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

# FORM 10-Q

# [ X ] QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

# FOR THE QUARTERLY
PERIOD ENDED JUNE 30, 2009

OR

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

# FOR THE TRANSITION
PERIOD FROM _____ TO _____.

Commission file number:
000-50015

---

# TierOne Corporation

(EXACT NAME OF
REGISTRANT AS SPECIFIED IN ITS CHARTER)

|Wisconsin                                                      | 04-3638672                          
|-------------------------------------------------------------- | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.)
|1235 N Street                                               
|Lincoln, Nebraska                                              | 68508                               
|(Address of Principal Executive Offices)                       | (Zip Code)                          

|(402) 475-0521                                      
|----------------------------------------------------
|(Registrants Telephone Number, Including Area Code)

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          No

Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). (Registrant is not yet required to
provide financial disclosure in Interactive Data File format).

| | Yes    
              No
| | ------------------------

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

Large accelerated filer 
   Accelerated filer      Non-accelerated filer     Smaller reporting company

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

As of August 5, 2009 there were
18,034,474 issued and outstanding shares of the Registrants common stock.

---

# PART I - FINANCIAL
INFORMATION

|         |                                                            
|-------- | -----------------------------------------------------------
|Item 1 - | Financial Statements                                       
|Item 2 - | Managements Discussion and Analysis of Financial Condition
|         | and Results of Operations                                  
|Item 3 - | Quantitative and Qualitative Disclosures About Market Risk 
|Item 4 - | Controls and Procedures                                    

# PART II - OTHER
INFORMATION

|Item 1 -      | Legal Proceedings                                           | 73
|------------- | ----------------------------------------------------------- | --
|Item 1A -     | Risk Factors                                                | 73
|Item 2 -      | Unregistered Sales of Equity Securities and Use of Proceeds | 73
|Item 3 -      | Defaults Upon Senior Securities                             | 74
|Item 4 -      | Submission of Matters to a Vote of Security Holders         | 74
|Item 5 -      | Other Information                                           | 74
|Item 6 -      | Exhibits                                                    | 74
|Signatures    | 75                                                         
|Exhibit Index | 76                                                         

2

---

# Forward-Looking
Statements

Statements
contained in this Quarterly Report on Form 10-Q which are not historical facts may be
forward-looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties
which could cause actual results to differ materially from those currently anticipated due
to a number of factors. In addition to risk factors described in Item 1A of our Annual
Report on Form 10-K for the year ended December 31, 2008, risks and uncertainties that could result
in material variations include, but are not limited to:

| |  | General
 economic  conditions  and  trends,  either  nationally  or in some or all of the areas
in which we and our  customers          conduct our businesses;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Changes
in interest rates or other competitive factors which could affect net interest margins
and result in a change in net interest income and noninterest income;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Changes
in deposit flows,  and in the demand for deposits,  loans,  investment  products and
other  financial  services in the          markets we serve;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Changes
 in the  quality  or  composition  of our loan  portfolio,  or the  unanticipated
 further  deterioration  of our loan          portfolio;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Changes
in our underlying assumptions or any unanticipated issues that could impact managements
judgment regarding our allowance and provisions for loan losses, which could cause our
existing allowance for loan losses to be inadequate;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Changes
in real estate values, which could impact the quality of the assets securing the loans in
our portfolios;
| | - | -----------------------------------------------------------------------------------------------------------------

| |  | Changes
in the financial or operating performance of our customers businesses;
| | - | -------------------------------------------------------------------------------

| |  | Issues
associated with unanticipated increases in the levels of losses, customer bankruptcies,
claims and assessments;
| | - | ----------------------------------------------------------------------------------------------------------------------

| |  | Our
timely development of new lines of business and competitive products or services within
our existing lines of business in a changing environment, and the acceptance of such
products or services by our customers;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Any
interruption or breach of security resulting in failures or disruption in customer
account management, general ledger, deposit operations, lending or other systems;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Changes
in fiscal, monetary, regulatory, trade and tax policies and laws;
| | - | -------------------------------------------------------------------------

| |  | Increased
competitive challenges and expanding product and pricing pressures among financial
institutions;
| | - | ----------------------------------------------------------------------------------------------------------

| |  | Changes
in accounting policies or procedures as may be required by various regulatory agencies;
| | - | -----------------------------------------------------------------------------------------------

| |  | Changes
in consumer spending and savings habits;
| | - | ------------------------------------------------

| |  | Unanticipated
issues related to our ability to achieve expected results pursuant to our plan to address
asset quality, restore long-term profitability and increase capital;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Changes
in liquidity levels in capital markets;
| | - | -----------------------------------------------

| |  | Unanticipated
events related to the supervisory agreement or actions by regulators, including any
failure to meet enhanced regulatory capital requirements; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Other
factors discussed in documents we may file with the Securities and Exchange Commission
from time to time.
| | - | ---------------------------------------------------------------------------------------------------------------

These
factors should be considered in evaluating the forward-looking statements and undue
reliance should not be placed on such statements. We undertake no obligation, and disclaim
any obligation, to update information contained in this Quarterly Report on Form 10-Q,
including these forward-looking statements, to reflect events or circumstances that occur
after the date of the filing of this Quarterly Report on Form 10-Q.

3

---

# Item 1  Financial
Statements

# TierOne Corporation
and Subsidiaries Consolidated
Statements of Financial Condition June 30, 2009
(Unaudited) and December 31, 2008

|(Dollars in thousands, except per share data)                   | June 30, 2009 | December 31, 2008
|--------------------------------------------------------------- | ------------- | -----------------
|ASSETS                                                          |               |                  
|Cash and due from banks                                         |               |                  
|Funds held at Federal Reserve Bank                              |               |                  
|Federal funds sold                                              |               |                  
|                                                               
|Total cash and cash equivalents                                 |               |                  
|                                                               
|Investment securities:                                          |               |                  
|Held to maturity, at cost which approximates fair value         |               |                  
|Available for sale, at fair value                               |               |                  
|Mortgage-backed securities, available for sale, at fair value   |               |                  
|Loans receivable:                                               |               |                  
|Net loans (includes loans held for sale of $16,856 and $13,917  |               |                  
|at June 30, 2009 and December 31, 2008, respectively)           |               |                  
|Allowance for loan losses                                       |               |                  
|                                                               
|Net loans after allowance for loan losses                       |               |                  
|                                                               
|FHLBank Topeka stock, at cost                                   |               |                  
|Premises and equipment, net                                     |               |                  
|Accrued interest receivable                                     |               |                  
|Other real estate owned and repossessed assets, net             |               |                  
|Other intangible assets, net                                    |               |                  
|Mortgage servicing rights, net                                  |               |                  
|Other assets                                                    |               |                  
|                                                               
|Total assets                                                    |               |                  
|                                                               
|LIABILITIES AND STOCKHOLDERS EQUITY                            |               |                  
|Liabilities:                                                    |               |                  
|Deposits                                                        |               |                  
|FHLBank Topeka advances and other borrowings                    |               |                  
|Advance payments from borrowers for taxes, insurance and        |               |                  
|other escrow funds                                              |               |                  
|Accrued interest payable                                        |               |                  
|Accrued expenses and other liabilities                          |               |                  
|                                                               
|Total liabilities                                               |               |                  
|                                                               
|Stockholders equity:                                           |               |                  
|Preferred stock, $0.01 par value. 10,000,000 shares authorized; |               |                  
|none issued                                                     |               |                  
|Common stock, $0.01 par value.  60,000,000 shares authorized;   |               |                  
|22,575,075 issued at June 30, 2009 and December 31, 2008;       |               |                  
|18,034,474 and 18,034,878 shares outstanding at                 |               |                  
|June 30, 2009 and December 31, 2008, respectively               |               |                  
|Additional paid-in capital                                      |               |                  
|Retained earnings (deficit), substantially restricted           |               |                  
|Treasury stock, at cost; 4,540,601 and 4,540,197 shares at      |               |                  
|June 30, 2009 and December 31, 2008, respectively               |               |                  
|Unallocated common stock held by Employee Stock                 |               |                  
|Ownership Plan                                                  |               |                  
|Accumulated other comprehensive loss, net                       |               |                  
|                                                               
|Total stockholders equity                                      |               |                  
|                                                               
|Total liabilities and stockholders equity                      |               |                  
|                                                               

See accompanying notes to
consolidated financial statements.

4

---

# TierOne Corporation
and Subsidiaries Consolidated Statements of Operations  (Unaudited)

|                                                        | For the Three Months Ended
June 30, | For the Six Months Ended
June 30,
|------------------------------------------------------- | ----------------------------------- | ---------------------------------
|
|Interest income:                                        |                                     |                                  
|Loans receivable                                        |                                     |                                  
|Investment securities                                   |                                     |                                  
|Other interest-earning assets                           |                                     |                                  
|                                                       
|Total interest income                                   |                                     |                                  
|                                                       
|Interest expense:                                       |                                     |                                  
|Deposits                                                |                                     |                                  
|FHLBank Topeka advances and other borrowings            |                                     |                                  
|                                                       
|Total interest expense                                  |                                     |                                  
|                                                       
|Net interest income                                     |                                     |                                  
|Provision for loan losses                               |                                     |                                  
|                                                       
|Net interest loss after provision for loan losses       |                                     |                                  
|                                                       
|Noninterest income:                                     |                                     |                                  
|Fees and service charges                                |                                     |                                  
|Debit card fees                                         |                                     |                                  
|Loss from real estate operations, net                   |                                     |                                  
|Loss on impairment of securities                        |                                     |                                  
|Net gain (loss) on sales of:                            |                                     |                                  
|Loans held for sale                                     |                                     |                                  
|Other real estate owned                                 |                                     |                                  
|Other operating income                                  |                                     |                                  
|                                                       
|Total noninterest income                                |                                     |                                  
|                                                       
|Noninterest expense:                                    |                                     |                                  
|Salaries and employee benefits                          |                                     |                                  
|Goodwill impairment                                     |                                     |                                  
|Occupancy, net                                          |                                     |                                  
|Data processing                                         |                                     |                                  
|Advertising                                             |                                     |                                  
|Federal Deposit Insurance Corporation insurance premium |                                     |                                  
|Legal services                                          |                                     |                                  
|Other operating expense                                 |                                     |                                  
|                                                       
|Total noninterest expense                               |                                     |                                  
|                                                       
|Loss before income taxes                                |                                     |                                  
|Income tax expense (benefit)                            |                                     |                                  
|                                                       
|Net loss                                                |                                     |                                  
|                                                       
|Net loss per common share, basic                        |                                     |                                  
|                                                       
|Net loss per common share, diluted                      |                                     |                                  
|                                                       
|Dividends declared per common share                     |                                     |                                  
|                                                       
|Average common shares outstanding, basic (000s)        |                                     |                                  
|                                                       
|Average common shares outstanding, diluted (000s)      |                                     |                                  
|                                                       

See accompanying notes to
consolidated financial statements.

