##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
  FORM 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31, 2005oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Transition Period
    From          
    to   Commission File Number
    001-08634
  Temple-Inland Inc.
 (Exact Name of Registrant as
    Specified in its Charter)
  Delaware

75-1903917(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)   1300 MoPac Expressway South
 Austin, Texas 78746
 (Address of principal executive
    offices, including Zip code)
  Registrants telephone number, including area code:
    (512) 434-5800
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange On Which
    RegisteredCommon Stock, $1.00 Par Value
    per Share,
    non-cumulative
    Preferred Share Purchase Rights

New York Stock Exchange
    The Pacific Exchange
    New York Stock Exchange
    The Pacific Exchange        Indicate by check mark if the registrant is a well-known
    seasoned issuer, as defined in Rule 405 of the Securities
    Act.  Yes þ     No o
  Indicate by check mark if the registrant is not required to
    file reports pursuant to Section 13 or Section 15(d)
    of the Securities Exchange Act of
    1934.  Yes o     No þ
  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     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 statements incorporated by reference in
    Part III of this
    Form 10-K
    or any amendment to this
    Form 10-K.þ
  Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, or a non-accelerated
    filer. See definition of accelerated filer and large
    accelerated filer in
    Rule 12b-2
    of the Exchange Act. (Check one):
 Large accelerated
    filer þ o o
  Indicate by check mark whether the registrant is a shell
    company (as defined in Exchange Act
    Rule 12b-2).  Yes o No þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 



TABLE OF
    CONTENTS
  
  PagePART I.Item 1.

Business


1Item 1A.

Risk Factors


9Item 1B.

Unresolved Staff
    Comments


12Item 2.

Properties


12Item 3.

Legal
    Proceedings


15Item 4.

Submission of
    Matters to a Vote of Security Holders


17 PART II.Item 5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


17Item 6.

Selected Financial
    Data


18Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


20Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


48Item 8.

Financial
    Statements and Supplementary Data


49Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


107Item 9A.

Controls and
    Procedures


107Item 9B.

Other
    Information


107 PART III.Item 10.

Directors and
    Executive Officers of the Registrant


107Item 11.

Executive
    Compensation


108Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


108Item 13.

Certain
    Relationships and Related Transactions


108Item 14.

Principal
    Accounting Fees and Services


108 PART IV.Item 15.

Exhibits and
    Financial Statement Schedules


109SIGNATURES


112Revised Form of Performance Stock Units AgreementRevised Form of Restricted Stock Unit AgreementRevised Form of Nonqualified Stock Option AgreementSubsidiaries of the CompanyConsent of Ernst & Young LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906   i




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##### Table of Contents



PART I  Item 1.
    Business  Introduction
    
    Corrugated packaging,
    Forest products, and
    Financial services.    Form 10-K.
  
  (512) 434-5800. http://www.templeinland.com.
  Form 10-K, Form 10-Q, Form 8-K,
  
    corporate governance principles,
    audit committee charter,
    management development and executive compensation committee
    charter, 1




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##### Table of Contents




    nominating and governance committee charter,
    standards of business conduct and ethics,
    code of ethics for senior financial officers, and
    information on how to communicate directly with our board of
    directors.    Financial
    Information
  Form 10-K. Form 10-K.
  Narrative
    Description of the Business
  Corrugated Packaging.
  
    five linerboard mills,
    one corrugating medium mill, and
    67 converting and other facilities.                Forest Products.
  
    lumber,
    gypsum wallboard,
    particleboard,
    fiberboard, and
    medium density fiberboard (or MDF). 2




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##### Table of Contents



Financial Services.
  
    consumer and commercial banking,
    real estate development, and
    insurance.         3




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##### Table of Contents



Raw
    Materials
    PercentageSuppliedRaw Material

InternallySawtimber


55
%Pine Pulpwood


38
%     and/or
   4




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##### Table of Contents



Energy
        Employees
    Location

Bargaining Unit(s)

Employees Covered

Expiration DatesLinerboard Mill, Orange, Texas

United Steel, Paper and Forestry,
    Rubber, Manufacturing, Energy, Allied Industrial and Service
    Workers International Union (or USW), Local 1398, and USW, Local
    391

Approximately 220 hourly
    production employees and 100 hourly maintenance employees

July 31, 2008Linerboard Mill, Bogalusa,
    Louisiana

USW, Local 189, and International
    Brotherhood of Electrical Workers (or IBEW), Local 1077

Approximately 335 hourly
    production employees, and 28 electrical maintenance employees

July 31, 2009Linerboard Mill, Rome, Georgia

USW, Local 804, IBEW, Local 613,
    United Association of Journeymen & Apprentices of
    the Plumbing & Pipefitting Industry Local 72, and
    International Association of Machinists & Aerospace
    Workers, Local 414

Approximately 255 hourly
    production employees, 30 electrical maintenance employees,
    28 pipefitter maintenance employees, and 66 mechanical
    maintenance employees

August 28, 2006 5




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##### Table of Contents



Location

Bargaining Unit(s)

Employees Covered

Expiration DatesEvansville, Indiana and
    Middletown, Ohio, Box Plants (or Northern Multiple)

USW, Local 1046 and USW, Local
    114, respectively

Approximately 104 and
    99 hourly production and maintenance employees, respectively

April 30, 2008Rome, Georgia and Orlando,
    Florida, Box Plants (or Southern Multiple)

USW Local 838 and USW Local 834,
    respectively

Approximately 128 and
    90 hourly production and maintenance employees, respectively

December 1, 2008       Environmental
    Protection
             6




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Competition
   7




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##### Table of Contents



Executive
    Officers of the Registrant
    Name

Age

OfficeKenneth M. Jastrow, II


58


Chairman of the Board and Chief
    Executive OfficerDoyle R. Simons


42


Executive Vice PresidentJ. Patrick Maley III


44


Executive Vice PresidentJames M. DeCosmo


47


Group Vice PresidentBart J. Doney


56


Group Vice PresidentKenneth R. Dubuque


57


Group Vice PresidentJack C. Sweeny


59


Group Vice PresidentDennis J. Vesci


58


Group Vice PresidentRandall D. Levy


54


Chief Financial OfficerLouis R. Brill


64


Chief Accounting Officer and Vice
    PresidentScott Smith


51


Chief Information OfficerJ. Bradley Johnston


50


Chief Administrative Officer and
    General CounselLeslie K. ONeal


50


Vice President, Assistant General
    Counsel and SecretaryDavid W. Turpin


55


Treasurer          8




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##### Table of Contents



Item 1A.
    Risk
    Factors  The
    industries in which we operate are highly
    competitive.       9




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##### Table of Contents



Our
    manufacturing segments are affected by the cost of certain raw
    materials and energy.
      The
    corrugated packaging and forest products industries are cyclical
    in nature and experience periods of overcapacity.
  and/or
  Our
    manufacturing activities are subject to environmental
    regulations and liabilities that could have a negative effect on
    our operating results.
  Form 10-K,
  Our
    financial services segment operates in a highly regulated
    environment and may be adversely affected by changes in federal
    and local laws and regulations.
   10




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##### Table of Contents



Fluctuations
    in interest rates could reduce our financial services
    segments profitability.
      If our
    allowance for loan losses is not sufficient to cover actual loan
    losses, the income from our financial services segment could
    decrease.
    We
    face risks related to the composition of our financial services
    segments loan portfolio.
   11




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##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Containerboard
    Mills
  Number of


Annual


2005Location

Product

Machines


Capacity


Production(In tons)Ontario, California

Linerboard and corrugating medium


1



335,730



343,243Rome, Georgia

Linerboard


2



823,400



812,865Orange, Texas

Linerboard and corrugating medium


2



730,320



633,164Bogalusa, Louisiana

Linerboard


2



877,100



857,276Maysville, Kentucky

Linerboard and corrugating medium


1



427,785



430,336New Johnsonville, Tennessee

Corrugating medium


1



335,730



336,5893,530,065



3,413,473Newport, Indiana*

Corrugating medium and gypsum
    facing paper


1



305,100



297,056     *
    
    The table shows the full capacity of this facility that is owned
    by a joint venture in which we own a 50 percent interest.
    In 2005, we purchased 68,601 tons of corrugating medium and
    31,972 tons of gypsum facing paper from the venture.  Corrugated
    Packaging Plants*
  CorrugatorLocation

SizePhoenix, Arizona

982Fort Smith, Arkansas

872Fort Smith,
    Arkansas(1)***

NoneBell, California

972Buena Park,
    California(1)

852City of Industry, California**

872
    and 982El Centro,
    California(1)

872Gilroy,
    California(1)

872Gilroy,
    California(1)

982Ontario, California

872Santa Fe Springs, California

972Santa Fe Springs, California**

872
    872 and
    782 12




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##### Table of Contents



CorrugatorLocation

SizeSanta Fe Springs,
    California***

NoneTracy, California**

872
    and 872Union City,
    California(1)***

NoneWheat Ridge, Colorado

872Orlando, Florida

982Tampa,
    Florida(1)

782Rome, Georgia

982Carol Stream, Illinois

872Chicago, Illinois

872Chicago, Illinois***

NoneElgin, Illinois

782Elgin, Illinois***

NoneCrawfordsville, Indiana

982Evansville, Indiana

982Indianapolis, Indiana

872St. Anthony, Indiana***

NoneTipton,
    Indiana(1)

1102Garden City, Kansas

982Kansas City, Kansas

872Bogalusa, Louisiana

972Minden, Louisiana

982Minneapolis, Minnesota

872St. Louis, Missouri

872St. Louis, Missouri

982Milltown, New
    Jersey(1)***

NoneSpotswood, New Jersey

982Binghamton, New York

872Buffalo, New York***

NoneScotia, New York***

NoneUtica, New York***

NoneWarren County, North Carolina

982Madison, Ohio***

NoneMarion, Ohio

872Middletown, Ohio

982Streetsboro, Ohio

982Biglerville, Pennsylvania

982Hazleton, Pennsylvania

982Kennett Square, Pennsylvania***

NoneLittlestown, Pennsylvania***

NoneScranton, Pennsylvania

682Vega Alta, Puerto Rico

872Lexington, South Carolina

982Ashland City,
    Tennessee(1)***

NoneElizabethton,
    Tennessee(1)***

NoneDallas, Texas

982Edinburg, Texas

872San Antonio, Texas

982 13




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##### Table of Contents



CorrugatorLocation

SizeSan Antonio, Texas

982Petersburg, Virginia

872San Jose Iturbide, Mexico

982Monterrey, Mexico

872Los Mochis, Sinaloa, Mexico

802Guadalajara,
    Mexico(1)***

None     *
    
    The annual capacity of the box plants is a function of the
    product mix, customer requirements and the type of converting
    equipment installed and operating at each plant, each of which
    varies from time to time.**
    
    These plants each contain more than one corrugator.***
    
    Sheet plants.  (1)
    
    Leased facilities.  2
  Forest
    Products
  Rated AnnualDescription

Location

Capacity(In millions ofboard feet)Lumber

Diboll, Texas


199
*Lumber

Pineland, Texas


310
**Lumber

Buna, Texas


198Lumber

Rome, Georgia


151Lumber

DeQuincy, Louisiana


198     *
    
    Includes separate finger jointing capacity of 20 million
    board feet.**
    
    Includes separate stud mill capacity of 110 million board
    feet.  Rated AnnualDescription

Location

Capacity(In millions ofsquare feet)Gypsum Wallboard

West Memphis, Arkansas


440Gypsum Wallboard

Fletcher, Oklahoma


460Gypsum
    Wallboard(3)

McQueeney, Texas


400Gypsum
    Wallboard(3)

Cumberland City, Tennessee


700Particleboard

Monroeville, Alabama


160Particleboard

Thomson, Georgia


150Particleboard

Diboll, Texas


150Particleboard

Hope, Arkansas


200Particleboard(1)(2)

Mt. Jewett, Pennsylvania


200Fiberboard

Diboll, Texas


460MDF*

El Dorado, Arkansas


150MDF(1)

Mt. Jewett, Pennsylvania


120     *
    
    The table shows the full capacity of this facility that is owned
    by a joint venture in which we own a 50 percent interest. 14




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##### Table of Contents



(1)
    
    Leased facilities.(2)
    
    Due to market conditions, we indefinitely curtailed production
    at this facility beginning in 2003.(3)
    
    During 2005, this facility was owned by a joint venture in which
    we owned a 50 percent interest. In January 2006, we
    purchased our partners 50 percent interest in the
    joint venture.  Timber
    and Timberland*
    (In acres)
  Pine Plantations


1,167,573Natural Pine


78,398Hardwood


105,263Special Use/Non-Forested


661,509Total


2,012,743     *
    
    Includes approximately 230,000 acres of leased land.            Item 3.
    Legal
    Proceedings  General
    Antitrust
    Litigation
     15




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##### Table of Contents



Bogalusa
    Litigation
      Tax-exempt
    bonds
        Asbestos
    Other
    Litigation
   16




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##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II   Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information
    2005


2004Price Range


Price RangeHigh


Low


Dividends


High


Low


DividendsFirst Quarter

$
42.36


$
31.58


$
0.225


$
33.25


$
28.80


$
0.18Second Quarter

$
37.60


$
32.34


$
0.225


$
34.70


$
29.76


$
0.18Third Quarter

$
41.06


$
36.30


$
0.225


$
35.01


$
32.18


$
0.18Fourth Quarter

$
45.28


$
35.70


$
0.225


$
34.59


$
28.63


$
0.68
*For the Year

$
45.28


$
31.58


$
0.90


$
35.01


$
28.63


$
1.22     two-for-one
  *
    
    Includes special dividend of $0.50 per share paid
    December 15, 2004.  Shareholders
    Dividend
    Policy
    Issuer
    Purchases of Equity
    Securities(1)
  MaximumTotal Number


Number ofof Shares


Shares ThatPurchased as


May yet beTotal


Average


Part of Publicly


PurchasedNumber of


Price


Announced


Under theShares


Paid per


Plans or


PlansPeriod

Purchased


Share


Programs


or ProgramsMonth 1
    (10/1/2005  10/31/2005)


300,000


$
36.52



300,000



4,700,000Month 2
    (11/1/2005  11/30/2005)


425,000


$
37.29



425,000



4,275,000Month 3
    (12/1/2005  12/31/2005)


775,000


$
44.17



775,000



3,500,000Total


1,500,000


$
40.69



1,500,000     (1)
    
    On August 5, 2005, we announced that our Board of Directors
    authorized the repurchase of up to 6,000,000 shares of our
    common stock. The plan has no expiration date. We have no other
    repurchase plans or programs. We have no plans or programs that
    expired during the period covered by the table above and no
    plans or programs that we intend to terminate prior to
    expiration or under which we no longer intend to make further
    purchases. 17




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##### Table of Contents



Other
  Item 12. Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters
  Item 6.
    Selected
    Financial Data  For the Year2005


2004


2003(a)


2002(b)


2001(b)(Dollars in millions, except per
    share)Revenues:Corrugated packaging

$
2,819


$
2,736


$
2,700


$
2,587


$
2,082Forest products


1,031



971



801



787



726Total manufacturing


3,850



3,707



3,501



3,374



2,808Financial services


1,038



1,043



1,152



1,144



1,297Total revenues

$
4,888


$
4,750


$
4,653


$
4,518


$
4,105Segment operating income:Corrugated packaging

$
120


$
96


$
18


$
85


$
101Forest products


238



215



67



49



13Financial services


220



207



186



171



184Segment operating income


578



518



271



305



298Expenses not allocated to segments:General and administrative


(91
)


(79
)


(73
)


(32
)


(27
)Share-based compensation


(26
)


(14
)


(7
)


(2
)


(3
)Other operating income
    (expense)(c)


(90
)


(76
)


(138
)


(13
)


1Other non-operating income
    (expense)(c)










(8
)


(11
)


Parent company interest


(109
)


(125
)


(135
)


(133
)


(98
)Income (loss) before taxes


262



224



(90
)


114



171Income (taxes)
    benefit(d)


(86
)


(67
)


192



(45
)


(64
)Income from continuing operations


176



157



102



69



107Discontinued
    operations(e)






3







(1
)


Effect of accounting
    change(f)










(1
)


(11
)


(2
)Net income

$
176


$
160


$
101


$
57


$
105Diluted earnings per share:Income from continuing operations

$
1.54


$
1.39


$
0.94


$
0.66


$
1.17Discontinued operations






0.03







(0.01
)


Effect of accounting change










(0.01
)


(0.11
)


(0.02
)Net income

$
1.54


$
1.42


$
0.93


$
0.54


$
1.15Dividends per common
    share(g)

$
0.90


$
1.22


$
0.68


$
0.64


$
0.64Average diluted shares outstanding


114.5



112.4



108.4



104.8



98.6Common shares outstanding at
    year-end


111.0



112.2



109.2



107.6



98.6Depreciation and amortization:Parent company

$
221


$
223


$
238


$
224


$
188Financial services


28



31



32



36



40Capital expenditures:Parent company

$
224


$
223


$
137


$
112


$
184Financial services


41



41



33



16



26At Year-EndTotal assets:Parent company

$
4,887


$
4,900


$
4,862


$
5,188


$
4,331Financial services


18,031



16,440



17,661



18,016



15,738Long-term debt (excluding current
    maturities):Parent company

$
1,498


$
1,485


$
1,611


$
1,883


$
1,339Financial services


2,135



2,868



3,408



3,322



992Preferred stock issued by
    subsidiaries

$
305


$
305


$
305


$
305


$
305Shareholders equity

$
2,080


$
2,107


$
1,988


$
1,964


$
1,907Ratio of total debt to total
    capitalization  parent company


42
%


41
%


45
%


49
%


41
%  18




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Throughout Selected Financial Data
    and Managements Discussion and Analysis of Financial
    Condition and Results of Operations, we refer to parent company
    financial information, which includes only Temple-Inland and our
    manufacturing subsidiaries with our financial services
    subsidiaries reported on the equity method.Share and per share amounts for all
    years have been adjusted to reflect our
    two-for-one
    stock split on April 1, 2005.    (a)
    
