief Financial Officer by others within the entity, particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

~~appropriate~~Changes ~~level~~in ofInternal ~~allowance~~Control ~~for~~Over ~~loan~~Financial ~~losses required a high degree of judgment. The allowance for loan losses was increased or decreased through a provision for loan losses.~~ Reporting

InNo ~~determining~~change ~~the~~to ~~adequacy of the allowance for loan losses, management made significant judgments. Aurora Bank initially reviewed~~ our ~~loan~~internal ~~portfolio~~control toover ~~identify loans for which specific~~financial ~~allocations~~reporting ~~were~~(as ~~considered~~defined ~~prudent.~~in ~~Specific~~Rules 13a-15(f) ~~allocations~~and ~~included~~15d-15(f) under the ~~results~~Exchange ofAct) ~~measuring impaired~~occurred ~~loans.~~during ~~Further,~~ the ~~allowance~~year ~~for~~ended ~~these loans was determined by a formula whereby the~~December 31, ~~portfolio~~2011 ~~was~~that ~~stratified~~has bymaterially ~~type~~affected, ~~and~~or ~~internal~~is ~~risk~~reasonably ~~rating~~likely ~~categories. Loss factors were then applied~~ to ~~each~~materially ~~strata based on various considerations including collateral type~~affect, ~~loss~~our ~~experience, delinquency~~internal ~~trends,~~control ~~current~~over ~~economic~~financial ~~conditions and industry standards~~reporting. ~~The allowance for loan losses was management’s estimate of the probable loan losses incurred as of the balance sheet date.~~

~~The determination of the allowance for loan losses required management~~Management’s ~~use~~Report of significant estimates and judgments. In making this determination, management considered known information relative to specific loans, as well as collateral type, loss experience, delinquency trends, current economic conditions and industry trends, generally. Based on ~~these factors, management~~Internal ~~estimated~~Control ~~the~~over ~~probable~~Financial loan losses incurred as of the reporting date and increased or decreased the allowance through a change in the provision for loan losses. Loan losses were charged against the allowance when management believed the net investment of the loan, or a portion thereof, was uncollectible. Subsequent recoveries, if any, were credited to the allowance when cash payments were received. Reporting

~~Gains~~The management of EOS is responsible for establishing and ~~losses~~maintaining onadequate ~~sales~~internal ofcontrol ~~loans~~over ~~are~~financial ~~determined~~reporting, ~~using~~as ~~the~~such ~~specific~~term ~~identification~~is ~~method~~defined in Exchange Act Rule 13a-15(f). ~~The~~Under ~~excess~~the orsupervision ~~deficiency~~and with the participation of ~~any~~management, ~~cash~~including ~~received~~our asPresident ~~compared~~and toChief Financial Officer, an evaluation of the ~~carrying~~effectiveness ~~value~~of our internal control over financial reporting was ~~recorded~~conducted. asIn making this assessment, management followed ~~gain~~the orcriteria ~~loss~~in onInternal ~~sales~~Control-Integrated Framework issued by the Committee of ~~loans~~Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management determined that our internal control over financial reporting was effective as of December 31, 2011 based on the criteria in Internal Control-Integrated Framework issued by COSO.

~~Transfer of financial assets~~ 49

~~Transfers~~Table of financial assets are accounted for as sales when control over the assets is surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets are isolated from EOS, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) we do not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Contents

~~Revenue~~This ~~Recognition~~annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.

WeITEM ~~recognize interest income on loans as revenue as it is earned~~9B. ~~This~~OTHER revenue is included in Interest and fees on loans on the Statements of Operations. Any discount relating to the purchase of the loans by us is not accreted as interest income during the period the loans are classified as held for sale but is recognized when the related loan is paid in full or sold. Accrual status loans include any loan which returns to performing status from non-accrual status. INFORMATION

~~Taxes~~ None.

We have elected, for federal income tax purposes, to be treated as a REIT and intend to comply with the provisions of the Internal Revenue Code (the “IRC”). Accordingly, we will not be subject to corporate income taxes to the extent we distribute at least 90% of our REIT taxable income to stockholders and as long as certain assets, income, distribution, and stock ownership tests are met in accordance with the IRC. As such, no provision for income taxes is included in the accompanying financial statements. 50

AsTable of December 31, 2010, management evaluated the quantitative and qualitative requirements for REIT status and believes that we qualify as a REIT for federal and state income tax purposes. Accordingly, we have not recorded any uncertain tax positions. As of December 31, 2010, we do not have any unrecognized tax benefits. We do not anticipate any material changes in existing unrecognized tax benefits during the next 12 months. The Company is subject to examination by the respective taxing authorities for the tax years 2007 to 2009. Our policy is Contents

50 PART III

~~Table~~ITEM of10. ~~Contents~~DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

~~EOS~~Directors ~~PREFERRED~~and ~~CORPORATION (f/k/a~~Executive ~~Capital Crossing Preferred Corporation)~~ Officers

~~NOTES~~The TOnames ~~FINANCIAL~~and ~~STATEMENTS~~ages of each of our directors and executive officers and their principal occupation and business experience for at least the last five years are set forth below. The executive officers hold office until their successors are duly elected and qualified.

Years Ended December 31, 2010, 2009 and 2008

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