5

---

# TierOne Corporation
and Subsidiaries  Consolidated Statements of Changes in Stockholders Equity and
Comprehensive Loss  For the Six Months Ended June 30, 2009 and 2008  (Unaudited)

|(Dollars in thousands)                  | Common Stock | AdditionalPaid-In-Capital | Retained Earnings (Deficit), Substantially Restricted | Treasury Stock | Unallocated Common StockHeld by theEmployee StockOwnership Plan | Accumulated OtherComprehensiveLoss, Net | Total Stockholderss Equity
|--------------------------------------- | ------------ | ------------------------- | ----------------------------------------------------- | -------------- | --------------------------------------------------------------- | --------------------------------------- | ---------------------------
|Balance at December 31, 2007            |              |                           | $                                                     | 226            |                                                                 | $                                       | 366,042                    
|                                       
|Common stock earned by employees        |              |                          
|in Employee Stock Ownership Plan        |              |                           |                                                       | --             |                                                                 |                                         | 155                        
|Amortization of awards under the        |              |                          
|Management Recognition and              |              |                          
|Retention Plan                          |              |                           |                                                       | --             |                                                                 |                                         | 954                        
|Amortization of stock options  under    |              |                          
|2003 Stock Option Plan                  |              |                           |                                                       | --             |                                                                 |                                         | 661                        
|Repurchase of common stock              |              |                          
|(23,812 shares)                         |              |                           |                                                       | --             |                                                                 |                                         | --                         
|Treasury stock reissued under 2003      |              |                          
|Stock Option Plan                       |              |                           |                                                       | --             |                                                                 |                                         | (5                         
|Excess tax expense realized from stock- |              |                          
|based compensation plans                |              |                           |                                                       | --             |                                                                 |                                         | (459                       
|Dividends paid ($0.12 per common share) |              |                           |                                                       | --             |                                                                 |                                         | --                         
|Comprehensive loss:                     |              |                          
|Net loss                                |              |                           |                                                       | --             |                                                                 |                                         | --                         
|Change in unrealized loss on            |              |                          
|available for sale securities, net of   |              |                          
|tax                                     |              |                           |                                                       | --             |                                                                 |                                         | --                         
|                                       
|Total comprehensive loss                |              |                           |                                                       | --             |                                                                 |                                         | --                         
|                                       
|Balance at June 30, 2008                |              |                           | $                                                     | 226            |                                                                 | $                                       | 367,348                    
|                                       
|Balance at December 31, 2008            |              |                           | $                                                     | 226            |                                                                 | $                                       | 367,028                    
|                                       
|Common stock earned by employees        |              |                          
|in Employee Stock Ownership Plan        |              |                           |                                                       | --             |                                                                 |                                         | (591                       
|Amortization of awards under the        |              |                          
|Management Recognition and              |              |                          
|Retention Plan                          |              |                           |                                                       | --             |                                                                 |                                         | 99                         
|Amortization of stock options under     |              |                          
|2003 Stock Option Plan                  |              |                           |                                                       | --             |                                                                 |                                         | 25                         
|Repurchase of common stock              |              |                          
|(404 shares)                            |              |                           |                                                       | --             |                                                                 |                                         | --                         
|Excess tax expense realized from stock- |              |                          
|based compensation plans                |              |                           |                                                       | --             |                                                                 |                                         | (353                       
|Comprehensive loss:                     |              |                          
|Net loss                                |              |                           |                                                       | --             |                                                                 |                                         | --                         
|Change in unrealized loss on            |              |                          
|available for sale securities, net of   |              |                          
|tax                                     |              |                           |                                                       | --             |                                                                 |                                         | --                         
|                                       
|Total comprehensive loss                |              |                           |                                                       | --             |                                                                 |                                         | --                         
|                                       
|Balance at June 30, 2009                |              |                           | $                                                     | 226            |                                                                 | $                                       | 366,208                    
|                                       

See accompanying notes to
consolidated financial statements.

6

---

# TierOne Corporation
and Subsidiaries  Consolidated Statements of Cash Flows (Unaudited)

|                                                                                          | For the Six Months Ended
June 30,
|----------------------------------------------------------------------------------------- | ---------------------------------
|
|Cash flows from operating activities:                                                     |                                  
|Net loss                                                                                  |                                  
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                  
|Net premium amortization (discount accretion) of                                          |                                  
|investment and mortgage-backed securities                                                 |                                  
|Premises and equipment depreciation and amortization                                      |                                  
|Amortization of other intangible assets                                                   |                                  
|Accretion of discount on FHLBank Topeka advances                                          |                                  
|Employee Stock Ownership Plan compensation expense                                        |                                  
|2003 Management Recognition and Retention Plan compensation expense                       |                                  
|2003 Stock Option Plan compensation expense                                               |                                  
|Net amortization of premiums (accretion of discounts) on net loans                        |                                  
|FHLBank Topeka stock dividend                                                             |                                  
|Deferred income tax expense (benefit)                                                     |                                  
|Goodwill impairment                                                                       |                                  
|Impairment of investment securities                                                       |                                  
|Provision for loan losses                                                                 |                                  
|Provision for other real estate owned losses                                              |                                  
|Provision for valuation allowance on net deferred tax assets                              |                                  
|Mortgage servicing rights originated, net                                                 |                                  
|Mortgage servicing rights valuation allowance                                             |                                  
|Proceeds from sales of loans held for sale                                                |                                  
|Originations and purchases of loans held for sale                                         |                                  
|Excess tax expense from stock-based compensation plans                                    |                                  
|Net (gain) loss on sales of:                                                              |                                  
|Loans held for sale                                                                       |                                  
|Other real estate owned                                                                   |                                  
|Premises and equipment                                                                    |                                  
|Changes in certain assets and liabilities:                                                |                                  
|Accrued interest receivable                                                               |                                  
|Other assets                                                                              |                                  
|Accrued interest payable                                                                  |                                  
|Accrued expenses and other liabilities                                                    |                                  
|                                                                                         
|Net cash provided by operating activities                                                 |                                  
|                                                                                         
|Cash flows from investing activities:                                                     |                                  
|Purchase of investment and mortgage-backed securities, available for sale                 |                                  
|Proceeds from maturities of investment securities, available for sale                     |                                  
|Proceeds from principal repayments of investment and mortgage-backed                      |                                  
|securities, available for sale and held to maturity                                       |                                  
|Decrease in loans receivable                                                              |                                  
|Redemption of FHLBank Topeka stock                                                        |                                  
|Additions to premises and equipment                                                       |                                  
|Proceeds from sale of premises and equipment                                              |                                  
|Proceeds from sale of other real estate owned and repossessed assets                      |                                  
|                                                                                         
|Net cash provided by investing activities                                                 |                                  
|                                                                                         

See accompanying notes to
consolidated financial statements.

7

---

# TierOne Corporation
and SubsidiariesConsolidated Statements of Cash Flows (continued) (Unaudited)

|                                                                               | For the Six Months Ended
June 30,
|------------------------------------------------------------------------------ | ---------------------------------
|
|Cash flows from financing activities:                                          |                                  
|Net decrease in deposits                                                       |                                  
|Net advances (repayments) on FHLBank Topeka line of credit, short-term         |                                  
|advances and other borrowings                                                  |                                  
|Repayments of FHLBank Topeka long-term advances and other borrowings           |                                  
|Net increase in advances from borrowers for taxes, insurance and               |                                  
|other escrow funds                                                             |                                  
|Repurchase of common stock                                                     |                                  
|Dividends paid on common stock                                                 |                                  
|Excess tax expense from stock-based compensation plans                         |                                  
|Proceeds from the exercise of stock options                                    |                                  
|                                                                              
|Net cash used in financing activities                                          |                                  
|                                                                              
|Net increase (decrease) in cash and cash equivalents                           |                                  
|Cash and cash equivalents at beginning of period                               |                                  
|                                                                              
|Cash and cash equivalents at end of period                                     |                                  
|                                                                              
|Supplemental disclosures of cash flow information:                             |                                  
|Cash paid during period for:                                                   |                                  
|Interest                                                                       |                                  
|Income taxes, net of refunds                                                   |                                  
|                                                                              
|Noncash investing activities:                                                  |                                  
|Transfers from loans to real estate owned and other assets through foreclosure |                                  
|Loss on impairment of securities                                               |                                  
|                                                                              

See accompanying notes to
consolidated financial statements.

8

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 1  Basis of
Presentation and Consolidation

TierOne
Corporation (Company) is a Wisconsin corporation headquartered in Lincoln,
Nebraska. TierOne Corporation is the holding company for TierOne Bank (Bank).
The Bank has two wholly owned subsidiaries, TMS Corporation of the Americas
(TMS) and United Farm & Ranch Management, Inc. (UFARM). TMS is
the holding company of TierOne Investments and Insurance, Inc. (d/b/a TierOne Financial),
a wholly owned subsidiary that administers the sale of securities and insurance products,
and TierOne Reinsurance Company, a wholly owned subsidiary that reinsures credit life and
disability insurance policies. UFARM provides agricultural customers with professional
farm and ranch management services. The accompanying unaudited consolidated financial
statements include the accounts of the Bank and its wholly owned subsidiaries.