    The 2003 fiscal year, which ended
    on January 3, 2004, had 53 weeks. The extra week did
    not have a significant effect on earnings or financial position.
    As a result of the consolidation of our administrative functions
    and adoption of a shared services concept, beginning 2004, we
    changed the way we allocate costs to our business segments. The
    effect of this change was to increase segment operating income
    and to increase unallocated expenses by a like amount. The year
    2003 amounts have been reclassified to reflect this change as
    follows:  For the Year 2003As





AsReported


Reclassifications


Reclassified(In millions)Segment operating income:Corrugated packaging

$
(7
)

$
25


$
18Forest products


57



10



67Financial services


186







186Segment operating income


236



35



271Unallocated expenses


(326
)


(35
)


(361
)Income (loss) before taxes

$
(90
)

$



$
(90
)   It was not practical to reclassify years prior to 2003.
    Corrugated packaging segment operating income has been adjusted
    to reflect a change in method of accounting for inventories.  (b)
    
    In 2002, we acquired Gaylord
    Container Corporation (March), a box plant in Puerto Rico
    (March), certain assets of Mack Packaging Group, Inc. (May), and
    Fibre Innovations LLC (November). Also in May 2002, we sold
    8.2 million shares of common stock, $345 million of
    Upper
    DECSsmunits, and
    $500 million of Senior Notes due 2012. In the aggregate,
    these transactions significantly increased the assets and
    operations of our corrugated packaging segment and changed our
    capital structure. Unaudited pro forma information for 2002
    assuming these acquisitions and related financing transactions
    had occurred at the beginning of 2002 follows: total revenues
    $4,461 million, income from continuing operations
    $54 million, and income from continuing operations, per
    diluted share $0.52. We derived this pro forma information by
    adjusting for the effects of the purchase price allocations and
    financing transactions described above and the reclassification
    of the discontinued operations. The pro forma information does
    not reflect the effects of capacity closures, cost savings or
    other synergies realized. These pro forma results are not
    necessarily an indication of what actually would have occurred
    if the acquisitions and financing transactions had been
    completed at the beginning of 2002 and are not intended to be
    indicative of future results.In 2001, we acquired the corrugated
    packaging operations of Chesapeake Corporation and Elgin
    Corrugated Box Company (May) and ComPro Packaging LLC
    (October). Unaudited pro forma results of operations, assuming
    these acquisitions had been effected as of the beginning of
    2001, would not have been materially different from what we
    reported. 19




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##### Table of Contents



(c)
    
    Other operating and non-operating
    income and expense consists of:  For the Year2005


2004


2003


2002


2001(In millions)Other operating income (expense):Closure and sale of converting and
    production facilities and sale of non-strategic assets

$
(53
)

$
(27
)

$
(83
)

$



$
1Hurricane related costs


(16
)














Consolidation of administrative
    functions






(11
)


(48
)






Financial services mortgage
    origination and servicing repositioning and other asset
    impairments


(5
)


(34
)


(5
)


(7
)


Antitrust litigation and other


(16
)


(4
)


(2
)


(6
)


$
(90
)

$
(76
)

$
(138
)

$
(13
)

$
1Other non-operating income
    (expense):Charges related to early repayment
    of debt

$
(6
)

$
(2
)

$
(8
)

$
(11
)

$
Litigation settlement


2















Interest and other income


4



2











$



$



$
(8
)

$
(11
)

$
   (d)
    
    Income taxes includes one-time tax
    benefits of $16 million in 2005 related to the sale of our
    Pembroke, Canada MDF facility and $20 million in 2004 and
    $165 million in 2003 related to the resolution and
    settlement of prior years tax examinations.(e)
    
    Discontinued operations include in
    2005, 2004, 2003, and 2002 the non-strategic operations obtained
    in the Gaylord acquisition including the retail bag business,
    which was sold in May 2002; the multi-wall bag business and
    kraft paper mill, which were sold in January 2003; and the
    chemical business. The resolution and settlement of
    environmental and other indemnifications we provided in the 1999
    sale of the bleached paperboard operation is also included in
    2004.(f)
    
    Effect of accounting change
    includes the effects of adopting (i) in 2003, Statement of
    Financial Accounting Standards (SFAS) No. 143,
    Accounting for Asset Retirement Obligations, which
    resulted in an after tax charge of $1 million or
    $0.01 per share for the cumulative effect of adoption;
    (ii) in 2002, SFAS No. 142, Goodwill and Other
    Intangible Assets, which resulted in an after tax charge of
    $11 million or $0.11 per share; and (iii) in
    2001, SFAS No. 133, Accounting for Derivative
    Instruments and Hedging Activities, as amended, which
    resulted in an after tax charge of $2 million or
    $0.02 per diluted share. As a result of the adoption of
    SFAS No. 142 in 2002, year 2002 and thereafter amounts
    are not comparable to prior years due to the amortization of
    goodwill and trademarks in the prior years. In 2003, we also
    voluntarily adopted the prospective transition method of
    SFAS No. 148, Accounting for Stock-Based
    Compensation  Transition and Disclosure, an
    amendment of FASB Statement No. 123, which decreased
    2003 net income by $1 million or $0.01 per share.  In addition, in first quarter 2005,
    we changed our method of accounting for our corrugated packaging
    inventories from the LIFO method to the average cost method,
    which approximates FIFO. As required by generally accepted
    accounting principles, we have adjusted prior years
    selected financial data to reflect the retrospective application
    of the average cost method. Please read Note 1 to the
    Consolidated Financial Statements for further information.  (g)
    
    Includes a $0.50 per share
    special dividend in December 2004.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Forward-Looking
    Statements
    
    general economic, market or business conditions;
    the opportunities (or lack thereof) that may be presented to us
    and that we may pursue;
    the availability and price of raw materials we use; 20




---



##### Table of Contents




    fluctuations in the cost of purchased energy;
    fluctuations in the costs we incur to transport the raw
    materials we use and the products we manufacture;
    assumptions related to pension and postretirement costs;
    assumptions related to accounting for impaired assets;
    the collectibility of loans and accounts receivable and related
    provisions for losses;
    competitive actions by other companies;
    changes in laws or regulations and actions or restrictions of
    regulatory agencies;
    the accuracy of certain judgments and estimates concerning our
    integration of acquired operations;
    our ability to execute certain strategic and business
    improvement initiatives; and
    other factors, many of which are beyond our control.    Non-GAAP Financial
    Measure
        Accounting
    Policies
  Critical
    Accounting Estimates
   21




---



##### Table of Contents




    Measuring assets for impairment requires estimating intentions
    as to holding periods, future operating cash flows and residual
    values of the assets under review. Changes in our intentions,
    market conditions or operating performance could require us to
    revise the impairment charges we previously provided.
    The expected long-term rate of return on pension plan assets is
    an important assumption in determining pension expense. In
    selecting that rate, currently 8.50 percent, consideration
    is given to both historical returns and our estimate of returns
    over the next quarter century. The actual rate of return on plan
    assets for the last ten years was 10.6 percent. Another
    important consideration is the discount rate used to determine
    the present value of our benefit obligations, currently
    5.50 percent. Differences between actual and expected rates
    of return and changes in the discount rate will affect future
    pension expense and funded status. For example, a 50 basis
    point change in the estimated expected rate of return would
    affect annual pension expense by $5 million, and a
    50 basis point change in the discount rate would affect the
    funded status by $90 million and annual pension expense by
    $10 million.
    Allowances for loan losses are based on historical experiences
    and evaluations of future cash flows and collateral values and
    are subject to regulatory scrutiny. Changes in general economic
    conditions or loan specific circumstances will inevitably change
    those evaluations.    New
    Accounting Pronouncements and Change in Method of Accounting for
    Certain Inventories
    Results
    of Operations for the Years 2005, 2004 and 2003
  Summary
      
    focusing on corrugated packaging from an integrated platform,
    which eliminates mill downtime and lowers costs through improved
    asset utilization,
    maximizing the value of our timberland through accelerated fiber
    growth that is aligned with well-located converting operations
    and developing significant real estate opportunities on
    high-value land, and
    realizing earnings and cash flow from financial services, which
    is a low-cost, low-risk provider of financial services.    
    We closed four corrugated packaging converting facilities and
    sold our Pembroke, Canada MDF facility to reduce costs and
    improve asset utilization. These actions affected over 500
    employees.
    We modified and enhanced two of our linerboard mills to increase
    mill reliability and reduce reliance on natural gas as an energy
    source.
    We further repositioned our mortgage origination activities.
    These actions affected over 250 employees, and along with the
    mortgage repositioning efforts in 2004, will further reduce
    costs and exposure to changing market conditions. Our future
    mortgage origination efforts will focus on direct mortgage
    lending to consumers through our banking centers, and we will
    continue to restructure our mortgage origination capabilities. 22




---



##### Table of Contents




    We announced that in 2006 we intend to classify as a fourth
    business segment our real estate operations that are currently
    included within our forest products and financial services
    segments. This action will increase the visibility and
    transparency of our real estate operations.    For the Year2005


2004


2003(In millions, except per
    share)Consolidated revenues

$
4,888


$
4,750


$
4,653Income from continuing operations


176



157



102Income from continuing operations
    per diluted share


1.54



1.39



0.94ROI


8.9
%


8.5
%


1.2
%     
    In 2005, we continued to see the benefits in our manufacturing
    operations of our initiatives to lower costs, improve asset
    utilization, and increase operating efficiencies and the
    benefits in our financial services operations from repositioning
    our mortgage origination and servicing activities. Costs,
    principally energy, freight and chemicals, however, continued to
    escalate for our manufacturing operations. The increased costs
    offset some of the benefits from our initiatives in our
    manufacturing operations and lower health care costs
    attributable to the implementation of a new health plan design.
    Actions taken to lower costs, improve asset utilization, and
    increase operating efficiencies resulted in charges and expenses
    of $58 million, principally related to the closure of four
    corrugated packaging converting facilities, the further
    repositioning of our mortgage origination activities and the
    sale of our Pembroke, Canada MDF facility. As a result of the
    sale of the MDF facility, we recognized a one-time tax benefit
    of $16 million. During 2005, Hurricanes Katrina and Rita
    forced us to curtail operations at seven of our converting and
    production facilities for varying periods, which we estimate
    adversely affected segment operating income by about
    $11 million due to production downtime and
    start-up
    expenses. In addition, during 2005, we recognized hurricane
    related losses and other unusual expenses of $32 million.
    The hurricane costs principally related to impairment of our
    Texas and Louisiana forests, facility damage, and employee and
    community assistance and other unusual expenses principally
    related to antitrust litigation and the early repayment of debt.
    In 2004, we began to see the benefits in our manufacturing
    operations of our initiatives to lower costs and improve asset
    utilization and operating efficiencies. In addition, market
    demand strengthened, resulting in higher prices for most of our
    forest products, and prices for corrugated packaging began to
    improve in the second quarter of the year. Our financial
    services operations benefited from improved asset quality, which
    resulted in a recovery of previously recorded provisions for
    credit losses. This was partially offset by declining mortgage
    origination activities. Actions taken to lower costs and improve
    asset utilization and operating efficiencies resulted in charges
    and expenses of $76 million, principally related to the
    converting and production facility closures and the
    repositioning of our mortgage origination activities and sale of
    our third-party mortgage servicing portfolio. We also recognized
    a one-time tax benefit of $20 million resulting from the
    settlement of prior years tax examinations.
    In 2003, weak industry box demand and lower prices, continued
    excess capacity in most of our forest products, and higher
    energy and pension costs negatively affected our manufacturing
    revenues and earnings. The negative effect was partially offset
    by improvements in financial services earnings. Actions taken to
    lower costs and improve asset utilization and operating
    efficiencies resulted in charges and expenses of
    $138 million principally related to the sale or closure of
    under-performing assets and the consolidation of administrative
    functions. We also recognized a one-time tax benefit of
    $165 million resulting from the resolution and settlement
    of prior years tax examinations.  Business
    Segments
    
    Corrugated packaging,
    Forest products, and
    Financial services. 23




---



##### Table of Contents



Corrugated
    Packaging
      For the Year2005


2004


2003(Dollars in millions)Revenues

$
2,819


$
2,736


$
2,700Costs and expenses


(2,699
)


(2,640
)


(2,682
)Segment operating income

$
120


$
96


$
18Segment ROI


5.6
%


4.7
%


0.8
%   start-up
    Year over YearIncrease (Decrease)2005


2004


2003Corrugated packagingAverage prices


2
%


0
%


(1
)%Shipments, average week


2
%


6
%


(1
)%Industry shipments, average
    week(a)


1
%


3
%


0
%LinerboardAverage prices


(6
)%


11
%


(1
)%Shipments, tons


(18
)%


(44
)%


17
%     (a)
    
    Source: Fibre Box Association     24




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##### Table of Contents



Year over YearIncrease (Decrease)2005


2004


2003(In millions)Wood fiber

$
22


$
(7
)

$
30Recycled fiber


(6
)


27



(11
)Energy, principally natural gas


30



7



51Freight


40



32



65Depreciation


1



(8
)


12Health care


(16
)






3Pension and postretirement


(3
)


5



23         For the Year2005


2004


2003Number of converting facilities
    (at year-end)


65



69



74Mill capacity, in million tons


3.5



3.4



3.3Mill production, in million tons


3.4



3.3



3.2Percent mill production used
    internally


92
%


90
%


82
%Percent of total fiber
    requirements sourced from recycled fiber


36
%


36
%


34
%Corrugating medium purchases from
    our Premier Boxboard Limited LLC joint venture, in thousand tons


68



100



157     Forest
    Products
      For the Year2005


2004


2003(Dollars in millions)Revenues

$
1,031


$
971


$
801Costs and expenses


(793
)


(756
)


(734
)Segment operating income

$
238


$
215


$
67Segment ROI


25.4
%


22.0
%


6.3
%   start-up
 25




---



##### Table of Contents



Year over YearIncrease (Decrease)2005


2004


2003Lumber:Average prices


5
%


22
%


4
%Shipments


1
%


1
%


14
%Gypsum:Average prices


16
%


24
%


2
%Shipments


12
%


19
%


(5
)%Particleboard:Average prices


(1
)%


28
%


(4
)%Shipments


8
%


(1
)%


(8
)%MDF:Average prices


(1
)%


7
%


1
%Shipments


(20
)%


11
%


(20
)%       For the Year2005


2004


2003(In millions)Our share of gypsum and MDF joint
    venture operating income

$
28


$
21


$
1Hunting, mineral and recreational
    lease income


32



22



18Gain on sale of about
    4,500 acres of conservation timberland


8







Gain on sale of about
    7,000 acres to an affiliated real estate joint venture


6







         For the Year2005


2004


2003(Dollars in millions)High-value land:Acres sold


3,067



2,919



2,436Profit included in segment
    operating income

$
20


$
19


$
12    26




---



##### Table of Contents



Year over YearIncrease (Decrease)2005


2004


2003(In millions)Wood fiber

$
19


$
22


$
(6
)Energy, principally natural gas


13



4



4Freight


11



9



(1
)Chemicals


14



3



(2
)Depreciation


(5
)


(9
)


1Health care


(6
)


1



1Pension and postretirement


2



(1
)


3       For the Year2005


2004


2003Timber harvest, in million tons:Sawtimber


2.4



2.5



2.4Pulpwood


3.3



3.4



4.1Total


5.7



5.9



6.5Number of converting and
    manufacturing facilities (at year-end)


17



18



19Average operating rates for all
    product lines excluding sold or closed facilities:High


102
%


95
%


93
%Low


91
%


85
%


72
%     Financial
    Services
       27




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##### Table of Contents



For the Year2005


2004


2003(Dollars in millions)Net interest income

$
390


$
401


$
377Segment operating income


220



207



186Segment ROI


19.6
%


18.4
%


15.8
%     Net
    Interest Income and Earning Assets and Deposits
      For the Year2005


2004


2003Average


Yield/


Average


Yield/


Average


Yield/Balance


Rate


Balance


Rate


Balance


Rate(Dollars in millions)Earning assets

$
15,355



5.21
%

$
15,916



4.51
%

$
16,104



4.52
%Interest bearing liabilities


14,373



(2.85
)%


15,099



(2.10
)%


15,370



(2.29
)%Impact of noninterest bearing funds






0.18
%






0.10
%






0.11
%Net interest margin






2.54
%






2.51
%






2.34
%   Quantitative and Qualitative Disclosures About Market Risk .
   28




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##### Table of Contents



At Year-End2005


2004(Dollars in millions)Residential housing assets:Loans held for sale

$
280


$
510Loans


7,003



6,897Securities


6,512



4,982Total residential housing assets


13,795



12,389Other earning assets


3,204



3,015Total earning assets

$
16,999


$
15,404Residential housing assets as a
    percentage of earning assets


81
%


80
%Noninterest bearing deposit
    accounts

$
803


$
519Interest bearing deposit accounts


3,639



4,618Certificates of deposit


4,759



3,827Total deposits

$
9,201


$
8,964     loan-to-value
     29




---



##### Table of Contents



At Year-End2005


2004(Dollars in millions)California

$
1,730


$
1,983Texas


303



385Florida


154



112All other states


925



1,080Single-family mortgage loans

$
3,112


$
3,560Weighted average original LTV


73
%


74
%     Asset
    Quality and Allowance for Loan Losses
    At Year-End2005


2004


2003(Dollars in millions)Non-performing loans

$
35


$
50


$
65Restructured operating lease assets






37



40Foreclosed real estate


2



4



26Non-performing assets

$
37


$
91


$
131Non-performing loans as a
    percentage of total loans


0.35
%


0.51
%


0.71
%Non-performing assets ratio


0.37
%


0.93
%


1.42
%Allowance for loan losses as a
    percentage of non-performing loans


213
%


170
%


172
%Allowance for loan losses as a
    percentage of total loans


0.75
%


0.88
%


1.22
%         
    conditions affecting borrower liquidity and collateral values
    for impaired loans,
    risk characteristics for groups of loans that are not considered
    individually impaired but we believe have probable potential
    losses,
    risk characteristics for homogeneous pools of loans, and
    other risk factors that we believe are not apparent in
    historical information. 30




---



##### Table of Contents



For the Year2005


2004


2003(Dollars in millions)Loans:Balance at beginning of year

$
85


$
111


$
132Provision (credit) for loan losses


7



(12
)


43Net charge-offs


(18
)


(7
)


(64
)Transfer to reserve for unfunded
    credit commitments






(7
)


Balance at end of year


74



85



111Unfunded credit commitments:Balance at beginning of year


7



Provision for commitment-related
    credit losses


3







Net charge-offs


(3
)






Transfer from allowance for loan
    losses






7



Balance at end of year


7



7



Combined allowances for credit
    losses at year-end

$
81


$
92


$
111Provision (credit) for:Loan losses

$
7


$
(12
)

$
43Commitment-related credit losses


3







Combined provision (credit) for
    credit losses

$
10


$
(12
)

$
43Net charge-offs as a percentage of
    average loans outstanding


0.21
%


0.07
%


0.66
%          31




---



##### Table of Contents



lease-up
  Noninterest
    Income and Noninterest Expenses
    Year over YearIncrease (Decrease)2005


2004


2003(In millions)Noninterest income:Loan origination and sale of loans

$
(118
)

$
(128
)

$
58Servicing rights amortization and
    impairment


(40
)


(19
)


Real estate operations, net of
    cost of sales


(1
)


4



15     Year over YearIncrease (Decrease)2005


2004


2003(In millions)Noninterest expense:Compensation and benefits

$
(86
)

$
(57
)

$
25Real estate operations, excluding
    compensation


(8
)


(7
)


1    32




---



##### Table of Contents



For the Year2005


2004


2003(In millions)Loans originated and retained

$
855


$
1,617


$
2,089Loans originated for sale to third
    parties


1,815



5,227



10,813     Statistical and Other Data
  Expenses
    Not Allocated to Segments
        Litigation
    Matters  Antitrust Litigation
       33




---



##### Table of Contents



Income
    Taxes
        Average
    Shares Outstanding
    Capital
    Resources and Liquidity for the Year 2005
    Sources
    and Uses of Cash
   34




---



##### Table of Contents



Parent
    Company Sources and Uses of Cash
  For the Year2005


2004


2003(In millions)We received cash from:Operations

$
395


$
438


$
195Dividends from financial
    services(a)


25



105



166Working capital changes


(23
)


(103
)


60From operations


397



440



421Sale of non-strategic and other
    assets


49



42



64Exercise of options and in 2005
    the settlement of equity purchase contracts


393



62



13Borrowings, net


13







Total sources


852



544



498We used cash to:Reduce debt and other obligations,
    net






(191
)


(276
)Return to shareholders throughDividends


(102
)


(136
)


(73
)Repurchase of common stock


(527
)






Reinvest in the business throughCapital expenditures


(224
)


(223
)


(137
)Joint ventures


(5
)


(5
)


(9
)Total uses


(858
)


(555
)


(495
)Change in cash and cash equivalents

$
(6
)

$
(11
)

$
3     (a)
    
    Dividends we receive from financial services are eliminated in
    the consolidated statements of cash flows.           35




---



##### Table of Contents



Financial
    Services Sources and Uses of Cash
  For the Year2005


2004


2003(In millions)We received cash from:Operations

$
202


$
161


$
266Changes in loans held for sale,
    and other


70



(12
)


394From operations


272



149



660Change in deposits and borrowings


1,632



(707
)


(449
)Sale of non-strategic assets and
    collection of mortgage servicing rights sale receivables


46



14



Total sources


1,950



(544
)


211We used cash to:Pay dividends to the parent
    company(a)


(25
)


(105
)


(166
)Reinvest in the business through:Loans and securities, net of
    payments


(1,756
)


495



(68
)Capital expenditures, acquisitions
    and other uses


(91
)


138



(36
)Total uses


(1,872
)


528



(270
)Change in cash and cash equivalents

$
78


$
(16
)

$
(59
)     (a)
    
    Dividends we pay to the parent company are eliminated in the
    consolidated statements of cash flows.        Liquidity
    and Contractual Obligations
   36




---



##### Table of Contents



Payments Due or Expiring by
    YearTotal


2006


2007-8


2009-10


Thereafter(In millions)Parent CompanyLong-term debt*

$
1,501


$
18


$
114


$
320


$
1,049Capital lease obligations*


528



15



30



30



453Less, related municipal bonds we
    own*


(528
)


(15
)


(30
)


(30
)


(453
)Contractual interest payments on
    fixed rate long-term debt


740



103



197



155



285Operating leases


286



39



61



48



138Purchase obligations


322



82



129



98



13Other long-term liabilities*


8



1



4



1



2Total parent company

$
2,857


$
243


$
505


$
622


$
1,487Financial ServicesTransaction and savings deposit
    accounts*

$
4,442


$
4,442


$



$



$
Certificates of deposit*


4,759



4,031



431



296



1FHLB borrowings, repurchase
    agreements
    and other borrowings*


7,103



5,671



1,232



100



100Preferred stock issued by
    subsidiaries*


305







305







Contractual interest payments


345



163



97



62



23Operating leases


63



12



21



16



14Total financial services

$
17,017


$
14,319


$
2,086


$
474


$
138Total consolidated

$
19,874


$
14,562


$
2,591


$
1,096


$
1,625     *
    
    Denotes items included in our balance sheet.  Parent
    Company Liquidity and Contractual Obligations
    AccountsReceivableCredit


SecuritizationAgreements


Facility


TotalCommitted

$
700


$
250


$
950Less: borrowings and commitments


(5
)


(31
)


(36
)Unused borrowing capacity at
    year-end

$
695


$
219


$
914      37




---



##### Table of Contents



1 2
        Pension,
    Postretirement Medical and Health Care Matters
    Financial
    Services Liquidity and Contractual Obligations
     38




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
  Parent
    Company
    Expiring by YearTotal


2006


2007-8


2009-10


Thereafter(In millions)Joint venture guarantees

$
104


$
28


$
15


$
61


$
Performance bonds and recourse
    obligations


76



69



4



2



1Total

$
180


$
97


$
19


$
63


$
1         Financial
    Services
   39




---



##### Table of Contents



Expiring by YearTotal


2006


2007-8


2009-10


Thereafter(In millions)Single-family mortgage loans

$
204


$
204


$



$



$
Unused lines of credit


2,209



272



823



1,020



94Unfunded portion of credit
    commitments


4,141



2,341



1,626



162



12Commitments to originate
    commercial loans


571



148



304



117



2Letters of credit


382



148



89



142



3Total

$
7,507


$
3,113


$
2,842


$
1,441


$
111   Capital
    Adequacy and Other Regulatory Matters
        Pension,
    Postretirement Medical and Health Care Matters
     40




---



##### Table of Contents



Energy
    and the Effects of Inflation
      Environmental
    Protection
  Business  Environmental
    Regulation.
  Litigation
    Matters
  Legal
    Proceedings.
 41




---



##### Table of Contents



Calculation
    of Non-GAAP Financial Measures
  Parent


Corrugated


Forest


FinancialCompany


Packaging


Products


Services(Dollars in millions)Year 2005Return:Operating income or segment
    operating income determined in accordance with GAAP

$
371
(a)

$
120


$
238


$
220Adjustments for significant unusual
    items






N/A



N/A



N/AAs defined

$
371


$
120


$
238


$
220Investment:Beginning of year total assets,
    segment assets or investment in financial services determined in
    accordance with GAAP

$
4,900


$
2,459


$
1,008


$
1,121Adjustments:Current liabilities (excluding
    current portion of long-term debt)


(510
)


(323
)


(71
)


N/AAssets held for sale


(34
)


N/A



N/A



N/AMunicipal bonds related to capital
    leases included in other assets


(188
)


N/A



N/A



N/AAs defined

$
4,168


$
2,136


$
937


$
1,121ROI


8.9
%


5.6
%


25.4
%


19.6
%Year 2004Return:Operating income or segment
    operating income determined in accordance with GAAP

$
349
(a)

$
96


$
215


$
207Adjustments for significant unusual
    items






N/A



N/A



N/AAs defined

$
349


$
96


$
215


$
207Investment:Beginning of year total assets,
    segment assets or investment in financial services determined in
    accordance with GAAP

$
4,862


$
2,374


$
1,035


$
1,123Adjustments:Current liabilities (excluding
    current portion of long-term debt)


(503
)


(319
)


(57
)


N/AAssets held for sale


(50
)


N/A



N/A



N/AMunicipal bonds related to capital
    leases included in other assets


(188
)


N/A



N/A



N/AAs defined

$
4,121


$
2,055


$
978


$
1,123ROI


8.5
%


4.7
%


22.0
%


18.4
%Year 2003ReturnOperating income or segment
    operating income determined in accordance with GAAP

$
53
(a)

$
18


$
67


$
186Adjustments for significant unusual
    items






N/A



N/A



N/AAs defined

$
53


$
18


$
67


$
186Investment:Beginning of year total assets,
    segment assets or investment in financial services determined in
    accordance with GAAP

$
5,188


$
2,555


$
1,132


$
1,178Adjustments:Current liabilities (excluding
    current portion of long-term debt)


(488
)


(306
)


(65
)


N/AAssets held for sale


(78
)


N/A



N/A



N/AMunicipal bonds related to capital
    leases included in other assets


(188
)


N/A



N/A



N/AAs defined

$
4,434


$
2,249


$
1,067


$
1,178ROI


1.2
%


0.8
%


6.3
%


15.8
%     (a)
    
    Net of expenses not allocated to segments of $207 million
    in 2005, $169 million in 2004, and $218 million in
    2003. 42




---



##### Table of Contents



Statistical
    and Other Data
  Parent
    Company
    For the Year2005


2004


2003(Dollars in millions)RevenuesCorrugated PackagingCorrugated packaging

$
2,728


$
2,625


$
2,509Linerboard


91



111



191Total

$
2,819


$
2,736


$
2,700Forest ProductsPine
    lumber(a)

$
312


$
295


$
240Particleboard


195



182



143Medium density fiberboard


87



111



93Gypsum wallboard


143



110



75Fiberboard


83



77



71Other


211



196



179Total

$
1,031


$
971


$
801Unit salesCorrugated PackagingCorrugated packaging, thousands of
    tons


3,437



3,366



3,206Linerboard, thousands of tons


264



320



574Total, thousands of tons


3,701



3,686



3,780Forest ProductsPine lumber, million board
    feet(a)


777



769



761Particleboard, million square feet


640



595



598Medium density fiberboard, million
    square feet


202



254



228Gypsum wallboard, million square
    feet


859



766



643Fiberboard, million square feet


431



407



434     (a)
    
    We have reclassified some prior year revenue and unit sales to
    conform to this years classification 43




---



##### Table of Contents



Financial
    Services
    For the Year2005


2004


2003Ratio
    informationReturn on assetsBefore
    tax(a)


1.32
%


1.21
%


1.03
%After
    tax(c)


0.82
%


0.63
%


0.64
%Return on equityBefore
    tax(b)


18.74
%


18.21
%


15.90
%After
    tax(d)


11.63
%


9.57
%


9.91
%Dividend payout
    ratio(e)


18
%


96
%


143
%Equity to assets
    ratio(f)


7.06
%


6.62
%


6.50
%     (a)
    
    Segment operating income divided by average total assets(b)
    
    Segment operating income divided by average equity(c)
    
    Net income divided by average total assets(d)
    
    Net income divided by average equity(e)
    
    Dividends paid to the parent company divided by net income(f)
    
    Average equity divided by average assets 44




---



##### Table of Contents



For the Year2005


2004


2003Average





Yield/


Average





Yield/


Average





Yield/Balance


Interest


Rate


Balance


Interest


Rate


Balance


Interest


Rate(Dollars in millions)ASSETSCash equivalents

$
139


$
1



0.74
%

$
167


$
3



1.50
%

$
162


$
3



1.60
%Securities


4,932



209



4.24
%


5,627



222



3.95
%


5,275



218



4.14
%Loans(a)(b)


9,934



574



5.78
%


9,504



460



4.84
%


9,625



453



4.71
%Loans held for sale


350



16



4.49
%


618



33



5.33
%


1,042



54



5.18
%Total earning assets


15,355


$
800



5.21
%


15,916


$
718



4.51
%


16,104


$
728



4.52
%Other assets


1,249











1,268











1,945Total assets

$
16,604










$
17,184










$
18,049LIABILITIES AND
    EQUITYInterest bearing deposits:Transaction:Interest bearing demand

$
3,697


$
51



1.38
%

$
4,466


$
51



1.13
%

$
4,038


$
46



1.13
%Savings deposits


235



2



0.70
%


247



2



0.72
%


238



2



0.86
%Time (certificates of deposit)


4,407



136



3.10
%


3,579



89



2.51
%


4,488



134



2.99
%Total interest bearing deposits


8,339



189



2.27
%


8,292



142



1.71
%


8,764



182



2.08
%Federal Home Loan
    Bank borrowings


5,375



187



3.49
%


5,128



138



2.69
%


3,685



119



3.23
%Securities sold under repurchase
    agreements


144



4



2.63
%


1,155



15



1.31
%


2,415



29



1.22
%Other debt


208



13



6.06
%


217



10



4.76
%


199



10



4.86
%Preferred stock issued by
    subsidiaries


307



17



5.44
%


307



12



3.87
%


307



11



3.67
%Total borrowings


6,034



221



3.66
%


6,807



175



2.57
%


6,606



169



2.56
%Total interest bearing liabilities


14,373


$
410



2.85
%


15,099


$
317



2.10
%


15,370


$
351



2.29
%Noninterest bearing demand deposits


699











507











331Other liabilities


359











440











1,175Shareholders equity


1,173











1,138











1,173Total liabilities and equity

$
16,604










$
17,184










$
18,049Net interest income/margin





$
390



2.54
%





$
401



2.51
%





$
377



2.34
%     (a)
    
    Includes nonaccruing loans(b)
    
    Interest includes recognized loan fees of $27 million in
    2005, $27 million in 2004, and $28 million in 2003 45




---



##### Table of Contents



2005 Compared with 2004


2004 Compared with 2003Increase (Decrease) Due
    To


Increase (Decrease) Due
    ToVolume


Rate


Total


Volume


Rate


Total(In millions)Interest income:Cash equivalents

$
(1
)

$
(1
)

$
(2
)

$



$



$
Securities


(29
)


16



(13
)


(12
)


16



4Loans


21



93



114



(6
)


13



7Loans held for sale


(12
)


(5
)


(17
)


(22
)


1



(21
)Total interest income


(21
)


103



82



(40
)


30



(10
)Interest expense:Deposits:Transaction:Interest bearing demand


(10
)


10







5







5Savings deposits






















Time (certificates of deposit)


23



24



47



(25
)


(20
)


(45
)Total interest on deposits


13



34



47



(20
)


(20
)


(40
)Federal Home Loan Bank
    Borrowings


7



42



49



41



(22
)


19Securities sold under repurchase
    agreements


(19
)


8



(11
)


(16
)


2



(14
)Other debt






3



3











Preferred stock issued by
    subsidiaries






5



5







1



1Total interest expense


1



92



93



5



(39
)


(34
)Net interest income

$
(22
)

$
11


$
(11
)

$
(45
)

$
69


$
24     At Year-End2005


2004


2003


2002


2001(In millions)Single-family mortgage

$
3,112


$
3,560


$
3,255


$
2,470


$
1,987Single-family mortgage warehouse


757



580



387



522



547Single-family construction


1,665



1,303



889



1,004



991Multifamily and senior housing


1,469



1,454



1,769



1,858



1,927Total residential housing


7,003



6,897



6,300



5,854



5,452Commercial real estate


758



709



1,015



1,891



2,502Commercial and business


843



746



585



740



819Energy lending


756



717



562



420



116Asset-based lending and leasing


395



428



499



696



842Consumer and other


164



206



176



199



255Total loans


9,919



9,703



9,137



9,800



9,986Less allowance for loan losses


(74
)


(85
)


(111
)


(132
)


(139
)Loans receivable, net

$
9,845


$
9,618


$
9,026


$
9,668


$
9,847  46




---



##### Table of Contents



Commercial andBusiness,Energy, andAsset-BasedSingle-Family


Multifamily and


Commercial Real


Lending andConstruction


Senior Housing


Estate


LeasingVariable


Fixed


Variable


Fixed


Variable


Fixed


Variable


FixedRate


Rate


Rate


Rate


Rate


Rate


Rate


Rate


Total(In millions)Due within one year

$
1,248


$
117


$
1,099


$
44


$
632


$



$
1,132


$
19


$
4,291After one but within five years


221



79



224



8



119



5



742



14



1,412After five years










58



36



2







79



8



183$
1,469


$
196


$
1,381


$
88


$
753


$
5


$
1,953


$
41Total

$1,665

$1,469

$758

$1,994

$
5,886     For the Year2005


2004


2003


2002


2001(In millions)Balance at beginning of year

$
85


$
111


$
132


$
139


$
118Charge-offs:Single-family mortgage


(2
)






(1
)






Multifamily and senior housing


(1
)


(3
)






(11
)


Total residential housing loans


(3
)


(3
)


(1
)