The
assets of the Company, on an unconsolidated basis, primarily consist of 100% of the
Banks common stock. The Company has no significant independent source of income and
therefore depends on cash distributions from the Bank to meet its funding requirements.

The
accompanying interim consolidated financial statements as of June 30, 2009 and for the
three and six months ended June 30, 2009 and 2008 are unaudited. All significant
intercompany accounts and transactions have been eliminated in consolidation. In the
opinion of management, the accompanying unaudited consolidated financial statements
contain all adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation of the financial position and operating results for interim periods.
The unaudited consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles (GAAP) for interim financial
information, in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X
promulgated by the Securities and Exchange Commission (SEC), and do not
include all of the information and notes required for complete, audited financial
statements. The unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in our
Annual Report on Form 10-K for the year ended December 31, 2008. The results of operations
for the three and six months ended June 30, 2009 are not necessarily indicative of the
results which may be expected for the entire calendar year 2009.

We
have reviewed subsequent events occurring through August 10, 2009, which represents the date of the filing of the financial statements
with the SEC, and no subsequent events occurred requiring accrual or disclosure.

As
used in this report, unless the context otherwise requires, the terms we,
us, or our refer to the Company and the Bank.

9

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 2  Earnings
Per Share

Basic
earnings (loss) per share (EPS) is computed by dividing net income (loss) by
the weighted average number of common shares outstanding for each reporting period.
Diluted EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised. Diluted earnings per share is computed
after giving consideration to the weighted average dilutive effect of our 2003 Stock
Option Plan shares and 2003 Management Recognition and Retention Plan shares. All stock
options are assumed to be 100% vested for purposes of EPS computations. Due to our net
loss for the three and six month periods ended June 30, 2009 and 2008, no potentially
dilutive shares were included in the loss per share calculations since including such
shares would be anti-dilutive. The following table is a reconciliation of basic and
diluted EPS:

|                                                       | For the Three Months Ended June 30,
|------------------------------------------------------ | -----------------------------------
|
|
|Net loss                                               |                                    
|                                                      
|Total weighted average basic common shares outstanding |                                    
|Effect of dilutive securities:                         |                                    
|2003 Stock Option Plan                                 |                                    
|2003 Management Recognition and Retention Plan         |                                    
|                                                      
|Total weighted average basic and diluted               |                                    
|common shares outstanding                              |                                    
|                                                      
|Net loss per common share                              |                                    
|                                                      

|                                                       | For the Six Months Ended June 30,
|------------------------------------------------------ | ---------------------------------
|
|
|Net loss                                               |                                  
|                                                      
|Total weighted average basic common shares outstanding |                                  
|Effect of dilutive securities:                         |                                  
|2003 Stock Option Plan                                 |                                  
|2003 Management Recognition and Retention Plan         |                                  
|                                                      
|Total weighted average basic and diluted               |                                  
|common shares outstanding                              |                                  
|                                                      
|Net loss per common share                              |                                  
|                                                      

10

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 3  Investment
and Mortgage-Backed Securities

Investment
Security Composition. The amortized cost, gross unrealized gains and losses and fair value
of investment and mortgage-backed securities by major security category at June 30, 2009
and December 31, 2008 are as follows:

|                                        | June 30, 2009
|--------------------------------------- | -------------
|
|
|Held to maturity:                       |              
|Municipal obligations                   |              
|                                       
|Available for sale:                     |              
|Mortgage-backed securities              |              
|United States Government securities and |              
|agency obligations                      |              
|Corporate securities                    |              
|Municipal obligations                   |              
|Agency equity securities                |              
|Asset Management Fund - ARM Fund        |              
|                                       
|Total investment and mortgage-backed    |              
|securities, available for sale          |              
|                                       

|                                        | December 31, 2008
|--------------------------------------- | -----------------
|
|
|Held to maturity:                       |                  
|Municipal obligations                   |                  
|                                       
|Available for sale:                     |                  
|Mortgage-backed securities              |                  
|United States Government securities and |                  
|agency obligations                      |                  
|Corporate securities                    |                  
|Municipal obligations                   |                  
|Agency equity securities                |                  
|Asset Management Fund - ARM Fund        |                  
|                                       
|Total investment and mortgage-backed    |                  
|securities, available for sale          |                  
|                                       

Unrealized
 Losses.  The summary of  available-for-sale  investment and  mortgage-backed  securities
 shows that some of the  securities  in the  available-for-sale  portfolio  had
 unrealized  losses,  or were  temporarily impaired,  as of June 30, 2009 and December 31,
 2008.  This temporary  impairment  represents the estimated amount of loss that  would
be  realized  if the  securities  were  sold on the  valuation  date.   Securities  which
 were temporarily impaired are shown below, along with the length of the impairment
period.

|                                      | Less than 12 Months | 12 Months or Longer | Total
|------------------------------------- | ------------------- | ------------------- | -----
|
|At June 30, 2009:                     |                     |                     |      
|U.S. Government securities and        |                     |                    
|agency obligations                    |                     |                     | $    
|Corporate securities                  |                     |                     |      
|Municipal obligations                 |                     |                     |      
|Asset Management Fund - ARM Fund      |                     |                     |      
|Mortgage-backed securities            |                     |                     |      
|                                     
|Total temporarily impaired securities |                     |                     | $    
|                                     
|At December 31, 2008:                 |                     |                    
|U.S. Government securities and        |                     |                    
|agency obligations                    |                     |                     | $    
|Corporate securities                  |                     |                     |      
|Municipal obligations                 |                     |                     |      
|Asset Management Fund - ARM Fund      |                     |                     |      
|Mortgage-backed securities            |                     |                     |      
|                                     
|Total temporarily impaired securities |                     |                     | $    
|                                     

We
do not believe that the  investment  securities  that were in an unrealized  loss
position at June 30, 2009 represent  an  other-than-temporary  impairment.  Total gross
 unrealized  losses were  primarily  attributable  to changes  in  interest  rates and
 levels of market  liquidity,  relative  to when the  investment  securities  were
purchased,  and not due to the credit quality of the investment  securities.  We had two
securities with unrealized losses  totaling  $106,000 for 12 consecutive  months or
longer as of June 30, 2009. The unrealized  losses at June 30,  2009 are  believed to be
 temporarily  impaired  in value.  Impairment  is deemed  temporary  if the  positive
evidence  indicating that an investments  carrying amount is recoverable within a
reasonable time period outweighs negative  evidence to the  contrary.  At June 30,  2009,
 we had the  ability  and intent to hold these  securities until  maturity or for the
period  necessary to recover the unrealized  losses.  Losses on impairment of securities
totaled zero and $594,000 for both of the three- and six-month periods ended June 30,
2009 and 2008, respectively.

Contractual
Maturities. The table below presents an analysis of the contractual maturities of our
investment securities at June 30, 2009. Actual maturities may differ from the contractual
maturities because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties. Mortgage-backed securities are disclosed separately
in the table below as these investments may prepay prior to their scheduled contractual
maturity dates.

|                                               | Gross Unrealized
|---------------------------------------------- | ----------------
|
|Held to maturity:                              |                 
|Due after one year through five years          |                 
|                                              
|Available for sale:                            |                 
|Due in one year or less                        |                 
|Due after one year through five years          |                 
|Due after five years through ten years         |                 
|Due after ten years                            |                 
|                                              
|Total available for sale investment securities |                 
|                                              
|Mortgage-backed securities                     |                 
|                                              

11

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 4  Loans
Receivable

Loan
Portfolio Composition.  Loans receivable at June 30, 2009 and December 31, 2008
are summarized in the following table:

|                                                                                                    | June 30, 2009 | December 31, 2008
|--------------------------------------------------------------------------------------------------- | ------------- | -----------------
|
|Real estate loans:                                                                                  |               |                  
|One-to-four family residential (1)                                                                  |               |                  
|Second mortgage residential                                                                         |               |                  
|Multi-family residential                                                                            |               |                  
|Commercial real estate                                                                              |               |                  
|Land and land development                                                                           |               |                  
|Residential construction                                                                            |               |                  
|Commercial construction                                                                             |               |                  
|Agriculture                                                                                         |               |                  
|                                                                                                   
|Total real estate loans                                                                             |               |                  
|                                                                                                   
|Business                                                                                            |               |                  
|                                                                                                   
|Agriculture - operating                                                                             |               |                  
|                                                                                                   
|Warehouse mortgage lines of credit                                                                  |               |                  
|                                                                                                   
|Consumer loans:                                                                                     |               |                  
|Home equity                                                                                         |               |                  
|Home equity lines of credit                                                                         |               |                  
|Home improvement                                                                                    |               |                  
|Automobile                                                                                          |               |                  
|Other                                                                                               |               |                  
|                                                                                                   
|Total consumer loans                                                                                |               |                  
|                                                                                                   
|Total loans                                                                                         |               |                  
|                                                                                                   
|Unamortized premiums, discounts and                                                                 |               |                  
|deferred loan fees                                                                                  |               |                  
|Loans in process (2)                                                                                |               |                  
|                                                                                                   
|Net loans                                                                                           |               |                  
|Allowance for loan losses                                                                           |               |                  
|                                                                                                   
|Net loans after allowance for loan losses                                                           |               |                  
|                                                                                                   
|(1) Includes loans held for sale                                                                    |               |                  
|                                                                                                   
|(2) Loans in process represents the undisbursed portion of construction and land development loans. |               |                  
|                                                                                                   

12

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 5  Goodwill
and Other Intangible Assets

Goodwill.          We
recorded goodwill as a result of our 2004 acquisition of United Nebraska
          Financial Co. (UNFC). In accordance with Statement of Financial
          Accounting Standard (SFAS) No. 142, Goodwill and Other
Intangible           Assets, we tested this goodwill for impairment annually during
the third           quarter of each year, or between annual assessment dates whenever
events or           significant changes in circumstances indicated that the carrying value
may be           impaired. We performed a goodwill impairment test as of March 31, 2008
due to           adverse changes in the business climate. As a result of a decline in the
market           value of our common stock to levels below our book value, we determined
that the           entire amount of our goodwill was impaired, and we recorded a $42.1
million           goodwill impairment charge to write-off our goodwill at March 31, 2008.