(11
)


Commercial real estate






(6
)


(11
)






Commercial and business


(11
)


(2
)


(2
)


(31
)


(18
)Asset-based lending and leasing


(9
)


(1
)


(57
)


(10
)


(10
)Consumer and other






(3
)


(2
)


(2
)


(3
)Total charge-offs


(23
)


(15
)


(73
)


(54
)


(31
)Recoveries:Single-family mortgage warehouse






1



4



1



3Multifamily and senior housing


2











3



Total residential housing loans


2



1



4



4



3Commercial real estate


1



1











Commercial and business


1















Asset-based lending and leasing


1



5



5



2



Consumer and other






1







1



1Total recoveries


5



8



9



7



4Net charge-offs


(18
)


(7
)


(64
)


(47
)


(27
)Provision (credit) for loan losses


7



(12
)


43



40



46Acquisitions and bulk purchases of
    loans, net of adjustments


















2Transfer to reserve for unfunded
    credit commitments






(7
)










Balance at end of year

$
74


$
85


$
111


$
132


$
139Nonaccrual loans

$
35


$
50


$
65


$
126


$
166Accruing loans past-due
    90 days or more


8



1



3



7



Net charge-offs as a percentage of
    average loans outstanding


0.21
%


0.07
%


0.66
%


0.48
%


0.25
%  47




---



##### Table of Contents



2005


2004


2003


2002


2001Category





Category





Category





Category





Categoryas a %





as a %





as a %





as a %





as a %of





of





of





of





ofTotal





Total





Total





Total





TotalAllowance


Loans


Allowance


Loans


Allowance


Loans


Allowance


Loans


Allowance


Loans(Dollars in millions)Single-family mortgage

$
9



31
%

$
8



37
%

$
7



36
%

$
7



26
%

$
8



20
%Single-family mortgage warehouse


1



8
%


1



6
%


1



4
%


1



5
%


3



5
%Single-family construction


9



17
%


10



13
%


6



10
%


7



10
%


6



10
%Multifamily and senior housing


11



15
%


15



15
%


28



19
%


38



19
%


42



19
%Total residential


30



71
%


34



71
%


42



69
%


53



60
%


59



54
%Commercial real estate


5



8
%


8



7
%


18



11
%


18



19
%


19



25
%Commercial and business


7



8
%


7



8
%


10



13
%


12



12
%


14



9
%Energy lending


3



7
%


3



7
%






















Asset-based lending and leasing


8



4
%


9



5
%


9



5
%


23



7
%


21



9
%Consumer and other






2
%


1



2
%


1



2
%


2



2
%


2



3
%Not allocated


21







23







31







24







24



Total

$
74



100
%

$
85



100
%

$
111



100
%

$
132



100
%

$
139



100
%   Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate Risk
  12-months
  Increase (Decrease) in Income
    Before TaxesAt Year-End 2005


At Year-End 2004Change in

Parent


Financial


Parent


FinancialInterest Rates

Company


Services


Company


Services(In millions)+2%

$



$
(31
)

$
1


$
(21
)+1%






(12
)






(1
)−1%






(20
)






(34
)−2%






(49
)


n/a



n/a        48




---



##### Table of Contents



Foreign
    Currency Risk
    Commodity
    Price Risk
    Item 8.
    Financial
    Statements and Supplementary Data  PageManagements
    Annual Report on Internal Control over Financial Reporting


50Report of
    Independent Registered Public Accounting Firm


51Report of
    Independent Registered Public Accounting Firm


52Temple-Inland Inc. and
    Subsidiaries:Consolidated
    Balance Sheets


53Consolidated
    Statements of Income


55Consolidated
    Statements of Cash Flows


56Consolidated
    Statements of Shareholders Equity


57Notes to the
    Consolidated Financial Statements


58Parent Company (Temple-Inland Inc.
    and our manufacturing subsidiaries):Summarized Balance
    Sheets


77Summarized
    Statements of Income


78Summarized
    Statements of Cash Flows


79Notes to Summarized
    Financial Statements


80Financial Services:Summarized Balance
    Sheets


88Summarized
    Statements of Income


89Summarized
    Statements of Cash Flows


90Notes to Summarized
    Financial Statements


91  49




---



##### Table of Contents



MANAGEMENTS
    ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL
    REPORTING    Rule 13a-15 Internal
    Control  Integrated Framework
    Form 10-K,
 50




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  The Board of Directors and Shareholders of Temple-Inland
    Inc.:
  Internal
    Control  Integrated Framework
                51




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  The Board
    of Directors and Shareholders of Temple-Inland Inc.:
          Internal
    Control  Integrated Framework
      52




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEET
  At Year-End 2005Parent


FinancialCompany


Services


Consolidated(In millions)ASSETSCash and cash equivalents

$
3


$
441


$
444Trade receivables, net of
    allowance for doubtful accounts of $14


411







411Inventories


425







425Timber and timberland


498







498Loans held for sale






280



280Loans, net of allowance for losses
    of $74






9,845



9,845Securities
    available-for-sale






654



654Securities
    held-to-maturity






5,558



5,558Investment in Federal Home
    Loan Bank stock






300



300Real estate






322



322Property, premises, and equipment


1,632



194



1,826Goodwill


236



159



395Other intangible assets






31



31Prepaid expenses and other assets


452



247



644Investment in financial services


1,230







TOTAL ASSETS

$
4,887


$
18,031


$
21,633LIABILITIES AND
    SHAREHOLDERS EQUITYAccounts payable, accrued expenses
    and other liabilities

$
724


$
192


$
896Long-term debt and other borrowings


1,498



211



1,709Deposits






9,201



9,201Federal Home Loan Bank
    borrowings






6,892



6,892Deferred income taxes


178







143Pension liability


270







270Postretirement benefits


137







137Preferred stock issued by
    subsidiaries






305



305TOTAL LIABILITIES


2,807



16,801



19,553SHAREHOLDERS
    EQUITYPreferred
    stock  par value $1 per share: authorized
    25,000,000 shares; none issued










Common stock  par
    value $1 per share: authorized 200,000,000 shares;
    issued 123,605,344 shares, including shares held in the
    treasury










124Additional paid-in capital










445Accumulated other comprehensive
    loss










(189
)Retained earnings










2,1412,521Cost of shares held in the
    treasury: 12,630,953 shares










(441
)TOTAL SHAREHOLDERS
    EQUITY










2,080TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY









$
21,633    53




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
   CONSOLIDATED BALANCE SHEET
  At Year-End 2004Parent


FinancialCompany


Services


Consolidated(In millions)ASSETSCash and cash equivalents

$
9


$
363


$
372Trade receivables, net of
    allowance for doubtful accounts of $16


400







400Inventories


431







431Timber and timberland


496







496Loans held for sale






510



510Loans, net of allowance for losses
    of $85






9,618



9,618Securities
    available-for-sale






841



841Securities
    held-to-maturity






3,864



3,864Investment in Federal Home
    Loan Bank Stock






277



277Real estate






307



307Property, premises, and equipment


1,738



167



1,905Goodwill


236



146



382Other intangible assets






26



26Prepaid expenses and other assets


469



321



715Investment in financial services


1,121







TOTAL ASSETS

$
4,900


$
16,440


$
20,144LIABILITIES AND
    SHAREHOLDERS EQUITYAccounts payable, accrued expenses
    and other liabilities

$
740


$
340


$
1,052Long-term debt and other borrowings


1,485



206



1,691Deposits






8,964



8,964Federal Home Loan Bank
    borrowings






4,717



4,717Securities sold under repurchase
    agreements






787



787Deferred income taxes


136







89Pension liability


289







289Postretirement benefits


143







143Preferred stock issued by
    subsidiaries






305



305TOTAL LIABILITIES


2,793



15,319



18,037SHAREHOLDERS
    EQUITYPreferred
    stock  par value $1 per share: authorized
    25,000,000 shares; none issued










Common stock  par
    value $1 per share: authorized 200,000,000 shares;
    issued 122,779,104 shares, including shares held in the
    treasury










123Additional paid-in capital










350Accumulated other comprehensive
    loss










(192
)Retained earnings










2,0672,348Cost of shares held in the
    treasury: 10,592,914 shares










(241
)TOTAL SHAREHOLDERS
    EQUITY










2,107TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY









$
20,144   two-for-one
   54




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF INCOME
  For the Year2005


2004


2003(In millions, except per
    share)REVENUESManufacturing

$
3,850


$
3,707


$
3,501Financial services


1,038



1,043



1,1524,888



4,750



4,653COSTS AND EXPENSESManufacturing


(3,694
)


(3,531
)


(3,629
)Financial services


(823
)


(870
)


(971
)(4,517
)


(4,401
)


(4,600
)OPERATING INCOME


371



349



53Parent company interest


(109
)


(125
)


(135
)Other non-operating income
    (expense)










(8
)INCOME (LOSS) FROM CONTINUING
    OPERATIONS BEFORE TAXES


262



224



(90
)Income tax (expense) benefit


(86
)


(67
)


192INCOME FROM CONTINUING
    OPERATIONS


176



157



102Discontinued operations






3



INCOME BEFORE ACCOUNTING
    CHANGE


176



160



102Effect of accounting change










(1
)NET INCOME

$
176


$
160


$
101WEIGHTED AVERAGE COMMON
    SHARES OUTSTANDINGBasic


112.6



111.4



108.4Diluted


114.5



112.4



108.4EARNINGS PER SHAREBasic:Income from continuing operations

$
1.56


$
1.40


$
0.94Discontinued operations






0.03



Effect of accounting change










(0.01
)Net income

$
1.56


$
1.43


$
0.93Diluted:Income from continuing operations

$
1.54


$
1.39


$
0.94Discontinued operations






0.03



Effect of accounting change










(0.01
)Net income

$
1.54


$
1.42


$
0.93   two-for-one
   55




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Year2005


2004


2003(In millions)CASH PROVIDED BY (USED FOR)
    OPERATIONSNet income

$
176


$
160


$
101Adjustments:Depreciation and amortization


249



254



270Net, amortization and accretion of
    financial instruments, discounts and premiums


18



58



82Provision (credit) for credit losses


10



(12
)


43Deferred taxes (benefit)


51



38



(195
)Other non-cash charges and credits,
    net


50



26



71Cumulative effect of accounting
    change










1Other


19



73



67Changes in:Receivables


(16
)


(45
)


(8
)Inventories






(52
)


47Prepaid expenses and other


2



(6
)


(9
)Accounts payable and accrued
    expenses


(9
)






30Loans held for sale:Originations


(2,379
)


(6,898
)


(12,955
)Sales


2,595



6,920



13,447Collections on loans serviced for
    others, net


(122
)


(32
)


(77
)644



484



915CASH PROVIDED BY (USED FOR)
    INVESTINGCapital expenditures


(265
)


(264
)


(170
)Sale of non-strategic assets and
    operations


45



66



69Securities
    available-for-sale,
    net


180



285



576Securities
    held-to-maturity,
    net


(1,627
)


817



(1,164
)Loans originated or acquired, net
    of principal collected


(310
)


(644
)


453Proceeds from sale of loans and
    mortgage servicing rights


47



51



67Branch acquisitions






148



Acquisitions, net of cash acquired,
    and joint ventures


(26
)


(20
)


(10
)Other


(6
)


45



4(1,962
)


484



(175
)CASH PROVIDED BY (USED FOR)
    FINANCINGAdditions to debt


530



375



978Payments of debt


(1,264
)


(999
)


(1,240
)Borrowings under accounts
    receivable securitization facility, net


15



(15
)


39Payment of other long-term
    liabilities






(64
)


Deposits, net


238



113



(500
)Repurchase agreements and
    short-term borrowings, net


2,126



(308
)


(2
)Cash dividends paid to shareholders


(102
)


(136
)


(73
)Repurchase of common stock


(527
)






Exercise of stock options


48



62



13Settlement of equity purchase
    contracts


345







Other


(21
)


1



(6
)1,388



(971
)


(791
)Discontinued operations,
    principally operating activities


2



(24
)


(5
)Net increase (decrease) in cash and
    cash equivalents


72



(27
)


(56
)Cash and cash equivalents at
    beginning of year


372



399



455Cash and cash equivalents at end of
    year

$
444


$
372


$
399    56




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY
  AccumulatedOtherComprehensiveCommon


Paid-In


Income


Retained


TreasuryStock


Capital


(Loss)


Earnings


Stock


Total(In millions)Balance at beginning of year
    2003 as originally reported

$
61


$
368


$
(136
)

$
2,000


$
(344
)

$
1,949Effect of
    two-for-one
    stock split


62



(62
)














Effect of change in method of
    accounting for inventories














15







15Balance at beginning of year
    2003, as adjusted


123



306



(136
)


2,015



(344
)


1,964Comprehensive income, net of tax:Net income, as adjusted














101







101Unrealized gains on securities










(5
)










(5
)Minimum pension liability










(38
)










(38
)Foreign currency translation
    adjustment










(6
)










(6
)Derivative financial instruments






















Comprehensive income for the
    year 2003, as adjusted






















52Dividends paid on common
    stock  $0.68 per share














(73
)






(73
)Share-based
    compensation  1,053,022 shares






6











24



30Exercise of stock
    options  528,744 shares






1











12



13Reclassification of deferred
    compensation






2















2Balance at year-end 2003, as
    adjusted

$
123


$
315


$
(185
)

$
2,043


$
(308
)

$
1,988Comprehensive income, net of tax:Net income, as adjusted














160







160Unrealized gains on securities










(5
)










(5
)Minimum pension liability










(5
)










(5
)Foreign currency translation
    adjustment






















Derivative financial instruments










3











3Comprehensive income for the
    year 2004, as adjusted






















153Dividends paid on common
    stock  $1.22 per share














(136
)






(136
)Share-based
    compensation  632,338 shares






21











14



35Exercise of stock
    options  2,359,568 shares






9











53



62Tax benefit from exercise of stock
    options






5















5Balance at year-end 2004, as
    adjusted

$
123


$
350


$
(192
)

$
2,067


$
(241
)

$
2,107Comprehensive income, net of tax:Net income














176







176Unrealized gains on securities










(3
)










(3
)Minimum pension liability










3











3Foreign currency translation
    adjustment










4











4Derivative financial instruments










(1
)










(1
)Comprehensive income for the
    year 2005






















179Dividends paid on common
    stock  $0.90 per share














(102
)






(102
)Share-based
    compensation  578,774 shares






13











19



32Exercise of stock
    options  1,833,688 net shares


















48



48Tax benefit from exercise of stock
    options






7















7Settlement of equity purchase
    contracts  10,875,739 shares


1



75











269



345Repurchase of common
    stock  14,500,000 shares


















(536
)


(536
)Balance at year-end
    2005

$
124


$
445


$
(189
)

$
2,141


$
(441
)

$
2,080    57




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS
  Note 1  Summary
    of Significant Accounting Policies
  Basis
    of Presentation
              Cash
    and Cash Equivalents
    Capitalized
    Software
    Derivatives
   58




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fair
    Value of Financial Instruments
    Goodwill
    and Other Intangible Assets
    Impairment
    of Long-Lived Assets
    Income
    Taxes
    Share-Based
    Compensation
    Accounting for
    Stock-Based Compensation-Transition and Disclosure, an amendment
    of FASB Statement No. 123.
 59




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      For the Year2005


2004


2003(In millions, except per
    share)Net income, as reported

$
176


$
160


$
101Add: Share-based compensation
    expense, net of related tax effects, included in the
    determination of reported net income*


19



20



21Deduct: Total share-based
    compensation expense, net of related tax effects, determined
    under the fair value based method for all awards*


(23
)


(27
)


(31
)Pro forma net income

$
172


$
153


$
91Earnings per share, adjusted to
    reflect our
    two-for-one
    stock split on April 1, 2005:Basic, as reported

$
1.56


$
1.43


$
0.93Basic, pro forma

$
1.53


$
1.37


$
0.84Diluted, as reported

$
1.54


$
1.42


$
0.93Diluted, pro forma

$
1.50


$
1.36


$
0.84     *
    
    Includes treasury stock contributions to fulfill our obligation
    for matching contributions to our 401(k) plans of
    $3 million in 2005 and $12 million in 2004, net of
    related tax effects.    For the Year2005


2004


2003Expected dividend yield


2.3
%


2.9
%


2.5
%Expected stock price volatility


28.2
%


28.8
%


29.3
%Risk-free interest rate


4.2
%


4.4
%


3.9
%Expected life of options


8.0 years



8.0 years



8.0 yearsWeighted average estimated fair
    value of options granted

$
11.15


$
8.34


$
6.20   Pending Accounting Pronouncements
  Asset
    Retirement Obligations and Environmental
    Obligations
  Accounting for Asset Retirement Obligations.
 60




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting for Conditional Asset Retirement Obligations an
    interpretation of FASB Statement No. 143. and/or and/or
        Guarantees
  Guarantors Accounting and Disclosure
    Requirements, Including Indirect Guarantees of Indebtedness of
    Others an Interpretation of FASB Statements No. 5, 57 and
    107 and Rescission of FASB Interpretation No. 34.
  Liabilities
    and Equity Instruments
  Accounting for Certain Financial Instruments with
    Characteristics of both Liabilities and Equity.
 61




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Variable
    Interest Entities
  Consolidation of
    Variable Interest Entities an Interpretation of ARB
    No. 51.
  Change
    in Method of Accounting For Certain Inventories
      Inventories


Deferred Income Taxes


Retained EarningsAs Originally


As


As Originally


As


As Originally


AsReported


Adjusted


Reported


Adjusted


Reported


Adjusted(In millions)Year-end 2004

$
406


$
431


$
79


$
89


$
2,052


$
2,067Year-end 2003

$
330


$
366


$
7


$
23


$
2,023


$
2,043     Corrugated Packaging


Income FromSegment Operating
    Income


Continuing Operations


Per Diluted ShareAs Originally


As


As Originally


As


As


AsReported


Adjusted


Reported


Adjusted


Reported


Adjusted(In millions, except per
    share)Year 2004

$
105


$
96


$
162


$
157


$
1.44


$
1.39Year 2003


11



18



97



102



0.89



0.94   Pending
    Accounting Pronouncements
  Share-Based
    Payment Inventory
    Cost, an amendment of ARB No. 43, Chapter 4 Accounting Changes and Error Corrections,
   62




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 2 
    Capital
    Stock  two-for-one
  SM
        Note 3 
    Fair
    Value of Financial Instruments    At Year-End2005


2004Carrying


Fair


Carrying


FairValue


Value


Value


Value(In millions)Financial assetsLoans receivable

$
9,845


$
9,804


$
9,618


$
9,629Securities
    held-to-maturity


5,558



5,512



3,864



3,865Financial liabilitiesDeposits

$
9,201


$
9,172


$
8,964


$
8,962FHLB borrowings


6,892



6,856



4,717



4,719Fixed-rate long-term debt


1,484



1,534



1,437



1,646Other off-balance sheet
    instrumentsCommitments to extend credit

$
(7
)

$
(7
)

$
(7
)

$
(7
)   held-to-maturity
 63




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 4 
    Income
    Taxes    For the Year2005


2004


2003(In millions)Current tax provision:U.S. Federal

$
(18
)

$
(6
)

$
46State and other


(9
)


(9
)


(7
)(27
)


(15
)


39Deferred tax provision:U.S. Federal


(58
)


(51
)


150State and other


(1
)


(1
)


3(59
)


(52
)


153Income tax (expense) benefit

$
(86
)

$
(67
)

$
192Income taxes (paid) refunded, net

$
(44
)

$
(1
)

$
39      64




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     For the Year2005


2004


2003(In millions)Earnings (losses):U.S.