Other
Intangible Assets. Our only identifiable other intangible asset is the
value of core deposits acquired as part of the UNFC and Marine Bank transactions. The core
deposit intangible assets have been estimated to have nine- to ten-year lives. Core
deposit intangible assets are amortized using an accelerated method of amortization which
is recorded in other operating expense.

Other
Intangible Asset Activity. The changes in the carrying amount of acquired
intangible assets for the three and six months ended June 30, 2009 and 2008 are as
follows:

|                               | Three Months Ended June 30, | Six Months Ended June 30,
|------------------------------ | --------------------------- | -------------------------
|
|Balance at beginning of period |                             |                          
|Amortization expense           |                             |                          
|                              
|Balance at end of period       |                             |                          
|                              

Other
Intangible Asset Estimated Amortization. Estimated amortization expense
related to our core deposit intangible assets for the year ending December 31, 2009 and
the five years thereafter are as follows:

|(Dollars in thousands)                              | 
|--------------------------------------------------- | 
|Estimated Amortization Expense For the Year Ending: | 
|December 31, 2009                                   | 
|December 31, 2010                                   | 
|December 31, 2011                                   | 
|December 31, 2012                                   | 
|December 31, 2013                                   | 
|December 31, 2014                                   | 
|                                                   

13

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 6  Mortgage
Servicing Rights

In
accordance with SFAS No. 156, we utilize the amortization method for all of our mortgage
servicing right assets. Therefore, we carry our mortgage servicing rights at the
lower of cost or market (fair value). Under the amortization method, we
amortize mortgage servicing rights in proportion to and over the period of net servicing
income. Income generated as a result of newly acquired servicing assets is reported as net
gain on sale of loans held for sale in the Consolidated Statements of Operations. Loan servicing fees,
net of amortization of mortgage servicing rights, are recorded in fees and service charges
in the Consolidated Statements of Operations.

We
primarily service one-to-four family residential mortgage loans. We obtain mortgage
servicing right assets when we deliver loans, both originated and purchased, as an
agent into the secondary market on a servicing-retained basis. Initial fair value of
the servicing right is calculated by a discounted cash flow model based on market value
assumptions at the time of origination.

The
following are the key assumptions used in measuring the fair values of capitalized
mortgage servicing rights and the sensitivity of the fair values to changes in those
assumptions:

|(Dollars in thousands)             | June 30, 2009   | December 31, 2008
|---------------------------------- | --------------- | -----------------
|Serviced loan portfolio balance    | $1,885,792      | $1,600,715       
|Fair value                         | $19,403         | $15,853          
|Prepayment speed                   | 4.07% - 48.62%  | 5.34% - 49.44%   
|Weighted average prepayment speed  | 13.50%          | 13.57%           
|Fair value with 10% adverse change | $18,810         | $15,302          
|Fair value with 20% adverse change | $17,901         | $14,671          
|Discount rate                      | 10.00% - 13.50% | 10.50% - 14.50%  
|Weighted average discount rate     | 10.64%          | 11.76%           
|Fair value with 10% adverse change | $19,084         | $15,302          
|Fair value with 20% adverse change | $18,431         | $14,870          
|                                  

The
sensitivity of the fair values is hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a variation in assumptions generally
cannot be extrapolated because the relationship of the change in assumptions to the change
in fair value may not be linear. Also, in the table, the effect of a variation in a
particular assumption on the fair value of the mortgage servicing rights is calculated
without changing any other assumption. In reality, changes in one assumption may result in
changes in another that might magnify or counteract the sensitivities.

14

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

Mortgage
 Servicing Rights Activity.  The following table summarizes  mortgage  servicing
rights activity  including  amortization expense:

|                                      | Three Months Ended
June 30, | Six Months Ended
June 30,
|------------------------------------- | --------------------------- | -------------------------
|
|Balance at beginning of period        |                             |                          
|Mortgage servicing rights capitalized |                             |                          
|Amortization expense                  |                             |                          
|Valuation adjustment                  |                             |                          
|                                     
|Balance at end of period              |                             |                          
|                                     

Mortgage
 Servicing  Rights  Valuation  Allowance.  The  valuation  allowance on mortgage
 servicing  rights is  summarized in the following table for the periods presented:

|                                                | Three Months Ended
June 30, | Six Months Ended
June 30,
|----------------------------------------------- | --------------------------- | -------------------------
|
|Balance at beginning of period                  |                             |                          
|Changes in mortgage servicing valuation reserve |                             |                          
|                                               
|Balance at end of period                        |                             |                          
|                                               

We
evaluate the fair value of mortgage servicing rights on a quarterly basis using current
prepayment speeds, cash flow and discount rate estimates. Changes in these estimates
impact fair value and could require us to record a valuation allowance or recovery. The
amortization expense and valuation adjustment are recorded as a reduction of fees and
service charges in the accompanying Consolidated Statements of Operations.

15

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 7  Deposits

Deposit
Composition.  Deposits at June 30, 2009 and December 31, 2008 are summarized in
the following table:

|                                                                                      | June 30, 2009 | December 31, 2008
|------------------------------------------------------------------------------------- | ------------- | -----------------
|
|Transaction accounts:                                                                 |               |                  
|Noninterest-bearing checking                                                          |               |                  
|Savings                                                                               |               |                  
|Interest-bearing checking                                                             |               |                  
|Money market                                                                          |               |                  
|                                                                                     
|Total transaction accounts                                                            |               |                  
|                                                                                     
|Total transaction accounts as a                                                       |               |                  
|percentage of total deposits                                                          |               |                  
|                                                                                     
|Time deposits:                                                                        |               |                  
|0.00% to 0.99%                                                                        |               |                  
|1.00% to 1.99%                                                                        |               |                  
|2.00% to 2.99%                                                                        |               |                  
|3.00% to 3.99%                                                                        |               |                  
|4.00% to 4.99%                                                                        |               |                  
|5.00% to 5.99%                                                                        |               |                  
|                                                                                     
|Total time deposits (1)                                                               |               |                  
|                                                                                     
|Total time deposits as a                                                              |               |                  
|percentage of total deposits                                                          |               |                  
|                                                                                     
|Total deposits                                                                        |               |                  
|                                                                                     
|(1) We did not have any brokered time deposits at June 30, 2009 or December 31, 2008.
|                                                                                     

Time
Deposit Maturity.  The scheduled maturities of time deposits at June 30, 2009 are
presented in the following table:

|(Dollars in thousands)                       | Amount | Percent
|-------------------------------------------- | ------ | -------
|Amount Maturing During the 12 Months Ending: |        |        
|June 30, 2010                                |        |        
|June 30, 2011                                |        |        
|June 30, 2012                                |        |        
|June 30, 2013                                |        |        
|June 30, 2014                                |        |        
|Thereafter                                   |        |        
|                                            
|Total time deposits                          |        |        
|                                            

16

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

Time
Deposits of $100,000 or More.The following table shows the maturities of
our time deposits of $100,000 or more at June 30, 2009 by the time remaining to maturity.

|(Dollars in thousands)                    | Amount | Weighted Average Rate
|----------------------------------------- | ------ | ---------------------
|Amount Maturing During the Quarter Ended: |        |                      
|September 30, 2009                        |        |                      
|December 31, 2009                         |        |                      
|March 31, 2010                            |        |                      
|June 30, 2010                             |        |                      
|Thereafter                                |        |                      
|                                         
|Total time deposits of $100,000 or more   |        |                      
|                                         

Time
Deposits of $250,000 or More. The Emergency Economic Stabilization Act
of 2008 included a provision that temporarily raises the Federal Deposit Insurance Corporation (FDIC) insurance coverage limit
on non-retirement accounts from $100,000 to $250,000 per account holder per institution.
This increase in the insurance coverage limit is effective until December 31, 2013. The
following table shows the maturities of our time deposits of $250,000 or more at June 30,
2009 by the time remaining to maturity.

|(Dollars in thousands)                    | Amount | Weighted Average Rate
|----------------------------------------- | ------ | ---------------------
|Amount Maturing During the Quarter Ended: |        |                      
|September 30, 2009                        |        |                      
|December 31, 2009                         |        |                      
|March 31, 2010                            |        |                      
|June 30, 2010                             |        |                      
|Thereafter                                |        |                      
|                                         
|Total time deposits of $250,000 or more   |        |                      
|                                         

17

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 8  FHLBank
Topeka Advances and Other Borrowings

At
June 30, 2009 and December 31, 2008, we were indebted on notes as shown in the following
table:

|(Dollars in thousands)                  | June 30, 2009 | December 31, 2008
|--------------------------------------- | ------------- | -----------------
|Permanent fixed-rate notes payable to   |               |                  
|the FHLBank Topeka                      |               |                  
|Convertible fixed-rate notes payable to |               |                  
|the FHLBank Topeka                      |               |                  
|Retail repurchase agreements            |               |                  
|Junior subordinated debentures          |               |                  
|                                       
|Total FHLBank Topeka advances and       |               |                  
|other borrowings                        |               |                  
|                                       
|Weighted average interest rate          |               |                  
|                                       

The
convertible fixed-rate notes are convertible to adjustable-rate notes at the option of the
FHLBank Topeka (FHLBank). We did not have an outstanding balance on our
FHLBank line of credit at both June 30, 2009 and December 31, 2008. The line of credit
with the FHLBank expires in November 2009. We expect the line of credit agreement to be
renewed in the ordinary course of business.

Pursuant
to our collateral agreement with the FHLBank, such advances are secured by our qualifying
residential, multi-family residential and commercial real estate mortgages, residential
construction, commercial construction and agricultural real estate loans. Our borrowing
capacity with the FHLBank at June 30, 2009 was $556.4 million. Other qualifying collateral
can be pledged in the event additional borrowing capacity is required.

Our
retail repurchase agreements are primarily collateralized by governmental agency and
municipal obligations (investment securities).