$
255


$
215


$
(88
)Non-U.S.


7



9



(2
)Total

$
262


$
224


$
(90
)     For the Year2005


2004


2003Federal statutory rate


(35
)%


(35
)%


35
%State, net of federal benefit


(2
)


(3
)


Foreign






(1
)


(3
)Other


(2
)






(2
)(39
)%


(39
)%


30
%Sale of foreign subsidiary


6







Resolution and settlement of prior
    year tax examinations






8



170Effective tax rate (expense) benefit


(33
)%


(31
)%


200
%     At Year-End2005


2004(In millions)Deferred Tax
    Liabilities:Property, equipment and intangible
    assets

$
(331
)

$
(337
)Timber and timberland


(54
)


(32
)Asset leasing


(16
)


(18
)U.S. taxes on unremitted
    foreign earnings


(11
)


(10
)Other


(42
)


(38
)Total deferred tax liabilities


(454
)


(435
)Deferred Tax Assets:Alternative minimum tax credits


18



46Foreign and state net operating
    loss carryforwards


28



43Pension and postretirement benefits


154



158Employee benefits


40



33Allowance for credit losses and bad
    debts


33



37Accruals not deductible until paid


40



44Other


29



31Gross deferred tax assets


342



392Less valuation allowance


(31
)


(46
)Total deferred tax assets


311



346Net Deferred Tax
    Liability

$
(143
)

$
(89
)    65




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  pre-1988
    Note 5 
    Employee
    Benefit Plans    For the Year2005


2004


2003(In millions)Defined contribution

$
22


$
26


$
28Defined benefit


50



50



43Postretirement medical


8



10



12Total

$
80


$
86


$
83           Obligations
    and Funded Status
   66




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the YearDefined


PostretirementBenefits


Benefits2005


2004


2005


2004(In millions)Projected benefit obligation at
    beginning of year

$
(1,237
)

$
(1,143
)

$
(146
)

$
(152
)Service cost


(25
)


(24
)


(2
)


(2
)Interest cost


(72
)


(71
)


(8
)


(9
)Plan amendments


(1
)










Prior service costs














(2
)Medicare act














9Actuarial gain (loss)


(79
)


(58
)


(11
)


(4
)Benefits paid by the plan


63



59



14



17Participant contributions










(2
)


(3
)Projected benefit obligation at end
    of year


(1,351
)


(1,237
)


(155
)


(146
)Fair value of plan assets at
    beginning of year


882



847







Actual return


123



92







Benefits paid by the plan


(63
)


(59
)


(14
)


(17
)Contributions we made


62



2



12



14Participant contributions










2



3Fair value of plan assets at end of
    year


1,004



882







Funded status, (excess) of
    projected benefit obligation over fair value of plan assets


(347
)


(355
)


(155
)


(146
)Contributions we made after the
    annual measurement date


15



15



5



3Losses and costs to be recognized
    over future service periods:Net actuarial loss


337



331



31



21Prior service costs


18



20



(18
)


(21
)Net assets (liabilities) recognized
    in the balance sheet

$
23


$
11


$
(137
)

$
(143
)     At Year-EndPostretirementDefined Benefits


Benefits2005


2004


2005


2004(In millions)Intangible asset

$
18


$
19


$



$
Liability


(270
)


(289
)


(137
)


(143
)Accumulated other comprehensive
    income  cumulative pre-tax charge


275



281







Net amount recognized

$
23


$
11


$
(137
)

$
(143
)   For the YearDefined


PostretirementBenefits


Benefits2005


2004


2003


2005


2004


2003(In millions)Increase (decrease) in minimum
    pension liability included as a pre-tax change to other
    comprehensive income

$
(6
)

$
9


$
62


$



$



$
  67




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Additional
    Information
    At Year-End2005


2004(In millions)Projected benefit obligation

$
(1,351
)

$
(1,237
)Accumulated benefit obligation

$
(1,290
)

$
(1,186
)Fair value of plan assets


1,004



882Funded status, (excess) of
    accumulated benefit obligation over fair value of plan assets

$
(286
)

$
(304
)     Components
    of Annual Defined Benefit Expense
  For the YearDefined


PostretirementBenefits


Benefits2005


2004


2003


2005


2004


2003(In millions)Service
    costs  benefits earned during the period

$
25


$
24


$
23


$
2


$
2


$
3Interest cost on projected benefit
    obligation


72



71



66



8



9



10Expected return on plan assets


(72
)


(69
)


(63
)










Amortization of prior service costs


2



2



2



(2
)


(3
)


(3
)Amortization of actuarial net loss


23



22



15







2



2Defined benefit expense

$
50


$
50


$
43


$
8


$
10


$
12     Assumptions
    Defined


PostretirementBenefits


Benefits2005


2004


2005


2004Discount rate


5.50
%


6.00
%


5.50
%


6.00
%Rate of compensation increase


3.70
%


3.70
%






     Defined


PostretirementBenefits


Benefits2005


2004


2003


2005


2004


2003Discount rate


6.00
%


6.375
%


6.75
%


6.00
%


6.375
%


6.75
%Expected return on plan assets


8.50
%


8.50
%


8.50
%










Rate of compensation increase


3.70
%


3.40
%


3.50
%










    68




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          For theYear2005


2004Health care trend rate assumed for
    the next year


10.0
%


10.0
%Rate to which the cost trend rate
    is assumed to decline (ultimate trend rate)


4.5
%


4.5
%Year that the rate reaches the
    ultimate trend rate


2012



2011     1 Percentage


1 PercentagePoint Increase


Point Decrease(In millions)Increase (decrease) in:Total service and interest cost
    components

$
1


$
(1
)Postretirement projected benefit
    obligation


13



11   Plan
    Assets
    Percentageof PlanRange of


Assets atTarget


Year-EndAllocations


2005


2004Asset category:Equity securities


50-61
%


56
%


61
%Debt securities


30-34
%


36



32Real estate


0-5
%


2



1Other


0-5
%


6



6Total






100
%


100
%    69




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Cash
    Flows
      Defined


PostretirementBenefits


Benefits(In millions)2006

$
66


$
162007


70



152008


73



132009


77



132010


80



122011-2015


448



56   Note 6 
    Share-Based
    Compensation     70




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     For the Year2005


2004


2003Weighted Average





Weighted Average





Weighted AverageOptions


Exercise Price


Options


Exercise Price


Options


Exercise Price(Shares in thousands)Outstanding beginning of year


7,826


$
26



9,430


$
26



8,670


$
27Granted


1,062



37



1,078



30



1,940



22Exercised


(1,911
)


27



(2,434
)


27



(612
)


25Forfeited


(145
)


27



(248
)


19



(568
)


24Outstanding end of year


6,832



28



7,826



26



9,430



26Options exercisable


3,571



27



3,514



27



4,050



27       Note 7 
    Earnings
    Per Share    For the Year2005


2004


2003(In millions)Earnings for basic and diluted
    earnings per share:Income from continuing operations

$
176


$
157


$
102Discontinued operations






3



Effect of accounting change










(1
)Net income

$
176


$
160


$
101Weighted average shares outstanding:Weighted average shares
    outstanding  basic


112.6



111.4



108.4Dilutive effect of equity purchase
    contracts (Note 2)


0.4







Dilutive effect of stock options
    (Note 6)


1.5



1.0



Weighted average shares
    outstanding  diluted


114.5



112.4



108.4  71




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 8 
    Accumulated
    Other Comprehensive Income (Loss)    UnrealizedGains (Losses)





Foreignon Available-


Minimum


CurrencyFor-Sale


Pension


Translation


DerivativeSecurities


Liability


Adjustment


Instruments


Total(In millions)Balance at beginning of year 2003

$
16


$
(128
)

$
(21
)

$
(3
)

$
(136
)Changes during the year


(9
)


(62
)


(5
)






(76
)Deferred taxes on changes


3



24











27Net change for 2003


(6
)


(38
)


(5
)






(49
)Balance at year-end 2003

$
10


$
(166
)

$
(26
)

$
(3
)

$
(185
)Changes during the year


(8
)


(9
)






6



(11
)Deferred taxes on changes


3



4







(3
)


4Net change for 2004


(5
)


(5
)






3



(7
)Balance at year-end 2004

$
5


$
(171
)

$
(26
)

$



$
(192
)Changes during the year


(4
)


6



4



(1
)


5Deferred taxes on changes


1



(3
)










(2
)Net change for 2005


(3
)


3



4



(1
)


3Balance at year-end 2005

$
2


$
(168
)

$
(22
)

$
(1
)

$
(189
)   Note 9 
    Contingencies      Note 10 
    Segment
    Information     72




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Expenses NotAllocated toCorrugated


Forest


Financial


Segments andPackaging


Products


Services


Eliminations


Total(In millions)For the year or at year-end
    2005:Revenues from external customers

$
2,819


$
1,031


$
1,038


$



$
4,888Depreciation and amortization


160



50



28



11



249Income (loss) before taxes


120



238



220



(316
)(a)


262Financial services, net interest
    income










390







390Total assets


2,318



970



18,031



314



21,633Investment in equity method
    investees and joint ventures


11



36



76







123Capital expenditures


126



77



41



21



265Goodwill


236







159







395For the year or at year-end
    2004:Revenues from external customers

$
2,736


$
971


$
1,043


$



$
4,750Depreciation and amortization


159



55



31



9



254Income (loss) before taxes


96



215



207



(294
)(a)


224Financial services, net interest
    income










401







401Total assets


2,459



1,008



16,440



237



20,144Investment in equity method
    investees and joint ventures


13



33



54







100Capital expenditures


146



47



41



30



264Goodwill


236







146







382For the year or at year-end
    2003:Revenues from external customers

$
2,700


$
801


$
1,152


$



$
4,653Depreciation and amortization


167



64



32



7



270Income (loss) before
    taxes(b)


18



67



186



(361
)(a)


(90
)Financial services, net interest
    income










377







377Total assets


2,375



1,035



17,661



296



21,367Investment in equity method
    investees and joint ventures


7



30



40







77Capital expenditures


96



35



33



6



170Goodwill


237







141







378     (a)
    
    Expenses not allocated to segments consists of:  For the Year2005


2004


2003(In millions)General and administrative

$
(91
)

$
(79
)

$
(73
)Share-based compensation


(26
)


(14
)


(7
)Other operating income (expense)


(90
)


(76
)


(138
)Other non-operating income (expense)










(8
)Parent company interest


(109
)


(125
)


(135
)$
(316
)

$
(294
)

$
(361
)Other operating income (expense)
    applies to:Corrugated packaging

$
(38
)

$
(19
)

$
(70
)Forest products


(27
)


(12
)


(24
)Financial services


(5
)


(34
)


(5
)Unallocated


(20
)


(11
)


(39
)$
(90
)

$
(76
)

$
(138
)   Please read Note E to the Parent Company Summarized
    Financial Statements and Note L to the Financial Services
    Summarized Financial Statements for further information about
    other operating income (expense). 73




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (b)
    
    As a result of the consolidation of our administrative functions
    and adoption of a shared services concept, beginning first
    quarter 2004, we changed the way we allocate costs to the
    business segments. The effect of this change was to increase
    segment operating income and to increase unallocated expenses by
    a like amount. Year 2003 amounts have been reclassified to
    reflect this change.    For the YearGeographic Information

2005


2004


2003(In millions)Revenues from external customers:United States

$
4,705


$
4,566


$
4,501Mexico


156



132



113Canada(a)


27



52



39Total

$
4,888


$
4,750


$
4,653   At Year-End2005


2004


2003(In millions)Property and Equipment:United States

$
1,787


$
1,810


$
1,864Mexico


38



39



40Canada(a)


1



56



58Total

$
1,826


$
1,905


$
1,962     (a)
    
    In 2005, we sold our MDF facility located in Pembroke, Canada,
    and as a result, we have no significant assets or ongoing
    operations in Canada.  Note 11 
    Summary
    of Quarterly Results of Operations (Unaudited)    First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In millions, except per
    share)2005Total revenues

$
1,203


$
1,255


$
1,218


$
1,212Manufacturing net revenues


967



1,003



947



933Manufacturing gross profit


140



154



118



95Financial services income before
    taxes


47



51



67



50Income from continuing
    operations(a)

$
45


$
68


$
37


$
26Discontinued operations






1



1



(2
)Net income

$
45


$
69


$
38


$
24Earnings per
    share(b):Basic:Income from continuing operations

$
0.40


$
0.60


$
0.33


$
0.23Discontinued operations






0.01



0.01



(0.02
)Net income

$
0.40


$
0.61


$
0.34


$
0.21Diluted:Income from continuing operations

$
0.39


$
0.59


$
0.32


$
0.23Discontinued operations






0.01



0.01



(0.02
)Net income

$
0.39


$
0.60


$
0.33


$
0.21    74




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (a)
    
    Income from continuing operations includes the following pre-tax
    costs and expenses:  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In millions)Other operating income (expense):Converting and production facility
    closures

$
(11
)

$
(28
)

$
(5
)

$
(9
)Antitrust litigation


(7
)


(1
)


(5
)


Proxy contest


(4
)










Hurricane related costs










(16
)


Contract termination














4Repositioning of mortgage
    origination and servicing














(5
)Other charges


(2
)






(1
)


Total

$
(24
)

$
(29
)

$
(27
)

$
(10
)Other non-operating income
    (expense):Charges related to early repayment
    of debt

$



$



$



$
(6
)Interest and other income


1



1



1



3$
1


$
1


$
1


$
(3
)   (b)
    
    The sum of earnings per share for the quarters does not equal
    earnings per share for the year due to the use of average shares
    outstanding to compute these amounts.  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In millions, except per
    share)2004(b)Total revenues

$
1,154


$
1,218


$
1,194


$
1,184Manufacturing net revenues


893



940



955



919Manufacturing gross profit


86



126



141



108Financial services income before
    taxes


53



59



16



45Income from continuing
    operations(a)

$
12


$
54


$
39


$
52Discontinued operations






1



1



1Net income

$
12


$
55


$
40


$
53Earnings per
    share(c):Basic:Income from continuing operations

$
0.11


$
0.49


$
0.35


$
0.46Discontinued operations






0.01



0.01



0.01Net income

$
0.11


$
0.50


$
0.36


$
0.47Diluted:Income from continuing operations

$
0.11


$
0.48


$
0.35


$
0.45Discontinued operations






0.01



0.01



0.01Net income

$
0.11


$
0.49


$
0.36


$
0.46    75




---



##### Table of Contents



TEMPLE-INLAND
    INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (a)
    
    Income from continuing operations includes the following pre-tax
    costs and expenses:  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In millions)Other operating income (expense):Converting and production facility
    closures

$
(14
)

$
(3
)

$
(4
)

$
(6
)Consolidation and supply chain
    initiatives


(5
)


(1
)


(1
)


(4
)Repositioning of mortgage
    origination and servicing










(21
)


(13
)Other charges






(1
)


1



(4
)Total

$
(19
)

$
(5
)

$
(25
)

$
(27
)Other non-operating income
    (expense):Charges related to early repayment
    of debt

$



$



$



$
(1
)Interest and other income














1$



$



$



$
   (b)
    
    2004 information has been adjusted to reflect the retrospective
    application of the change in method of accounting for certain
    inventories, the effect of which is summarized as follows:  Manufacturing


Income from ContinuingGross Profit


Operations


Per Diluted ShareAs


Retrospective


As


Retrospective


As


RetrospectiveReported


Application


Reported


Application


Reported


Application(In millions, except per
    share)2004First quarter

$
88


$
86


$
13


$
12


$
0.12


$
0.11Second quarter


128



126



55



54



0.49



0.48Third quarter


143



141



40



39



0.36



0.35Fourth quarter


111



108



54



52



0.47



0.45Year

$
470


$
461


$
162


$
157


$
1.44


$
1.39   (c)
    
    The sum of earnings per share for the quarters does not equal
    earnings per share for the year due to the use of average shares
    outstanding to compute these amounts.  Note 12 
    Subsequent
    Events      For the Year2005