18

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 9 
Stock-Based Benefit Plans

General.          We
account for our stock-based benefit plans using SFAS No. 123(R), Share-Based Payment (SFAS
No. 123(R)). SFAS No. 123(R)           requires that compensation expense related
to stock-based payment transactions           be recognized in the financial statements
and that expense be measured based on           the fair value of the equity or liability
instrument issued. SFAS No. 123(R)           also requires that forfeitures be estimated
over the vesting period of the           instrument.

Stock-Based
Employee Compensation Expense. Amounts recognized in the financial
statements with respect to our Employee Stock Ownership Plan (ESOP) and
stock-based employee compensation plans are presented in the following table:

|                                                | Three Months Ended June 30, | Six Months Ended June 30,
|----------------------------------------------- | --------------------------- | -------------------------
|
|Stock-based employee compensation expense:      |                             |                          
|Employee Stock Ownership Plan                   |                             |                          
|Management Recognition and Retention Plan       |                             |                          
|2003 Stock Option Plan                          |                             |                          
|                                               
|Amount of stock-based compensation expense,     |                             |                          
|before income tax benefit                       |                             |                          
|                                               
|Amount of related income tax benefit recognized |                             |                          
|                                               

Employee
Stock Ownership Plan.Concurrent with the conversion from mutual to stock
ownership, we established an ESOP for the benefit of our employees. The ESOP is a
qualified pension plan under Internal Revenue Service guidelines that covers all full-time
employees who have completed 1,000 hours of service. Upon formation, the ESOP
purchased 1,806,006 shares of common stock issued in the initial public offering with the
proceeds of an $18,060,060 loan from the Company.

We
account for our ESOP in accordance with Financial Accounting Standards Board
(FASB) Statement of Position 93-6, Employers Accounting for Employee
Stock Ownership Plans. Accordingly, expense is recognized based on the market value
(average stock price) of shares scheduled to be released from the ESOP trust. The excess
fair value of ESOP shares over cost is recorded as compensation expense but is not
deductible for tax purposes. As shares are committed to be released from collateral, we
report compensation expense equal to the average market price of the shares and the shares
become outstanding for EPS computations. Our contributions and dividends on allocated and
unallocated ESOP shares are used to pay down the loan. Accordingly, we have recorded the
obligation with an offsetting amount of unearned compensation in stockholders equity
in the accompanying Consolidated Statements of Financial Condition.

19

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

|                                                               | At or for the
Three Months Ended
June 30, | At or for the
Six Months Ended
June 30,
|-------------------------------------------------------------- | ----------------------------------------- | ---------------------------------------
|
|Employee Stock Ownership Plan compensation expense             |                                           |                                        
|Employee Stock Ownership Plan shares allocated to employees    |                                           |                                        
|Employee Stock Ownership Plan shares unallocated               |                                           |                                        
|Fair value of Employee Stock Ownership Plan unallocated shares |                                           |                                        
|                                                              

Management
Recognition and Retention Plan. We established the 2003 Management Recognition and
Retention Plan (MRRP) which is a stock-based incentive plan. The shares
awarded by the MRRP vest to participants at the rate of 20% per year. Compensation expense
for this plan is being recorded over a 60-month period, using the straight-line
amortization method adjusted for forfeitures, and is based on the market value of our
stock as of the date the awards were made. Stockholders approved 903,003 shares to be
granted under the MRRP and 85,283 shares are still available for future grants as of June
30, 2009. The following table summarizes shares of our common stock that were subject to
award and have been granted pursuant to the MRRP as of June 30, 2009 and 2008:

|                                                    | At or for the
Three Months Ended
June 30, | At or for the
Six Months Ended
June 30,
|--------------------------------------------------- | ----------------------------------------- | ---------------------------------------
|
|Nonvested shares outstanding at beginning of period |                                           |                                        
|Shares granted                                      |                                           |                                        
|Shares vested                                       |                                           |                                        
|Shares forfeited                                    |                                           |                                        
|                                                   
|Nonvested shares outstanding at end of period       |                                           |                                        
|                                                   

Compensation
expense related to the MRRP totaled $50,000 and $228,000 for the three month periods ended
June 30, 2009 and 2008, respectively. Compensation expense related to the MRRP totaled
$99,000 and $954,000 for the six month periods ended June 30, 2009 and 2008, respectively.
The weighted average grant date fair value of outstanding shares awarded by the MRRP was
$13.23 and $20.37 at June 30, 2009 and 2008, respectively. As of June 30, 2009, we had
$175,000 of total unrecognized employee compensation expense related to unvested MRRP
shares which are expected to be recognized over a weighted average period of 29 months. We
realized excess tax benefits related to MRRP shares of zero and $10,000 during the three
months ended June 30, 2009 and 2008, respectively. We realized excess tax benefits related
to MRRP shares of zero and $10,000 during the six months ended June 30, 2009 and 2008,
respectively.

20

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

Stock
Option Plan. We established the 2003 Stock Option Plan (SOP)
under which 2,257,508 shares of our common stock were reserved for the grant of stock
options to directors, officers and employees. Stock options awarded under the SOP vest to
participants at the rate of 20% per year. Compensation expense for this plan is being
recorded over a 60-month period, using the straight-line amortization method adjusted for
forfeitures, and is based on the fair value of our stock options as of the date the awards
were made. The exercise price of the options is equal to the market price of the common
stock on the grant date. Stockholders approved 2,257,508 stock options to be granted under
the SOP and 349,758 of these stock options remain available for future grants as of June
30, 2009.

The
fair value of each option was estimated on the date of the grant using the Black-Scholes
model. The dividend yield was calculated based on the annual dividends paid and the
12-month average closing stock price at the time of the grant. Expected volatility was
based on historical volatility of our stock price at the date of grant. We have utilized
historical experience to determine the expected life of the stock options and to estimate
future forfeitures. All inputs into the Black-Scholes model are estimates at the time of
the grant. Actual results in the future could materially differ from these estimates;
however, such results would not impact future reported net income.

Stock
Option Activity. The following table details stock options granted,
exercised and forfeited during the three months ended June 30, 2009:

|(Dollars in thousands, except per share data) | Number of Shares | Weighted Average Exercise Price | Weighted Average RemainingContractual Term(In Years) | AggregateIntrinsicValue
|--------------------------------------------- | ---------------- | ------------------------------- | ---------------------------------------------------- | -----------------------
|Stock options outstanding at March 31, 2009   |                  |                                 |                                                      | 1,798,726              
|Stock options granted                         |                  |                                 |                                                      | --                     
|Stock options exercised                       |                  |                                 |                                                      | --                     
|Stock options forfeited                       |                  |                                 |                                                      | --                     
|                                             
|Stock options outstanding at June 30, 2009    |                  |                                 |                                                      | 1,798,726              
|                                             
|Stock options exercisable at June 30, 2009    |                  |                                 |                                                      | 1,781,726              
|                                             

21

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

The
following table details stock options granted, exercised and forfeited during the three
months ended June 30, 2008:

|(Dollars in thousands, except per share data) | Number of Shares | Weighted Average Exercise Price | Weighted Average RemainingContractual Term(In Years) | AggregateIntrinsicValue
|--------------------------------------------- | ---------------- | ------------------------------- | ---------------------------------------------------- | -----------------------
|Stock options outstanding at March 31, 2008   |                  |                                 |                                                      | 1,790,726              
|Stock options granted                         |                  |                                 |                                                      | --                     
|Stock options exercised                       |                  |                                 |                                                      | --                     
|Stock options forfeited                       |                  |                                 |                                                      | --                     
|                                             
|Stock options outstanding at June 30, 2008    |                  |                                 |                                                      | 1,790,726              
|                                             
|Stock options exercisable at June 30, 2008    |                  |                                 |                                                      | 1,776,726              
|                                             

The
following table details stock options granted, exercised and forfeited during the six
months ended June 30, 2009:

|(Dollars in thousands, except per share data)  | Number of Shares | Weighted Average Exercise Price | Weighted Average RemainingContractual Term(In Years) | AggregateIntrinsicValue
|---------------------------------------------- | ---------------- | ------------------------------- | ---------------------------------------------------- | -----------------------
|Stock options outstanding at December 31, 2008 |                  |                                 |                                                      | 1,799,726              
|Stock options granted                          |                  |                                 |                                                      | --                     
|Stock options exercised                        |                  |                                 |                                                      | --                     
|Stock options forfeited                        |                  |                                 |                                                      | (1,000                 
|                                              
|Stock options outstanding at June 30, 2009     |                  |                                 |                                                      | 1,798,726              
|                                              
|Stock options exercisable at June 30, 2009     |                  |                                 |                                                      | 1,781,726              
|                                              

The
following table details stock options granted, exercised and forfeited during the six
months ended June 30, 2008:

|(Dollars in thousands, except per share data)  | Number of Shares | Weighted Average Exercise Price | Weighted Average RemainingContractual Term(In Years) | AggregateIntrinsicValue
|---------------------------------------------- | ---------------- | ------------------------------- | ---------------------------------------------------- | -----------------------
|Stock options outstanding at December 31, 2007 |                  |                                 |                                                      | 1,792,226              
|Stock options granted                          |                  |                                 |                                                      | --                     
|Stock options exercised                        |                  |                                 |                                                      | (1,000                 
|Stock options forfeited                        |                  |                                 |                                                      | (500                   
|                                              
|Stock options outstanding at June 30, 2008     |                  |                                 |                                                      | 1,790,726              
|                                              
|Stock options exercisable at June 30, 2008     |                  |                                 |                                                      | 1,776,726              
|                                              

22

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

The
following table details the intrinsic value, cash received and tax benefit realized from
the exercise of stock options during the three and six months ended June 30, 2009 and
2008:

|                                     | Three Months Ended
June 30, | Six Months Ended
June 30,
|------------------------------------ | --------------------------- | -------------------------
|
|Intrinsic value (market value on the |                             |                          
|exercise date less the strike price) |                             |                          
|Cash received from the exercise of   |                             |                          
|stock options                        |                             |                          
|Tax benefit realized from the        |                             |                          
|exercise of stock options            |                             |                          
|                                    

At
June 30, 2009, there was $38,000 of total unrecognized compensation expense related to
unvested stock options that will be expensed over a weighted average period of 34 months.