2004(In millions, except per
    share)Parent company revenues

$
4,020


$
3,861Income from continuing operations


184



161Income from continuing operations,
    per diluted share

$
1.61


$
1.44    76




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  SUMMARIZED BALANCE SHEETS
  At Year-End2005


2004(In millions)ASSETSCurrent AssetsCash and cash equivalents

$
3


$
9Trade receivables, net of allowance
    for doubtful accounts of $14 in 2005 and $16 in 2004


411



400Inventories:Work in process and finished goods


95



130Raw materials


224



202Supplies and other


106



99Total inventories


425



431Prepaid expenses and other


82



98Total current assets


921



938Investment in Financial
    Services


1,230



1,121Timber and Timberland


498



496Property and EquipmentLand and buildings


618



637Machinery and equipment


3,336



3,327Construction in progress


62



86Less allowances for depreciation


(2,384
)


(2,312
)Total property and equipment


1,632



1,738Goodwill


236



236Assets Held for Sale


34



34Other Assets


336



337TOTAL ASSETS

$
4,887


$
4,900LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable

$
199


$
212Accrued employee compensation and
    benefits


101



93Accrued interest


19



24Accrued property taxes


24



21Other accrued expenses


129



153Liabilities of discontinued
    operations


9



7Current portion of long-term debt


3



3Total current liabilities


484



513Long-Term Debt


1,498



1,485Deferred Income Taxes


178



136Pension Liability


270



289Postretirement
    Benefits


137



143Other Long-Term
    Liabilities


240



227Total liabilities


2,807



2,793Shareholders
    Equity


2,080



2,107TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
4,887


$
4,900    77




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  SUMMARIZED STATEMENTS OF INCOME
  For the Year2005


2004


2003(In millions)NET REVENUES

$
3,850


$
3,707


$
3,501COSTS AND EXPENSESCost of sales


(3,343
)


(3,246
)


(3,235
)Selling


(96
)


(104
)


(116
)General and administrative


(209
)


(167
)


(151
)Other operating income (expense)


(46
)


(14
)


(127
)(3,694
)


(3,531
)


(3,629
)156



176



(128
)FINANCIAL SERVICES
    EARNINGS


215



173



181OPERATING INCOME


371



349



53Interest expense


(109
)


(125
)


(135
)Other non-operating income
    (expense)










(8
)INCOME (LOSS) FROM CONTINUING
    OPERATIONS BEFORE TAXES


262



224



(90
)Income tax (expense) benefit


(86
)


(67
)


192INCOME FROM CONTINUING
    OPERATIONS


176



157



102Discontinued operations






3



INCOME BEFORE ACCOUNTING
    CHANGE


176



160



102Effect of accounting change










(1
)NET INCOME

$
176


$
160


$
101    78




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  SUMMARIZED STATEMENTS OF CASH FLOWS
  For the Year2005


2004


2003(In millions)CASH PROVIDED BY (USED FOR)
    OPERATIONSNet income

$
176


$
160


$
101Adjustments:Depreciation and amortization


221



223



238Non-cash share-based compensation


31



35



30Non-cash pension and postretirement
    expense


58



60



55Cash contribution to pension and
    postretirement plans


(76
)


(30
)


(16
)Deferred income taxes (benefit)


41



63



(188
)Net earnings of financial services


(136
)


(109
)


(116
)Dividends from financial services


25



105



166Earnings of joint ventures


(39
)


(28
)


(6
)Dividends from joint ventures


43



20



8Other non-cash charges (credits)


50



26



71Cumulative effect of accounting
    change










1Other


26



18



17Changes in:Receivables


(16
)


(45
)


(8
)Inventories






(52
)


47Prepaid expenses and other


2



(6
)


(9
)Accounts payable and accrued
    expenses


(9
)






30397



440



421CASH PROVIDED BY (USED FOR)
    INVESTINGCapital expenditures


(224
)


(223
)


(137
)Sales of non-strategic assets and
    operations and proceeds from sale of property and equipment


45



66



69Acquisitions, net of cash acquired,
    and joint ventures


(5
)


(5
)


(9
)Other


2







(182
)


(162
)


(77
)CASH PROVIDED BY (USED FOR)
    FINANCINGPayments of debt


(502
)


(133
)


(321
)Borrowings under accounts
    receivable securitization facility, net


15



(15
)


39Payments of other long-term
    liabilities






(64
)


Other additions to debt


500



21



6Cash dividends paid to shareholders


(102
)


(136
)


(73
)Repurchase of common stock


(527
)






Exercise of options


48



62



13Settlement of equity purchase
    contracts


345







(223
)


(265
)


(336
)Net assets of discontinued
    operations, principally operating activities


2



(24
)


(5
)Net increase (decrease) in cash and
    cash equivalents


(6
)


(11
)


3Cash and cash equivalents at
    beginning of year


9



20



17Cash and cash equivalents at end of
    year

$
3


$
9


$
20    79




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  NOTES TO
    SUMMARIZED FINANCIAL STATEMENTS
  Note A  Summary
    of Significant Accounting Policies
  Basis
    of Presentation
    Inventories
  first-in,
  Property
    and Equipment
    CarryingValueEstimated


At Year-EndClassification

Useful Lives


2005(In millions)Land and land improvements





$
55Buildings


15 to 40 years



282Machinery and equipment:Paper machines


22 years



673Mill equipment


5 to 25 years



85Converting equipment


5 to 15 years



411Construction in progress


N/A



62Other production equipment


10 to 25 years



8Transportation equipment


3 to 15 years



37Office and other equipment


2 to 10 years



19$
1,632     Timber
    and Timberland
     80




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
      Revenue
      Note B  Long-Term
    Debt
    At Year-End2005


2004(In millions)Borrowings under bank credit
    agreements  average interest rate of 4.88% in
    2005 and 4.38% in 2004

$
3


$
14Accounts receivable securitization
    facility  average interest rate of 3.28% in 2005
    and 1.35% in 2004


31



168.13% to 8.38% Notes, payable
    in 2006


15



1005.003% Senior notes associated
    with Upper
    DECSsm,
    payable in 2007


5



3456.75% Notes, payable in 2009


300



3007.875% Senior notes, payable
    in 2012, net of discounts


498



4976.375% Senior notes, payable
    in 2016, net of discounts


249



6.625% Senior notes, payable
    in 2018, net of discounts


248



Revenue bonds, payable 2007 through
    2024  average interest rate of 5.92% in 2005 and
    5.40% in 2004


96



119Other indebtedness due through
    2011  average interest rate of 7.13% in 2005 and
    7.12% in 2004


56



971,501



1,488Less current portion of long-term
    debt


(3
)


(3
)$
1,498


$
1,485    81




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
             Note C  Joint
    Ventures
   82




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
     At Year-End2005


2004(In millions)Current assets

$
64


$
57Total assets


350



353Current
    liabilities(a)


93



94Long-term debt


102



102Equity


155



158Our investment in joint ventures:50% share in joint ventures
    equity

$
77


$
79Unamortized basis difference


(35
)


(37
)Other


3



3Investment in joint ventures

$
45


$
45     (a)
    
    Includes current maturities of debt of $56 million in 2005
    and $62 million in 2004.  For the Year2005


2004


2003(In millions)Net revenues

$
378


$
328


$
242Operating income


85



61



18Earnings (loss)


74



51



7Our equity in earnings (loss):50% share of earnings (loss)

$
37


$
26


$
4Amortization of basis difference


2



2



2Equity in earnings (loss) of joint
    ventures

$
39


$
28


$
6          83




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
     Note D  Assets
    Held for Sale
      At Year-End2005


2004(In millions)Working capital

$
5


$
2Property and equipment


8



13       Note E  Other
    Operating Income (Expense)
  For the Year2005


2004


2003(In millions)Equity in earnings of joint ventures

$
39


$
28


$
6Closure of production and
    converting facilities and sale of non-strategic assets


(53
)


(27
)


(83
)Hurricane related costs


(16
)






Antitrust litigation


(13
)






Proxy contest


(4
)






Contract termination


4







Consolidation of administrative
    functions






(11
)


(48
)Other


(3
)


(4
)


(2
)$
(46
)

$
(14
)

$
(127
)    84




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
              AdditionsBeginning


or


Cash


End ofof Year


Revisions


Payments


Year(In millions)Year 2005Involuntary employee terminations

$
2


$
7


$
(8
)

$
1Contract termination penalties


6



(4
)






2Environmental compliance


8



2



(8
)


2Demolition


8



(1
)






7Total

$
24


$
4


$
(16
)

$
12Year 2004Involuntary employee terminations

$
9


$
9


$
(16
)

$
2Contract termination penalties


6











6Environmental compliance


11







(3
)


8Demolition


11







(3
)


8Total

$
37


$
9


$
(22
)

$
24     Note F  Commitments
    and Contingencies
   85




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
           Note G  Derivative
    Instruments and Variable Interest Entities
     86




---



##### Table of Contents



PARENT
    COMPANY (TEMPLE-INLAND INC. AND OUR MANUFACTURING
    SUBSIDIARIES)
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
      Note H  Other
    Information
   87




---



##### Table of Contents



FINANCIAL
    SERVICES
  SUMMARIZED
    BALANCE SHEETS
  At Year-End2005


2004(In millions)ASSETSCash and cash equivalents

$
441


$
363Loans held for sale


280



510Loans, net of allowance for losses
    of $74 in 2005 and $85 in 2004


9,845



9,618Securities
    available-for-sale


654



841Securities
    held-to-maturity


5,558



3,864Investment in Federal Home
    Loan Bank stock


300



277Real estate


322



307Premises and equipment, net


194



167Accounts, notes and accrued
    interest receivable


130



170Goodwill


159



146Other intangible assets


31



26Other assets


117



151TOTAL ASSETS

$
18,031


$
16,440LIABILITIESDeposits

$
9,201


$
8,964Federal Home Loan Bank
    borrowings


6,892



4,717Securities sold under repurchase
    agreements






787Other liabilities


192



340Other borrowings


211



206Preferred stock issued by
    subsidiaries


305



305TOTAL LIABILITIES


16,801



15,319SHAREHOLDERS
    EQUITY


1,230



1,121TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
18,031


$
16,440    88




---



##### Table of Contents



FINANCIAL
    SERVICES
  SUMMARIZED
    STATEMENTS OF INCOME
  For the Year2005


2004


2003(In millions)Interest IncomeLoans and loans held for sale

$
589


$
493


$
507Securities
    available-for-sale


51



57



69Securities
    held-to-maturity


155



165



149Other earning assets


5



3



3Total interest income


800



718



728Interest ExpenseDeposits


(189
)


(142
)


(182
)Borrowed funds


(221
)


(175
)


(169
)Total interest expense


(410
)


(317
)


(351
)Net Interest Income


390



401



377(Provision) credit for credit
    losses


(10
)


12



(43
)Net Interest Income After
    (Provision) Credit For Credit Losses


380



413



334Noninterest IncomeLoan origination and sale of loans


22



140



268Real estate operations


58



59



55Insurance commissions and fees


61



47



43Service charges on deposits


44



42



35Operating lease income


6



10



11Loan servicing fees






31



32Amortization and impairment of
    servicing rights






(40
)


(59
)Other


47



36



39Total noninterest income


238



325



424Noninterest ExpenseCompensation and benefits


(183
)


(269
)


(326
)Loan servicing and origination,
    other than compensation






(13
)


(15
)Real estate operations, other than
    compensation


(28
)


(36
)


(43
)Insurance operations, other than
    compensation


(15
)


(11
)


(11
)Occupancy


(24
)


(29
)


(30
)Information systems and technology


(15
)


(18
)


(26
)Charges related to asset
    impairments and severance


(5
)


(34
)


(5
)Other


(133
)


(155
)


(121
)Total noninterest expense


(403
)


(565
)


(577
)Income Before Taxes


215



173



181Income tax (expense)


(79
)


(64
)


(65
)Net Income

$
136


$
109


$
116    89




---



##### Table of Contents



FINANCIAL
    SERVICES
  SUMMARIZED
    STATEMENTS OF CASH FLOWS
  For the Year2005


2004


2003(In millions)CASH PROVIDED BY (USED FOR)
    OPERATIONSNet income

$
136


$
109


$
116Adjustments:Depreciation


22



23



24Depreciation of leased assets


6



8



8Amortization and impairment of
    servicing rights






40



59Provision (credit) for credit losses


10



(12
)


43Net amortization and accretion of
    financial instruments, discounts and premiums


18



18



23Deferred income taxes


10



(25
)


(7
)Changes in:Loans held for sale:Originations


(2,379
)


(6,898
)


(12,955
)Sales


2,595



6,920



13,447Collections on loans serviced for
    others, net


(122
)


(32
)


(77
)Other


(24
)


(2
)


(21
)272



149



660CASH PROVIDED BY (USED FOR)
    INVESTINGSecurities
    available-for-sale:Purchases


(3
)






(9
)Principal payments and maturities


183



285



585Securities
    held-to-maturity:Purchases


(2,966
)


(910
)


(3,278
)Principal payments and maturities


1,339



1,727



2,114Loans originated or acquired, net
    of collections


(310
)


(644
)


453Collection of mortgage servicing
    rights sale receivables


46



14



Sales of loans


1



37



67Acquisitions, net of cash acquired


(21
)


(15
)


(1
)Branch acquisitions






148



Capital expenditures


(41
)


(41
)


(33
)Other


(8
)


45



4(1,780
)


646



(98
)CASH PROVIDED BY (USED FOR)
    FINANCINGDeposits, net


238



113



(500
)Repurchase agreements and
    short-term borrowings, net


2,126



(308
)


(2
)Long-term FHLB and other borrowings:Additions


30



354



972Payments


(762
)


(866
)


(919
)Dividends paid to parent company


(25
)


(105
)


(166
)Other


(21
)


1



(6
)1,586



(811
)


(621
)Net increase (decrease) in cash and
    cash equivalents


78



(16
)


(59
)Cash and cash equivalents at
    beginning of year


363



379



438Cash and cash equivalents at end of
    year

$
441


$
363


$
379Interest paid

$
396


$
305


$
348    90




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL STATEMENTS
  Note A  Summary
    of Significant Accounting Policies
  Basis
    of Presentation
    Cash
    and Cash Equivalents
    Loans
    Held for Sale
    Loans
    Allowance
    for Loan Losses
       91




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
          Foreclosed
    Assets
    Securities
  held-to-maturity available-for-sale other-than-temporary,
  held-to-maturity available-for-sale
 92




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
   Transfers
    and Servicing of Financial Assets
      Real
    Estate
      Premises
    and Equipment
    Other
    Intangible Assets
    Securities
    Sold Under Repurchase Agreements
   93




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
    Other
    Revenue Recognition
    Income
    Taxes
    Note B  Acquisitions
    and Intangible Assets
         94




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
   Note C  Loans
    At Year-End2005


2004(In millions)Single-family mortgage

$
3,112


$
3,560Single-family mortgage warehouse


757



580Single-family construction


1,665



1,303Multifamily and senior housing


1,469



1,454Total residential


7,003



6,897Commercial real estate


758



709Commercial and business


843



746Energy lending


756



717Asset-based lending and leasing


395



428Consumer and other


164



206Total loans


9,919



9,703Less allowance for loan losses


(74
)


(85
)Loans, net

$
9,845


$
9,618   loan-to-value
    At Year-End2005


2004(In millions)California

$
1,730


$
1,983Texas


303



385Florida


154



112All other states


925



1,080$
3,112


$
3,560      95




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
            For the Year2005


2004


2003(In millions)Loans:Balance at beginning of year

$
85


$
111


$
132Provision (credit) for loan losses


7



(12
)


43Charge-offs


(23
)


(15
)


(73
)Recoveries


5



8



9Transfer to reserve for unfunded
    credit commitments






(7
)


Balance at end of year


74



85



111Unfunded credit commitments:Balance at beginning of year


7







Provision for commitment-related
    credit losses


3







Charge-offs


(3
)






Transfer from allowance for loan
    losses






7



Balance at end of year


7



7



Combined allowances for credit
    losses at year-end

$
81


$
92


$
111Provision (credit) for:Loan losses

$
7


$
(12
)

$
43Commitment-related credit losses


3







Combined provision (credit) for
    credit losses

$
10


$
(12
)

$
43  96




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
     At Year-End2005


2004(In millions)Past due 90 days or more and
    accruing interest

$
8


$
1Recorded investment in nonaccrual
    loans


35



50Restructured loans included in
    nonaccrual loans


1



9Impaired loans


1



9Allowance for loss on impaired loans






3Average recorded investment in
    impaired loans


4



9      97




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
   Note D  Securities
    Gross


GrossAmortized


Unrealized


Unrealized


Fair


Year-EndCost


Gains


(Losses)


Value


Yield(Dollars in millions)At year-end 2005Available for saleMortgage-backed securities:U.S. Government

$
21


$



$



$
21U.S. Government Sponsored
    Enterprises (FNMA, FHLMC)


615



8



(4
)


619Private issuer


7











7643



8



(4
)


647



4.59
%U.S. Government debt securities


3











3



4.85
%Equity securities


4











4$
650


$
8


$
(4
)

$
654Held-to-maturityMortgage-backed securities:U.S. Government

$
115


$



$
(1
)

$
114U.S. Government Sponsored
    Enterprises (FNMA, FHLMC)


2,276



3



(35
)


2,244Private issuer


3,167



1



(14
)


3,154$
5,558


$
4


$
(50
)

$
5,512



4.40
%At year-end 2004Available for saleMortgage-backed securities:U.S. Government

$
28


$
1


$



$
29U.S. Government Sponsored
    Enterprises (FNMA, FHLMC)


789



11



(5
)


795Private issuer


11











11828



12



(5
)