23

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 10 
Unrecognized Tax Benefits

Unrecognized
tax benefits, excluding interest and penalties, were $173,000 and $737,000 at June 30,
2009 and 2008, respectively. Unrecognized tax benefits of $170,000 and interest and
penalties of $3,000 would favorably affect our effective tax rate if recognized in future
periods. The following table summarizes our unrecognized tax benefits for the six months
ended June 30, 2009 and 2008:

|                                                                                   | Six Months Ended
June 30,
|---------------------------------------------------------------------------------- | -------------------------
|
|Unrecognized tax benefits at beginning of period                                   |                          
|Change in unrecognized tax benefits                                                |                          
|Changes in unrecognized tax benefits related to deferred loan fees due to a change |                          
|in a tax accounting method approved by the Internal Revenue Service                |                          
|                                                                                  
|Unrecognized tax benefits at end of period                                         |                          
|                                                                                  

Any
interest and penalties related to uncertain tax positions are recorded in income tax
expense in the Consolidated Statements of Operations. At June 30, 2009 and 2008, we had
approximately $3,000 and $87,000, respectively, of accrued interest payable related to
uncertain tax positions recorded in our Consolidated Statements of Financial Condition.

We
anticipate that a reduction in unrecognized tax benefits of up to $32,000 is reasonably
possible during the next 12 months. This potential reduction is primarily attributable to
the expiration of the statute of limitations related to the 2005 tax period.

The
tax years of 2005 through 2008 remain open for examination by federal and state taxing
authorities.

# Note 11  Deferred
Taxes

In
assessing the realizability of our deferred tax assets, we consider whether it is more
likely than not that some portion or all of the deferred tax assets will be realized. We
consider the scheduled reversals of deferred tax liabilities and carryback opportunities
in making the assessment of the necessity of a valuation allowance. At June 30, 2009 and
December 31, 2008, the Company determined a valuation allowance was necessary, largely
based on the evidence represented by a cumulative loss in the most recent three-year
period. In addition, general uncertainty surrounding future economic and business
conditions has increased the potential volatility and uncertainty of projected earnings.
Other assets include net deferred tax benefits of $11.6 million and $1.8 million at June 30,
2009 and December 31, 2008, respectively. We have established a valuation allowance
related to our net deferred tax benefits of $11.6 million and $1.8 million at June 30, 2009
and December 31, 2008, respectively. We evaluate our deferred tax assets and the related
valuation allowance quarterly.

24

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

# Note 12  Fair
Value Measurements

On
January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements, (SFAS No.
157) and SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities, (SFAS No. 159). SFAS No. 157 defines fair value, establishes
a framework for measuring fair value in GAAP and expands disclosure related to the use of
fair value measures in financial statements. SFAS No. 157 establishes a fair value
hierarchy from observable market data as the highest level to fair value based on the
entitys own fair value assumption as the lowest level.

SFAS
No. 159 allows us to choose to measure eligible items at fair value at specified election
dates. Unrealized gains and losses on items for which the fair value measurement option
has been elected are reported in earnings at each subsequent reporting date. The fair
value option: (a) may be applied instrument by instrument, with certain exceptions, thus
we may record identical financial assets and liabilities at fair value or by another
measurement basis permitted under generally accepted accounting principals; (b) is
irrevocable (unless a new election date occurs); and (c) is applied only to entire
instruments and not to portions of instruments.

In
accordance with SFAS No. 157, we group financial assets and financial liabilities measured
at fair value in three levels, based on the markets in which the assets and liabilities
are traded and the reliability of the assumption used to determine fair value. The fair
value hierarchy is as follows:

| | Level 1  | Quoted prices for identical assets or liabilities in active markets that the
entity has the ability to access as of the measurement date.
| | --------- | -----------------------------------------------------------------------------------------------------------------------------------------

| | Level 2  | Significant other observable inputs other than Level 1 prices, such as quoted
prices for similar assets or liabilities, quoted prices in markets that are not active
and other inputs that are observable or can be corroborated by observable market data.
| | --------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level 3  | Significant unobservable inputs that reflect an entitys own assumption about
the assumptions that market participants would use in pricing an asset or liability.
| | --------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
general, fair value is based upon quoted market prices, where available. If such quoted
market prices are not available, fair value is based upon internally developed models that
primarily use, as inputs, observable market-based parameters. Valuation adjustments may be
made to ensure that financial instruments are recorded at fair value. These adjustments
may include amounts that reflect counterparty credit quality and creditworthiness, among
other things, as well as unobservable parameters. Any such valuation adjustments are
applied consistently over time. Our valuation methodologies may produce a fair value
calculation that may not be indicative of net realizable value or reflective of future
fair values. While management believes our valuation methodologies are appropriate and
consistent with other market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial instruments could result in a
different estimate of fair value at the reporting date.

A
description of the valuation methodologies used for instruments measured at fair value, as
well as the general classification of such instruments pursuant to the valuation
hierarchy, is set forth below.

25

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

The
following is a description of our valuation methodologies used for instruments measured at
fair value on a recurring basis:

Investment
Securities, Available for Sale. This portfolio comprises the majority of
the assets which we record at fair value. Securities classified as available for sale,
which include U.S. Government securities and agency obligations and corporate securities
are priced utilizing observable data from an active market. These measurements are
classified as Level 1. Changes in the fair value of available for sale investment
securities are included in other comprehensive income (loss) to the extent the changes are
not considered other than temporary impairments. Other than temporary impairment tests are
performed on a quarterly basis and any decline in the fair value of an individual security
below its cost that is deemed to be other than temporary results in a write-down to
estimated fair value. These write-downs are reflected in our Statement of Operations as
loss on impairment of securities. Losses on impairment of securities totaled zero and
$594,000 for both of the three and six month periods ended June 30, 2009 and 2008,
respectively.

Municipal
obligations, mortgage-backed securities and agency equity securities are valued using a
type of matrix, or grid, pricing in which securities are benchmarked against the treasury
rate based on credit rating. These model and matrix measurements are classified as
Level 2 in the fair value hierarchy.

The
Asset Management Fund  ARM Funds Net Asset Value (NAV) or fair
value is an accumulation of the estimated fair value of the debt instruments owned by the
fund. The debt instruments are valued using market quotations or prices obtained from
independent pricing services or, on certain securities, a fixed income fair value pricing
methodology. The NAV is classified as Level 2 in the fair value hierarchy.

Assets
Held in Employee Deferred Compensation Plans. Assets held in employee
deferred compensation plans are recorded at fair value and included in other assets on our
Statement of Financial Condition. The assets associated with these plans are invested
primarily in mutual funds and classified as Level 1 as the fair value measurement is based
upon available quoted prices. We also record a liability in accrued expenses and other
liabilities in our Statement of Financial Condition for the amount due to employees
related to these plans.

Derivatives. Our derivative instruments are loan commitments and forward loan
          sales related to personal mortgage loan origination activity. The fair values
of           mortgage loan commitments and forward sales contracts are based on quoted
prices           for similar loans in the secondary market. The fair value of derivatives
is           classified as Level 2. The net fair value of derivatives was $2.0
million           and $2.3 million at June 30, 2009 and December 31, 2008, respectively. The derivative
          mark-to-market gains are recorded in other assets while the derivative
          mark-to-market losses are recorded in accrued expenses and other liabilities in
          the Consolidated Statements of Financial Condition. The $253,000 decline in the
          fair value for the six months ended June 30, 2009 was included in the gain on the sale of loans in the accompanying
          Consolidated Statements of Operations. The decrease in the fair value was
          primarily related to an $88.1 million decrease in forward loan commitments at
          June 30, 2009 compared to December 31, 2008 and was due to increased mortgage
          loan refinancing activity.

26

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

The
following table summarizes financial assets and financial liabilities measured at fair
value on a recurring basis as of June 30, 2009, segregated by the level of the valuation
inputs within the fair value hierarchy.

|(Dollars in thousands)                              | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Fair Value atJune 30, 2009
|--------------------------------------------------- | -------------- | -------------- | -------------- | --------------------------
|Securities, available for sale:                     |                |                |                |                           
|Mortgage-backed securities                          |                |                | $              | --                        
|U.S. Government securities and                      |                |               
|agency obligations                                  |                |                |                | 89,129                    
|Corporate securities                                |                |                |                | 3,430                     
|Municipal obligations                               |                |                |                | --                        
|Agency equity securities                            |                |                |                | --                        
|Asset Management Fund - ARM Fund                    |                |                |                | --                        
|                                                   
|Total investment securities, available for sale     |                |                |                | 92,559                    
|                                                   
|Assets held in employee deferred compensation plans |                |                |                | 1,282                     
|                                                   
|SFAS No. 133 derivatives:                           |                |               
|Loan commitments                                    |                |                |                | --                        
|Forward loan sales                                  |                |                |                | --                        
|                                                   
|Total SFAS No. 133 derivatives                      |                |                |                | --                        
|                                                   
|Total assets measured at fair value                 |                |                | $              | 93,841                    
|                                                   

The
following is a description of our valuation methodologies used for other financial
instruments measured at fair value on a nonrecurring basis. Except as noted below for
impaired loans, no fair value adjustments on these instruments were recognized in the
current period.

Loans
Receivable / Impaired Loans. We do not record loans at their fair value on
a recurring basis. However, we evaluate loans for impairment when it is probable the
payment of interest and principal will not be made in accordance with the contractual
terms of the loan agreement. Once a loan has been determined to be impaired, it is
measured to establish the amount of impairment, if any, based on the present value of
expected future cash flows discounted at the loans effective interest rate, except
that collateral-dependent loans may be measured for impairment based on the fair value of
the collateral, less costs to sell. If the measure of the impaired loan is less than the
recorded investment in the loan, a valuation allowance or loan charge-off is recognized.
In determining the value of real estate collateral, we rely on external appraisals and
assessment of property values by our internal staff. In the case of non-real estate
collateral, reliance is placed on a variety of sources, including external estimates of
value and judgments based on the experience and expertise of internal specialists. Because
many of these inputs are not observable, the measurements are classified as Level 3.
The carrying value of these impaired loans was $289.1 million and $185.9 million at
June 30, 2009 and December 31, 2008, respectively. Impaired loans at June 30, 2009 and December 31, 2008 have been reduced
by charge-offs totaling $52.3 million and $40.1 million, respectively. The allowance for loan losses related
to impaired loans was $17.9 million and $16.4 million at June 30, 2009 and December 31,
2008, respectively.