835



3.99
%Corporate debt securities


2











2



5.91
%Equity securities


4











4$
834


$
12


$
(5
)

$
841Held-to-maturityMortgage-backed securities:U.S. Government

$
166


$



$
(1
)

$
165U.S. Government Sponsored
    Enterprises (FNMA, FHLMC)


3,289



20



(12
)


3,297Private issuer


409







(6
)


403$
3,864


$
20


$
(19
)

$
3,865



4.12
%      98




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
      available-for-sale held-to-maturity
    Less Than12 Months


12 Months or MoreGross





GrossFair


Unrealized


Fair


UnrealizedValue


(Losses)


Value


(Losses)(In millions)Available for saleMortgage-backed securities:U.S. Government Sponsored
    Enterprises

$
24


$



$
184


$
(4
)Held-to-maturityMortgage-backed securities:U.S. Government

$
19


$



$
68


$
(1
)U.S. Government Sponsored
    Enterprises


1,119



(13
)


882



(22
)Private issuer


1,875



(9
)


231



(5
)$
3,013


$
(22
)

$
1,181


$
(28
)$
3,037


$
(22
)

$
1,365


$
(32
)     
    The unrealized losses are, in general, a result of changes in
    market interest rates and not changes in credit quality. The
    securities are guaranteed directly or indirectly by the
    U.S. Government or U.S. Government Sponsored
    Enterprises, or are senior-tranche mortgage-backed securities
    considered investment grade quality by third-party rating
    agencies. We do not believe any of these unrealized losses are
    related to credit or other concerns about the collectibility of
    contractual amounts due.
    The mortgage-backed securities cannot be settled at maturity or
    through prepayment in such a way that we would not recover
    substantially all of our recorded investment. We do not have
    significant purchase premiums on the securities. Additionally,
    we have no specific plans to sell these mortgage-backed
    securities and we have the ability to hold them to maturity. 99




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
   Note E  Real
    Estate
    At Year-End2005


2004(In millions)Real estate held for development
    and sale

$
219


$
231Income producing properties


42



46Investments in real estate
    partnerships


76



54Foreclosed real estate


2



4339



335Accumulated depreciation


(17
)


(21
)Valuation allowance






(7
)Real estate, net

$
322


$
307     At Year-End2005


2004(In millions)Real estate

$
184


$
319Total assets


240



378Debt


76



188Total liabilities


77



203Equity


163



175Our investment in partnerships:Our share of partnership equity

$
82


$
62Unrecognized deferred gain


(8
)


(10
)Subordinated debt


2



2Investment in partnerships

$
76


$
54   For the Year2005


2004


2003(In millions)Revenues

$
145


$
56


$
40Earnings


84



42



15Our equity in earnings (reported in
    real estate operations)


14



12



8    100




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
   Note F  Premises
    and Equipment
    Estimated


At Year-EndClassification

Useful Lives


2005


2004(In millions)Land





$
43


$
37Buildings


10 - 40 years



148



131Leasehold improvements


5 - 20 years



24



23Furniture, fixtures and equipment


3 - 10 years



91



98306



289Less accumulated depreciation and
    amortization






(112
)


(122
)$
194


$
167     Note G  Deposits
    At Year-End2005


2004Average





AverageStated





StatedRate


Amount


Rate


Amount(Dollars in millions)Noninterest bearing demand


N/A


$
803



N/A


$
519Interest bearing demand


1.35
%


3,416



0.98
%


4,377Savings deposits


0.80
%


223



0.68
%


241Certificates of deposit


3.54
%


4,759



2.56
%


3,827$
9,201






$
8,964     $100,000 Or


Less ThanMore


$100,000


Total(In millions)3 months or less

$
455


$
929


$
1,384Over 3 through 6 months


355



701



1,056Over 6 through 12 months


485



1,106



1,591Over 12 months


189



539



728$
1,484


$
3,275


$
4,759     Note H  Borrowings
   101




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
     2005


2004


2003(Dollars in millions)Short-term FHLB
    Borrowings:At year-end:Balance

$
4,968


$
2,055


$
1,823Weighted average interest rate


4.0
%


2.1
%


1.0
%For the year:Average daily balance

$
3,084


$
2,161


$
858Maximum month-end balance

$
4,968


$
2,908


$
1,871Weighted average interest rate


3.4
%


1.4
%


1.2
%Long-term FHLB
    Borrowings:At year-end:Balance

$
1,924


$
2,662


$
3,169Weighted average interest rate


3.7
%


3.7
%


3.6
%Repurchase Agreements:At year-end:Balance

$



$
787


$
1,327Weighted average interest rate






2.3
%


1.1
%For the year:Average daily balance

$
144


$
1,155


$
2,415Maximum month-end balance

$
711


$
1,696


$
3,060Weighted average interest rate


2.5
%


1.3
%


1.2
%     At Year-End2005


2004(In millions)Subordinated
    debentures  average rate of 6.47% in 2005 and
    4.63% in 2004, payable in 2013 through 2014

$
100


$
100Senior bank credit
    facility  average rate of 6.04% in 2005 and
    3.94% in 2004, payable in 2006, primarily real estate related


74



65Other indebtedness due through 2014
    at interest rates from 4.50% to 10.25%, secured primarily by
    real estate


37



41$
211


$
206       For the Year2005


2004


2003(In millions)Short-term FHLB borrowings

$
103


$
31


$
10Long-term FHLB borrowings


84



107



109Repurchase agreements


4



15



29Preferred stock issued by
    subsidiaries


17



12



11Other borrowings


13



10



10$
221


$
175


$
169  102




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
     Payment Due or Expiring by
    YearTotal


2006


2007


2008


2009


2010


Thereafter(In millions)FHLB borrowings

$
6,892


$
5,588


$
955


$
250


$
99


$



$
Other borrowings


211



83



4



23



1







100Total

$
7,103


$
5,671


$
959


$
273


$
100


$



$
100   Note I  Preferred
    Stock Issued by Subsidiaries
      Note J  Mortgage
    Loan Servicing
   103




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
     For the Year2004


2003(In millions)Balance, beginning of year

$
100


$
120Additions


19



44Amortization expense


(28
)


(63
)Sales


(91
)


(1
)



100Valuation allowance






(11
)Balance, end of year

$



$
89   Note K  Derivative
    Instruments
    Note L  Noninterest
    Expense
      For the Year2005


2004


2003(In millions)Severance

$
2


$
9


$
4Loss on closure of origination
    facilities






11



Loss on sale of mortgage servicing
    rights






11



Other


3



3



1$
5


$
34


$
5  104




---



##### Table of Contents



FINANCIAL
    SERVICES
  NOTES TO
    SUMMARIZED FINANCIAL
    STATEMENTS  (Continued)
     Beginning





Cash


End ofof Year


Additions


Payments


Year(In millions)Year 2005Involuntary employee terminations

$
3


$
2


$
(3
)

$
2Contract termination penalties


2







(1
)


1Other


6







(3
)


3Total

$
11


$
2


$
(7
)

$
6Year 2004Involuntary employee terminations

$



$
9


$
(6
)

$
3Contract termination penalties






2







2Other






8



(2
)


6Total

$



$
19


$
(8
)

$
11     For the Year2005


2004


2003(In millions)Furniture, fixtures and equipment

$
20


$
22


$
22Leased equipment depreciation


6



8



8Advertising and promotional


20



22



19Travel and other employee


11



11



13Professional services


16



21



14Other


60



71



45Other noninterest expense

$
133


$
155


$
121   Note M  Capital
    Adequacy and Other Regulatory Matters
       105




---



##### Table of Contents



For Capital


For CategorizationAdequacy


As WellActual


Requirements


CapitalizedAmount


Ratio


Amount


Ratio


Amount


Ratio(Dollars in millions)At year-end 2005:Total Risk-Based Ratio (Risk-based
    capital/Total risk-weighted assets)

$
1,293



10.54
%

3$
981



3 8.00
%

3 $
1,227



310.00
%Tier 1 (Core) Risk-Based Ratio
    (Core capital/Total risk-weighted assets)

$
1,213



9.89
%

3 $
491



3 4.00
%

3 $
736



36.00
%Tier 1 (Core) Leverage Ratio
    (Core capital/Adjusted tangible assets)

$
1,213



6.94
%

3 $
699



3 4.00
%

3$
874



35.00
%Tangible Ratio (Tangible
    equity/Tangible assets)

$
1,213



6.94
%

3$
350



32.00
%


N/A



N/AAt year-end 2004:Total Risk-Based Ratio (Risk-based
    capital/Total risk-weighted assets)

$
1,219



10.83
%

3 $
901



38.00
%

3$
1,126



310.00
%Tier 1 (Core) Risk-Based Ratio
    (Core capital/Total risk-weighted assets)

$
1,096



9.74
%

3$
450



34.00
%

3$
675



36.00
%Tier 1 (Core) Leverage Ratio
    (Core capital/Adjusted tangible assets)

$
1,096



6.89
%

3 $
636



34.00
%

3$
795



35.00
%Tangible Ratio (Tangible
    equity/Tangible assets)

$
1,096



6.89
%

3$
318



32.00
%


N/A



N/A    106




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures    Rule 13a-15(e)) Form 10-K.
    Item 8. Financial Statements and Supplementary Data.
    Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant    Year FirstElected toName

Age

the Board

Principal OccupationKenneth M. Jastrow, II


58



1998


Chairman and Chief Executive
    Officer of Temple-Inland Inc.Afsaneh M. Beschloss


50



2002


President and Chief Executive
    Officer of The Rock CreekGroupDr. Donald M. Carlton


68



2003


Former President and Chief
    Executive Officer of Radian International LLCCassandra C. Carr


61



2004


Senior Advisor, Public Strategies,
    Inc.E. Linn Draper, Jr.


64



2004


Former Chairman, President and
    Chief Executive Officer of AmericanElectric Power Company, Inc.Larry R. Faulkner


60



2005


President of Houston Endowment Inc.James T. Hackett


52



2000


Chairman, President and Chief
    Executive Officer ofAnadarko Petroleum CorporationJeffrey M. Heller


66



2004


President and Chief Operating
    Officer of Electronic Data Systems, Inc.James A. Johnson


62



2000


Vice Chairman of Perseus LLCW. Allen Reed


58



2000


Chairman of the Board of General
    Motors Asset Management CorporationArthur Temple III


64



1983


Chairman of the Board of First
    Bank & Trust, East Texas and the T.L.L. Temple
    FoundationLarry E. Temple


70



1991


Attorney-at-law  107




---



##### Table of Contents



Form 10-K
  Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Number of SecuritiesRemaining Availablefor Future IssuanceNumber of Securities


Weighted-Average


Under Equityto be Issued Upon


Exercise Price of


Compensation PlansExercise of Outstanding


Outstanding Options,


(Excluding SecuritiesOptions, Warrants and


Warrants and


Reflected in Column(a))Plan Category

Rights(a)


Rights(b)


(c)Equity compensation plans approved
    by security holders


9,160,337


$
24.75



3,068,468Equity compensation plans not
    approved by security holders


None



None



NoneTotal


9,160,337


$
24.75



3,068,468   Accounting for
    Stock-Based Compensation  Transition and
    Disclosure, an amendment of FASB Statement No. 123.
  Share based
    payment
    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accounting Fees and Services   108




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##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Financial Statements
  Form 10-K.
  Financial Statement Schedules
    Exhibits
  ExhibitNumber



Exhibit3
.01



Certificate of Incorporation of the
    Company (incorporated by reference to Exhibit 3.01 to
    registration statement on
    Form S-1
    (Reg.
    No. 2-87570)
    filed by the Company with the Commission on November 2,
    1983)3
.02



Certificate of Amendment to the
    Certificate of Incorporation of the Company, effective
    May 4, 1987 (incorporated by reference to Exhibit 4.01
    to post-effective amendment No. 2 to registration statement
    on
    Form S-8
    (Reg.
    No. 2-88202)
    filed by the Company with the Commission on November 16,
    1987)3
.03



Certificate of Amendment to the
    Certificate of Incorporation of the Company, effective
    May 5, 1990 (incorporated by reference to Exhibit 4.01
    to post-effective amendment No. 2 to registration statement
    on
    Form S-8
    (Reg.
    No. 33-25650)
    filed by the Company with the Commission on June 14, 1990)3
.04



By-laws of the Company as amended
    and restated May 2, 2002 (incorporated by reference to
    Exhibit 3.1 to the Companys
    Form 10-Q
    for the quarter ended September 28, 2002, and filed with
    the Commission on November 12, 2002)4
.01



Form of Specimen Common Stock
    Certificate of the Company (incorporated by reference to
    Exhibit 4.03 to registration statement on
    Form S-8
    (Reg.
    No. 33-27286)
    filed by the Company with the Commission on March 2, 1989)4
.02



Indenture dated as of
    September 1, 1986, between the Registrant and Chemical
    Bank, as Trustee (or Senior Notes Indenture) (incorporated
    by reference to Exhibit 4.01 to registration statement on
    Form S-1 (Reg. No. 33-8362)
    filed by the Company with the Commission on August 29, 1986)4
.03



First Supplemental Indenture to the
    Senior Notes Indenture, dated as of April 15, 1988,
    between the Company and JPMorgan Chase Bank, N.A. (formerly
    known as The Chase Manhattan Bank and Chemical Bank), as Trustee
    (incorporated by reference to Exhibit 4.02 to registration
    statement on
    Form S-3,
    Registration
    No. 33-20431,
    filed with the Commission on March 2, 1988)4
.04



Second Supplemental Indenture to
    the Senior Notes Indenture, dated as of December 27,
    1990, between the Company and JPMorgan Chase Bank, N.A.
    (formerly known as The Chase Manhattan Bank and Chemical Bank),
    as Trustee (incorporated by reference to Exhibit 4.03 to
    Form 8-K,
    filed with the Commission on December 27, 1990)4
.05



Third Supplemental Indenture to the
    Senior Notes Indenture, dated as of May 9, 1991,
    between the Company and JPMorgan Chase Bank, N.A. (formerly
    known as The Chase Manhattan Bank and Chemical Bank), as Trustee
    (incorporated by reference to Exhibit 4 to
    Form 10-Q
    for the quarter ended June 29, 1991, filed with the
    Commission on August 7, 1991)4
.06



Form of Fixed-rate Medium Term
    Note, Series D, of the Company (incorporated by reference
    to Exhibit 4.05 to registration statement on
    Form S-3
    (Reg.
    No. 33-43978)
    filed by the Company with the Commission on November 14,
    1991)4
.07



Certificate of Designation,
    Preferences and Rights of Series A Junior Participating
    Preferred Stock, dated February 16, 1989 (incorporated by
    reference to Exhibit 4.04 to the Companys
    Form 10-K
    for the year ended December 31, 1988, and filed with the
    Commission on March 21, 1989)4
.08



Rights Agreement, dated
    February 20, 1999, between the Company and Equiserve Trust
    Company, N.A. (f/k/a First Chicago Trust Company of New York),
    as Rights Agent (incorporated by reference to Exhibit 1 to
    the Companys registration statement on Form 8A filed
    with the Commission on February 19, 1999)4
.09



Form of Fixed-rate Medium Term
    Note, Series F, of the Company (incorporated by reference
    to Exhibit 4.05 to the Companys
    Form 8-K
    filed with the Commission on June 3, 1998) 109




---



##### Table of Contents



ExhibitNumber



Exhibit4
.10




Form of 5.003% Senior Note due
    2007 of the Company (incorporated by reference to
    Exhibit 4.2 to the Companys
    Form 8-K
    filed with the Commission on May 3, 2002)4
.11




Form of 7.875% Senior Notes
    due 2012 of the Company (incorporated by reference to
    Exhibit 4.1 to the Companys
    Form 8-K
    filed with the Commission on May 3, 2002)4
.12




Form of 6.375% Senior Notes
    due 2016 of the Company (incorporated by reference to
    Exhibit 4.1 to the Companys
    Form 8-K
    filed with the Commission on December 6, 2005)4
.13




Form of 6.625% Senior Notes
    due 2018 of the Company (incorporated by reference to
    Exhibit 4.2 to the Companys
    Form 8-K
    filed with the Commission on December 6, 2005)10
.01




Credit Agreement dated
    July 28, 2005, with Bank of America, N.A., as
    administrative agent and L/C Issuer; Citibank, N.A. and The
    Toronto Dominion Bank, as co-syndication agents; BNP Paribas and
    The Bank Of Nova Scotia, as co-documentation agents; Banc of
    America Securities LLC and Citigroup Global Markets Inc., as
    joint lead arrangers and joint book managers; and the lenders
    party thereto (incorporated by reference to the Companys
    Current Report on
    Form 8-K
    filed with the Commission on August 1, 2005)10
.02
*



Temple-Inland Inc. 1993 Stock
    Option Plan (incorporated by reference to the Companys
    definitive proxy statement in connection with the Annual Meeting
    of Shareholders held May 6, 1994, and filed with the
    Commission on March 21, 1994)10
.03
*



Temple-Inland Inc. 1997 Stock
    Option Plan (incorporated by reference to the Companys
    Definitive Proxy Statement in connection with the Annual Meeting
    of Shareholders held May 2, 1997, and filed with the
    Commission on March 17, 1997), as amended May 7, 1999
    (incorporated by reference to the Companys definitive
    proxy statement in connection with the Annual Meeting of
    Shareholders held May 7, 1999, and filed with the
    Commission on March 26, 1999)10
.04
*



Temple-Inland Inc. 1997 Restricted
    Stock Plan (incorporated by reference to the Companys
    Definitive Proxy Statement in connection with the Annual Meeting
    of Shareholders held May 2, 1997, and filed with the
    Commission on March 17, 1997)10
.05
*



Temple-Inland Inc. 2001 Stock
    Incentive Plan (incorporated by reference to the Companys
    definitive proxy statement in connection with the Annual Meeting
    of Shareholders held May 4, 2001, and filed with the
    Commission on March 23, 2001)10
.06
*



Temple-Inland Inc. 2003 Stock
    Incentive Plan (incorporated by reference to Appendix A of
    the Companys definitive proxy statement dated
    March 31, 2003, and prepared in connection with the annual
    meeting of stockholders held May 2, 2003)10
.07
*



Form of Nonqualified Stock Option
    Agreement issued pursuant to the Temple-Inland Inc. 2003 Stock
    Incentive Plan (incorporated by reference to Exhibit 10.23
    to the Companys
    Form 10-K
    for the year ended January 3, 2004, and filed with the
    Commission on February 23, 2004)10
.08
*



Revised Form of Performance Stock
    Units Agreement issued pursuant to the Temple-Inland Inc. 2003
    Stock Incentive Plan (1)10
.09
*



Revised Form of Restricted Stock
    Unit Agreement issued pursuant to the Temple-Inland Inc. 2003
    Stock Incentive Plan (1)10
.10
*



Revised Form of Nonqualified Stock
    Option Agreement for Non-Employee Directors issued pursuant to
    the Temple-Inland Inc. 2003 Stock Incentive Plan (1)10
.11
*



Temple-Inland Inc. Stock Deferral
    and Payment Plan (as amended and restated effective
    February 2, 2001) (incorporated by reference to the
    Companys definitive proxy statement in connection with the
    Annual Meeting of Shareholders held May 4, 2001, and filed
    with the Commission on March 23, 2001)10
.12
*



Temple-Inland Inc. Directors
    Fee Deferral Plan (incorporated by reference to the
    Companys definitive proxy statement in connection with the
    Annual Meeting of Shareholders held May 4, 2001, and filed
    with the Commission on March 23, 2001)10
.13
*



Temple-Inland Inc. Supplemental
    Executive Retirement Plan (incorporated by reference to
    Exhibit 10.1 to the Companys
    Form 10-Q
    for the quarter ended June 30, 2001 filed with the
    Commission on August 14, 2001)10
.14
*



Employment Agreement between the
    company and Kenneth M. Jastrow, II, dated February 11,
    2005 (incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Commission on February 11, 2005)10
.15
*



Employment Agreement and Change in
    Control Agreement dated June 1, 2003, between the Company
    and J. Patrick Maley III (incorporated by reference to
    Exhibit 10.1 to the Companys
    Form 10-Q
    for the quarter ended September 28, 2003, and filed with
    the Commission on November 12, 2003) 110




---



##### Table of Contents



ExhibitNumber



Exhibit10
.16
*



Letter Agreement with M. Richard
    Warner dated November 4, 2005 (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed with the Commission on November 7, 2005)10
.17
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Kenneth M.
    Jastrow, II (incorporated by reference to
    Exhibit 10.22 to the Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001), as amended on
    February 11, 2005 (incorporated by reference to
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K
    filed with the Commission on February 11, 2005)10
.18
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Bart J. Doney
    (incorporated by reference to Exhibit 10.25 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.19
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Kenneth R. Dubuque
    (incorporated by reference to Exhibit 10.26 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.20
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Jack C. Sweeny
    (incorporated by reference to Exhibit 10.29 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.21
*



Change in Control Agreement dated
    October 2, 2000, between the Company and M. Richard Warner
    (incorporated by reference to Exhibit 10.30 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.22
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Randall D. Levy
    (incorporated by reference to Exhibit 10.31 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.23
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Louis R. Brill
    (incorporated by reference to Exhibit 10.32 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.24
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Scott Smith
    (incorporated by reference to Exhibit 10.33 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.25
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Doyle R. Simons
    (incorporated by reference to Exhibit 10.34 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.26
*



Change in Control Agreement dated
    October 2, 2000, between the Company and David W. Turpin
    (incorporated by reference to Exhibit 10.35 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.27
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Leslie K.
    ONeal (incorporated by reference to Exhibit 10.36 to
    the Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.28
*



Change in Control Agreement dated
    November 1, 2002, between the Company and J. Bradley
    Johnston (incorporated by reference to Exhibit 10.24 to the
    Companys
    Form 10-K
    for the year ended December 28, 2002, and filed with the
    Commission on March 20, 2003)21





Subsidiaries of the Company (1)23





Consent of Ernst & Young
    LLP (1)31
.1




Certification of Chief Executive
    Officer pursuant to Exchange Act
    rule 13a-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 (1)31
.2




Certification of Chief Financial
    Officer pursuant to Exchange Act
    rule 13a-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 (1)32
.1




Certification of Chief Executive
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002 (1)32
.2




Certification of Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002 (1)    *
    
    Management contract or compensatory plan or arrangement.(1)
    
    Filed herewith 111




---



##### Table of Contents



SIGNATURES    Temple-Inland Inc.
  By:
    /s/  Kenneth
    M. Jastrow, II   Chairman of the Board and
  Chief Executive Officer
     Signature

Capacity

Date/s/  Kenneth
    M. Jastrow, IIKenneth
    M. Jastrow, II

Director, Chairman of the
    Board,
    and Chief Executive Officer


March 7, 2006/s/  Randall
    D. LevyRandall
    D. Levy

Chief Financial Officer


March 7, 2006/s/  Louis
    R. BrillLouis
    R. Brill

Vice President and
    Chief Accounting Officer


March 7, 2006/s/  Afsaneh
    M. BeschlossAfsaneh
    M. Beschloss

Director


March 7, 2006/s/  Donald
    M. CarltonDonald
    M. Carlton

Director


March 7, 2006/s/  Cassandra
    C. CarrCassandra
    C. Carr

Director


March 7, 2006/s/  E.
    Linn Draper, Jr.E.
    Linn Draper, Jr.

Director


March 7, 2006/s/  Larry
    R. FaulknerLarry
    R. Faulkner

Director


March 7, 2006/s/  James
    T. HackettJames
    T. Hackett

Director


March 7, 2006/s/  Jeffrey
    M. HellerJeffrey
    M. Heller

Director


March 7, 2006/s/  James
    A. JohnsonJames
    A. Johnson

Director


March 7, 2006/s/  W.
    Allen ReedW.
    Allen Reed

Director


March 7, 2006/s/  Arthur
    Temple IIIArthur
    Temple III

Director


March 7, 2006/s/  Larry
    E. TempleLarry
    E. Temple

Director


March 7, 2006  112




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##### Table of Contents



EXHIBIT
    INDEX
  ExhibitNumber



Exhibit3
.01



Certificate of Incorporation of
    the Company (incorporated by reference to Exhibit 3.01 to
    registration statement on
    Form S-1
    (Reg.
    No. 2-87570)
    filed by the Company with the Commission on November 2,
    1983)3
.02



Certificate of Amendment to the
    Certificate of Incorporation of the Company, effective
    May 4, 1987 (incorporated by reference to Exhibit 4.01
    to post-effective amendment No. 2 to registration statement
    on
    Form S-8
    (Reg.
    No. 2-88202)
    filed by the Company with the Commission on November 16,
    1987)3
.03



Certificate of Amendment to the
    Certificate of Incorporation of the Company, effective
    May 5, 1990 (incorporated by reference to Exhibit 4.01
    to post-effective amendment No. 2 to registration statement
    on
    Form S-8
    (Reg.
    No. 33-25650)
    filed by the Company with the Commission on June 14, 1990)3
.04



By-laws of the Company as amended
    and restated May 2, 2002 (incorporated by reference to
    Exhibit 3.1 to the Companys
    Form 10-Q
    for the quarter ended September 28, 2002, and filed with
    the Commission on November 12, 2002)4
.01



Form of Specimen Common Stock
    Certificate of the Company (incorporated by reference to
    Exhibit 4.03 to registration statement on
    Form S-8
    (Reg.
    No. 33-27286)
    filed by the Company with the Commission on March 2, 1989)4
.02



Indenture dated as of
    September 1, 1986, between the Registrant and Chemical
    Bank, as Trustee (or Senior Notes Indenture) (incorporated
    by reference to Exhibit 4.01 to registration statement on
    Form S-1
    (Reg.
    No. 33-8362)
    filed by the Company with the Commission on August 29, 1986)4
.03



First Supplemental Indenture to
    the Senior Notes Indenture, dated as of April 15,
    1988, between the Company and JPMorgan Chase Bank, N.A.
    (formerly known as The Chase Manhattan Bank and Chemical Bank),
    as Trustee (incorporated by reference to Exhibit 4.02 to
    registration statement on
    Form S-3,
    Registration
    No. 33-20431,
    filed with the Commission on March 2, 1988)4
.04



Second Supplemental Indenture to
    the Senior Notes Indenture, dated as of December 27,
    1990, between the Company and JPMorgan Chase Bank, N.A.
    (formerly known as The Chase Manhattan Bank and Chemical Bank),
    as Trustee (incorporated by reference to Exhibit 4.03 to
    Form 8-K,
    filed with the Commission on December 27, 1990)4
.05



Third Supplemental Indenture to
    the Senior Notes Indenture, dated as of May 9, 1991,
    between the Company and JPMorgan Chase Bank, N.A. (formerly
    known as The Chase Manhattan Bank and Chemical Bank), as Trustee
    (incorporated by reference to Exhibit 4 to
    Form 10-Q
    for the quarter ended June 29, 1991, filed with the
    Commission on August 7, 1991)4
.06



Form of Fixed-rate Medium Term
    Note, Series D, of the Company (incorporated by reference
    to Exhibit 4.05 to registration statement on
    Form S-3
    (Reg.
    No. 33-43978)
    filed by the Company with the Commission on November 14,
    1991)4
.07



Certificate of Designation,
    Preferences and Rights of Series A Junior Participating
    Preferred Stock, dated February 16, 1989 (incorporated by
    reference to Exhibit 4.04 to the Companys
    Form 10-K
    for the year ended December 31, 1988, and filed with the
    Commission on March 21, 1989)4
.08



Rights Agreement, dated
    February 20, 1999, between the Company and Equiserve Trust
    Company, N.A. (f/k/a First Chicago Trust Company of New York),
    as Rights Agent (incorporated by reference to Exhibit 1 to
    the Companys registration statement on Form 8A filed
    with the Commission on February 19, 1999)4
.09



Form of Fixed-rate Medium Term
    Note, Series F, of the Company (incorporated by reference
    to Exhibit 4.05 to the Companys
    Form 8-K
    filed with the Commission on June 3, 1998)4
.10



Form of 5.003% Senior Note
    due 2007 of the Company (incorporated by reference to
    Exhibit 4.2 to the Companys
    Form 8-K
    filed with the Commission on May 3, 2002)4
.11



Form of 7.875% Senior Notes
    due 2012 of the Company (incorporated by reference to
    Exhibit 4.1 to the Companys
    Form 8-K
    filed with the Commission on May 3, 2002)4
.12



Form of 6.375% Senior Notes
    due 2016 of the Company (incorporated by reference to
    Exhibit 4.1 to the Companys
    Form 8-K
    filed with the Commission on December 6, 2005)4
.13



Form of 6.625% Senior Notes
    due 2018 of the Company (incorporated by reference to
    Exhibit 4.2 to the Companys
    Form 8-K
    filed with the Commission on December 6, 2005)




---



##### Table of Contents



ExhibitNumber



Exhibit10
.01




Credit Agreement dated
    July 28, 2005, with Bank of America, N.A., as
    administrative agent and L/C Issuer; Citibank, N.A. and The
    Toronto Dominion Bank, as co-syndication agents; BNP Paribas and
    The Bank Of Nova Scotia, as co-documentation agents; Banc of
    America Securities LLC and Citigroup Global Markets Inc., as
    joint lead arrangers and joint book managers; and the lenders
    party thereto (incorporated by reference to the Companys
    Current Report on
    Form 8-K
    filed with the Commission on August 1, 2005)10
.02
*



Temple-Inland Inc. 1993 Stock
    Option Plan (incorporated by reference to the Companys
    definitive proxy statement in connection with the Annual Meeting
    of Shareholders held May 6, 1994, and filed with the
    Commission on March 21, 1994)10
.03
*



Temple-Inland Inc. 1997 Stock
    Option Plan (incorporated by reference to the Companys
    Definitive Proxy Statement in connection with the Annual Meeting
    of Shareholders held May 2, 1997, and filed with the
    Commission on March 17, 1997), as amended May 7, 1999
    (incorporated by reference to the Companys definitive
    proxy statement in connection with the Annual Meeting of
    Shareholders held May 7, 1999, and filed with the
    Commission on March 26, 1999)10
.04
*



Temple-Inland Inc. 1997 Restricted
    Stock Plan (incorporated by reference to the Companys
    Definitive Proxy Statement in connection with the Annual Meeting
    of Shareholders held May 2, 1997, and filed with the
    Commission on March 17, 1997)10
.05
*



Temple-Inland Inc. 2001 Stock
    Incentive Plan (incorporated by reference to the Companys
    definitive proxy statement in connection with the Annual Meeting
    of Shareholders held May 4, 2001, and filed with the
    Commission on March 23, 2001)10
.06
*



Temple-Inland Inc. 2003 Stock
    Incentive Plan (incorporated by reference to Appendix A of
    the Companys definitive proxy statement dated
    March 31, 2003, and prepared in connection with the annual
    meeting of stockholders held May 2, 2003)10
.07
*



Form of Nonqualified Stock Option
    Agreement issued pursuant to the Temple-Inland Inc. 2003 Stock
    Incentive Plan (incorporated by reference to Exhibit 10.23
    to the Companys
    Form 10-K
    for the year ended January 3, 2004, and filed with the
    Commission on February 23, 2004)10
.08
*



Revised Form of Performance Stock
    Units Agreement issued pursuant to the Temple-Inland Inc. 2003
    Stock Incentive Plan (1)10
.09
*



Revised Form of Restricted Stock
    Unit Agreement issued pursuant to the Temple-Inland Inc. 2003
    Stock Incentive Plan (1)10
.10
*



Revised Form of Nonqualified Stock
    Option Agreement for Non-Employee Directors issued pursuant to
    the Temple-Inland Inc. 2003 Stock Incentive Plan (1)10
.11
*



Temple-Inland Inc. Stock Deferral
    and Payment Plan (as amended and restated effective
    February 2, 2001) (incorporated by reference to the
    Companys definitive proxy statement in connection with the
    Annual Meeting of Shareholders held May 4, 2001, and filed
    with the Commission on March 23, 2001)10
.12
*



Temple-Inland Inc. Directors
    Fee Deferral Plan (incorporated by reference to the
    Companys definitive proxy statement in connection with the
    Annual Meeting of Shareholders held May 4, 2001, and filed
    with the Commission on March 23, 2001)10
.13
*



Temple-Inland Inc. Supplemental
    Executive Retirement Plan (incorporated by reference to
    Exhibit 10.1 to the Companys
    Form 10-Q
    for the quarter ended June 30, 2001 filed with the
    Commission on August 14, 2001)10
.14
*



Employment Agreement between the
    company and Kenneth M. Jastrow, II, dated February 11,
    2005 (incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Commission on February 11, 2005)10
.15
*



Employment Agreement and Change in
    Control Agreement dated June 1, 2003, between the Company
    and J. Patrick Maley III (incorporated by reference to
    Exhibit 10.1 to the Companys
    Form 10-Q
    for the quarter ended September 28, 2003, and filed with
    the Commission on November 12, 2003)10
.16
*



Letter Agreement with M. Richard
    Warner dated November 4, 2005 (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K
    filed with the Commission on November 7, 2005)




---



##### Table of Contents



ExhibitNumber



Exhibit10
.17
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Kenneth M.
    Jastrow, II (incorporated by reference to
    Exhibit 10.22 to the Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001), as amended on
    February 11, 2005 (incorporated by reference to
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K
    filed with the Commission on February 11, 2005)10
.18
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Bart J. Doney
    (incorporated by reference to Exhibit 10.25 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.19
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Kenneth R. Dubuque
    (incorporated by reference to Exhibit 10.26 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.20
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Jack C. Sweeny
    (incorporated by reference to Exhibit 10.29 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.21
*



Change in Control Agreement dated
    October 2, 2000, between the Company and M. Richard Warner
    (incorporated by reference to Exhibit 10.30 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.22
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Randall D. Levy
    (incorporated by reference to Exhibit 10.31 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.23
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Louis R. Brill
    (incorporated by reference to Exhibit 10.32 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.24
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Scott Smith
    (incorporated by reference to Exhibit 10.33 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.25
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Doyle R. Simons
    (incorporated by reference to Exhibit 10.34 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.26
*



Change in Control Agreement dated
    October 2, 2000, between the Company and David W. Turpin
    (incorporated by reference to Exhibit 10.35 to the
    Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.27
*



Change in Control Agreement dated
    October 2, 2000, between the Company and Leslie K.
    ONeal (incorporated by reference to Exhibit 10.36 to
    the Companys
    Form 10-K
    for the year ended December 30, 2000, and filed with the
    Commission on March 5, 2001)10
.28
*



Change in Control Agreement dated
    November 1, 2002, between the Company and J. Bradley
    Johnston (incorporated by reference to Exhibit 10.24 to the
    Companys
    Form 10-K
    for the year ended December 28, 2002, and filed with the
    Commission on March 20, 2003)21





Subsidiaries of the
    Company (1)23





Consent of Ernst & Young
    LLP (1)31
.1




Certification of Chief Executive
    Officer pursuant to Exchange Act
    rule 13a-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 (1)31
.2




Certification of Chief Financial
    Officer pursuant to Exchange Act
    rule 13a-14(a),
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002 (1)32
.1




Certification of Chief Executive
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002 (1)32
.2




Certification of Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002 (1)     *
    
    Management contract or compensatory plan or arrangement.(1)
    
    Filed herewith