27

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

The
Bank identified $40.6 million of loans which were less than 90 days past due that have
been classified as impaired. We determined that the fair value of the collateral was
insufficient to cover the outstanding principal and interest at June 30, 2009. As a result
of this determination, $455,000 of accrued interest receivable was fully reserved at June
30, 2009.

Loans
Held for Sale. Loans held for sale are carried at the lower of cost or market
value. The portfolio consists primarily of fixed rate single-family residential real
estate loans.

Single-family
residential real estate loan measurements are based on quoted market prices for similar
loans in the secondary market. These measurements are classified as Level 2 as they
utilize quoted market prices for similar assets in an active market.

FHLBank
Topeka Stock.At June 30, 2009, we held $39.7 million of FHLBank
stock which represents our carrying value which is approximately equal to fair value. Fair
value measurements for these securities are classified as Level 3 based on their
undeliverable nature related to credit risk.

Mortgage
Servicing Rights.We initially measure our mortgage servicing rights at
fair value, and amortize them over the period of estimated net servicing income. They are
periodically assessed for impairment based on fair value at the reporting date. Mortgage
servicing rights do not trade in an active market with readily observable prices.
Accordingly, the fair value is estimated based on a valuation model which calculates the
present value of estimated future net servicing income. The model incorporates assumptions
that market participants use in estimating future net servicing income, including
estimates of prepayment speeds, market discount rates, cost to service, float earnings
rates and other ancillary income, including late fees. The fair value measurements are
classified as Level 3. A valuation allowance of $1.1 million was recorded as a
reduction of fees and services charges during the six months ended June 30, 2009. The
valuation allowance was $2.5 million and $1.4 million at June 30, 2009 and December 31,
2008, respectively.

28

---

TierOne Corporation and
Subsidiaries  Notes to Consolidated Financial Statements (Unaudited)

Carrying
and Fair Value of Financial Instruments. The estimated fair values of our
financial instruments at June 30, 2009 and December 31, 2008 are presented in the
following table. Since the fair value of forward loan sales, loan purchase commitments and
loan origination commitments are not significant, these disclosures are not included in
this table.

|                            | At June 30, 2009 | At December 31, 2008
|--------------------------- | ---------------- | --------------------
|
|Financial assets:           |                  |                     
|Cash and cash equivalents   |                  |                     
|Investment securities       |                  |                     
|Mortgage-backed securities  |                  |                     
|Net loans after allowance   |                  |                     
|for loan losses             |                  |                     
|Accrued interest receivable |                  |                     
|FHLBank Topeka stock        |                  |                     
|Financial liabilities:      |                  |                     
|Deposits                    |                  |                     
|FHLBank Topeka advances     |                  |                     
|and other borrowings        |                  |                     
|Advances from borrowers for |                  |                     
|taxes, insurance and other  |                  |                     
|escrow funds                |                  |                     
|Accrued interest payable    |                  |                     

Limitations.          The
fair value of a financial instrument is the current amount that would be
          exchanged between willing parties, other than in a forced liquidation. Fair
          value is best determined based upon quoted market prices. However, in many
          instances, there are no quoted market prices for various financial instruments.
          In cases where quoted market prices are not available, fair values are based on
          estimates using present value or other valuation techniques. Those techniques
          are significantly affected by the assumptions used, including the discount rate
          and estimates of future cash flows. Accordingly, the fair value estimates may
          not be realized in an immediate settlement of the instrument.           SFAS No. 107,
Disclosures About Fair Value of Financial           Instruments, excludes
certain financial instruments and all           nonfinancial instruments from its
disclosure requirements. Accordingly, the           aggregate fair value amounts
presented may not necessarily represent the           underlying fair value of the
Company.

29

---

# Item 2 - Managements
Discussion and Analysis of Financial Condition and Results of      Operations.

The
following is a discussion and analysis of TierOne Corporations (Company)
financial condition and results of operations, including information on the Companys
critical accounting policies, asset/liability management, liquidity and capital resources
and contractual obligations. Information contained in this Managements Discussion
and Analysis should be read in conjunction with the disclosure regarding Forward-Looking
Statements and the risk factors described in Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2008.

# General

TierOne
Bank (Bank), a subsidiary of the Company, is a $3.2 billion federally
chartered stock savings bank headquartered in Lincoln, Nebraska. Established in 1907, the
Bank offers customers a wide variety of full-service consumer, commercial and agricultural
banking products and services through a network of 69 banking offices located in Nebraska,
Iowa and Kansas. Product offerings include residential, commercial and agricultural real
estate loans; consumer, construction, business and agricultural operating loans; warehouse
mortgage lines of credit; consumer and business checking and savings plans; investment and
insurance services; and telephone and internet banking.

Our
results of operations are dependent primarily on net interest income, which is the
difference between the interest earned on our assets and our cost of funds. Our results of
operations are also affected by our provision for loan losses, noninterest income,
noninterest expense and income tax expense (benefit). Noninterest income generally
includes fees and service charges, debit card fees, net income (loss) from real estate
operations, net gain on sales of investment securities, loans held for sale and other real
estate owned and other operating income. Noninterest expense consists of salaries and
employee benefits, occupancy, data processing, advertising, Federal Deposit Insurance
Corporation (FDIC)  insurance premium, legal services and other operating expense. Our results of
operations are significantly affected by general economic and competitive conditions,
particularly changes in market interest rates and U.S. Treasury yield curves, governmental
policies and actions of regulatory authorities.

As
used in this report, unless the context otherwise requires, the terms we,
us, or our refer to the Company and the Bank.

30

---

# Recent Developments

Regulatory
Developments.On January 15, 2009, the Bank entered into a supervisory
agreement with the Office of Thrift Supervision (OTS), the Banks primary
federal regulator, in response to regulatory concerns raised in the Banks most
recent regulatory examination by the OTS and to address the current economic environment
facing the banking and financial industry. The agreement requires, among other things:

| |  | The
review, and where appropriate, revisions to or adoption of: (a) loan policies, procedures
and reporting; (b) credit administration and underwriting; (c) asset classification; (d)
allowance for loan and lease losses; and (e) internal asset review;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Enhanced
management oversight including restrictions on changes in compensation arrangements; and
| | - | -------------------------------------------------------------------------------------------------

| |  | Strengthening
the Banks capital position, including a requirement that the Bank maintain a
minimum core capital ratio of 8.5% and a minimum total risk-based capital ratio of 11.0%.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The supervisory agreement also
prohibits capital distributions by the Bank and the acceptance of brokered deposits. The
Company agreed to maintain the Banks regulatory capital (at the levels described
above) as well as to not pay dividends on its common stock, make payments on its trust
preferred securities or repurchase any shares of its common stock until the OTS issues a
written notice of non-objection. The supervisory agreement will remain in effect until
modified, suspended or terminated by the OTS. The Bank has fulfilled all of the
obligations set forth in the supervisory agreement and continues to comply with the
ongoing reporting requirements. The foregoing information does not purport to be a
complete summary of the supervisory agreement and is qualified in its entirety by
reference to the supervisory agreement filed as Exhibit 10.24 to our Annual Report on Form
10-K for the year ended December 31, 2008.

Board
of Director Appointments. On July 22, 2009, we announced that the Company
has expanded its Board of Directors and has appointed James E. McClurg, Ph.D and James W.
Strand to serve in the two newly created Board positions. Both Dr. McClurg and Mr. Strand
were also appointed as directors of the Bank.  Dr.           McClurg will serve  for
          a term expiring at the Companys 2011 annual meeting and Mr. Strand will serve
          for a term expiring at the Companys 2012 annual           meeting.

31

---

# Critical Accounting
Policies

Various
elements of our accounting policies, by nature, are inherently subject to estimation
techniques, valuation assumptions and other subjective assessments. Our policies with
respect to the methodologies used to recognize income, determine the allowance for loan
losses, evaluating investment and mortgage-backed securities for impairment, evaluating
goodwill and other intangible assets, valuation of mortgage servicing rights, valuation
and measurement of derivatives and commitments, valuation of real estate owned and
estimating income taxes are our most critical accounting policies. These policies are
important to the presentation of our financial condition and results of operations,
involve a higher degree of complexity and require management to make difficult and
subjective judgments which often require assumptions or estimates about highly uncertain
matters. The use of different judgments, assumptions and estimates could result in
material differences in our reported financial condition and results of operations.

Income
Recognition. We recognize interest income by methods that conform to U.S.
generally accepted accounting principles (GAAP). In the event management
believes collection of all or a portion of contractual interest on a loan has become
doubtful, which generally occurs after a loan is contractually delinquent 90 days or more,
we discontinue the accrual of interest and charge-off all previously accrued interest.
Interest received on nonperforming loans is included in income only if principal recovery
is reasonably assured. A nonperforming loan is restored to accrual status when it is
brought current and the collectibility of the total contractual principal and interest is
no longer in doubt.

Allowance
for Loan Losses. We have identified the allowance for loan losses as a
critical accounting policy where amounts are subject to material variation. This policy is
significantly affected by our judgment and uncertainties and there is a likelihood that
materially different amounts could be reported under different, but reasonably plausible,
conditions or assumptions. The allowance for loan losses is considered a critical
accounting estimate because there is a large degree of judgment in:

| |  | Assigning
individual loans to specific risk levels (pass, special mention, substandard, doubtful
and loss);
| | - | -----------------------------------------------------------------------------------------------------------

32

---

| |  | Valuing
the underlying collateral securing the loans;
| | - | -----------------------------------------------------

| |  | Determining
the appropriate reserve factor to be applied to specific risk levels for special mention
loans and those adversely classified (substandard, doubtful and loss); and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Determining
reserve factors to be applied to pass loans based upon loan type.
| | - | -----------------------------------------------------------------------------

We
establish provisions for loan losses, which are charges to our operating results, in order
to maintain a level of total allowance for loan losses that, in managements belief,
covers all known and inherent losses that are both probable and reasonably estimable at
each reporting date. Management reviews the loan portfolio no less frequently than monthly
in order to identify those inherent losses and to assess the overall collection
probability of the loan portfolio. Managements review includes a quantitative
analysis by loan category, using historical loss experience, classifying loans pursuant to
a grading system and consideration of a series of qualitative loss factors. The evaluation
process includes, among other things:

| |  | Assigning
individual loans to specific risk levels (pass, special mention, substandard, doubtful
and loss);
| | - | -----------------------------------------------------------------------------------------------------------

| |  | Trends
and levels of delinquent, nonperforming or impaired loans;
| | - | -------------------------------------------------------------------

| |  | Trends
and levels of charge-offs and recoveries;
| | - | ------------------------------------------------

| |  | Underwriting
terms or guarantees for loans;
| | - | -------------------------------------------

| |  | Impact
of changes in underwriting standards, risk tolerances or other changes in lending
practices;
| | - | ---------------------------------------------------------------------------------------------------

| |  | Changes
in the value of collateral securing loans;
| | - | --------------------------------------------------

| |  | Total
loans outstanding and the volume of loan originations;
| | - | ------------------------------------------------------------

| |  | Type,
size, terms and geographic concentration of loans held;
| | - | -------------------------------------------------------------

| |  | Changes
in qualifications or experience of the lending staff;
| | - | -------------------------------------------------------------

| |  | Changes
in local or national economic or industry conditions;
| | - | -------------------------------------------------------------

| |  | Number
of loans requiring heightened management oversight;
| | - | ----------------------------------------------------------

| |  | Changes
in credit concentration; and
| | - | ------------------------------------

| |  | Changes
in regulatory requirements.
| | - | -----------------------------------

In addition, we use information about
specific borrower situations, including their financial position, work-out plans and
estimated collateral values under various liquidation scenarios to estimate the risk and
amount of potential loss.

This
evaluation is inherently subjective as it requires estimates that are susceptible to
significant revision as more information becomes available or as future events occur.

33

---

The
allowance for loan losses has two elements. The first element is an allocated allowance
established for specific loans identified by the credit review function that are evaluated
individually for impairment and are considered to be impaired. A loan is considered
impaired when, based on current information and events, it is probable that we will be
unable to collect the scheduled payments of principal and interest when due according to
the contractual terms of the loan agreement. Impairment is measured by:

| |  | The
fair value of the collateral if the loan is collateral dependent;
| | - | ---------------------------------------------------------------------

| |  | The
present value of expected future cash flows; or
| | - | ---------------------------------------------------

| |  | The
loans observable market price.
| | - | -----------------------------------

The second element is an estimated
allowance established for losses which are probable and reasonable to estimate on each
category of outstanding loans. While management uses available information to recognize
probable losses on loans inherent in the portfolio, future additions to the allowance may
be necessary based on changes in economic conditions and other factors. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review our allowance for loan losses. Such agencies may require us to
recognize additions to the allowance based on their judgment of information available to
them at the time of their examination.

Investment
and Mortgage-Backed Securities. We evaluate our available for sale and held
to maturity investment securities for impairment on a quarterly basis. An impairment
charge in the Consolidated Statements of Operations is recognized when the decline in the
fair value of investment securities below their cost basis is determined to be
other-than-temporary. Various factors are utilized in determining whether we should record
an impairment charge, including, but not limited to, the length of time and extent to
which the fair value has been less than its cost basis and our ability and intent to hold
the investment security for a period of time sufficient to allow for any anticipated
recovery in fair value.

Mortgage
Servicing Rights.On January 1, 2007 we adopted Statement of Financial
Accounting Standard (SFAS) No. 156, Accounting for Servicing of Financial
Assets  an Amendment of FASB Statement No. 140(SFAS No. 156). In
accordance with SFAS No. 156, we utilize the amortization method for all of our mortgage
servicing right assets, thus, carrying our mortgage servicing rights at the lower of
cost or market (fair value). Under the amortization method, we amortize mortgage
servicing rights in proportion to and over the period of net servicing income. Income
generated as a result of new servicing assets is reported as net gain on sale of loans
held for sale in the Consolidated Statements of Operations. Loan servicing fees, net of
amortization of mortgage servicing rights, is recorded in fees and service charges in the
Consolidated Statements of Operations.

We
capitalize the estimated value of mortgage servicing rights upon the sale of loans. The
estimated value takes into consideration contractually known amounts, such as loan
balance, term and interest rate. These estimates are impacted by loan prepayment speeds,
servicing costs and discount rates used to compute a present value of the cash flow
stream. We evaluate the fair value of mortgage servicing rights on a quarterly basis using
current prepayment speed, cash flow and discount rate estimates. Changes in these
estimates impact fair value and could require us to record a valuation allowance or
recovery. The fair value of mortgage servicing rights is highly sensitive to changes in
assumptions. Changes in prepayment speed assumptions have the most significant impact on
the fair value of mortgage servicing rights. Generally, as interest rates decline,
prepayments accelerate with increased refinance activity, which results in a decrease in
the fair value of mortgage servicing rights. As interest rates rise, prepayments generally
slow, which results in an increase in the fair value of mortgage servicing rights. All
assumptions are reviewed for reasonableness on a quarterly basis and adjusted as necessary
to reflect current and anticipated market conditions. Thus, any measurement of fair value
is limited by the conditions existing and the assumptions utilized as of a particular
point in time, and those assumptions may not be appropriate if applied at a different
point in time. We currently do not utilize direct financial hedges to mitigate the effect
of changes in the fair value of our mortgage servicing rights.

34

---

Derivatives
and Commitments.We account for our derivatives and hedging activities in
accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activity, as amended by SFAS No. 138, Accounting for Certain Derivative Instruments
and Certain Hedging Activities and SFAS No. 149, Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities.

In
the normal course of business, we enter into contractual commitments, including loan
commitments and rate lock commitments, to extend credit to finance residential mortgages.
These commitments, which contain fixed expiration dates, offer the borrower an interest
rate guarantee provided the loan meets underwriting guidelines and closes within the time
frame established by us. Interest rate risk arises on these commitments and subsequently
closed loans if interest rates increase or decrease between the time of the interest rate
lock and the delivery of the loan to the investor. Loan commitments related to mortgage
loans that are intended to be sold are considered derivatives in accordance with the
guidance of SEC Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at
Fair Value Through Earnings. Accordingly, the fair value of these derivatives at the
end of the reporting period is based on a quoted market price that closely approximates
the amount that would have been recognized if the loan commitment was funded and sold.

To
mitigate the effect of interest rate risk inherent in providing loan commitments, we hedge
our commitments by entering into mandatory or best efforts delivery forward sale
contracts. These forward contracts are marked-to-market through earnings and are not
designated as accounting hedges under SFAS No. 133. The change in the fair value of loan
commitments and the change in the fair value of forward sales contracts generally move in
opposite directions and, accordingly, the impact of changes in these valuations on net
income during the loan commitment period is generally inconsequential.

Although
the forward loan sale contracts also serve as an economic hedge of loans held for sale,
forward contracts have not been designated as accounting hedges under SFAS No. 133 and,
accordingly, loans held for sale are accounted for at the lower of cost or market in
accordance with SFAS No. 65, Accounting for Certain Mortgage Banking Activities.

Other
Real Estate Owned and Repossessed Assets. Property and other assets
acquired through foreclosure of defaulted mortgage or other collateralized loans are
carried at the lower of cost or fair value, less estimated costs to sell the property and
other assets. The fair value of other real estate owned is generally determined from
appraisals obtained by independent appraisers. Development and improvement costs relating
to such property are capitalized to the extent they are deemed to be recoverable.

35

---

An
allowance for losses on other real estate owned and repossessed assets is intended to
include amounts for estimated losses as a result of impairment in value of real property
after repossession. We review our other real estate owned for impairment in value whenever
events or circumstances indicate that the carrying value of the property or other assets
may not be recoverable.

Income
Taxes. We estimate income taxes payable based on the amount we expect to
owe various tax authorities. Accrued income taxes represent the net estimated amount due
to, or to be received from, taxing authorities. In estimating accrued income taxes, we
assess the relative merits and risks of the appropriate tax treatment of transactions,
taking into account the applicable statutory, judicial and regulatory guidance in the
context of our tax position. Although we utilize current information to record income
taxes, underlying assumptions may change over time as a result of unanticipated events or
circumstances.

In
assessing the realizability of our deferred tax assets, we consider whether it is more
likely than not that some portion or all of the deferred tax assets will be realized. We
consider the scheduled reversals of deferred tax liabilities and carryback opportunities
in making the assessment of the necessity of a valuation allowance.

Financial
Accounting Standards Board (FASB) Interpretation No. 48, Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109
(FIN 48) requires that we determine whether a tax position is more likely than
not to be sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. Once it is determined
that a position meets the recognition threshold, the position is measured to determine the
amount of benefit to be recognized in the financial statements. Any interest and penalties
related to uncertain tax positions are recorded in income tax expense in the Consolidated
Statements of Operations.

# Comparison of Financial
Condition at June 30, 2009 and December 31, 2008

# Assets

General.          Our
total assets were $3.2 billion at June 30, 2009, a decrease of $157.4           million,
or 4.7%, compared to $3.3 billion at December 31, 2008.

Cash
and Cash Equivalents. Our cash and cash equivalents totaled $285.4 million
at June 30, 2009, an increase of $35.5 million, or 14.2%, compared to $249.9 million at
December 31, 2008. The increase was primarily attributable to loan repayments which were
partially offset by repayment of FHLBank Topeka (FHLBank) advances and deposit
outflows.

Investment
Securities. Our available for sale investment securities totaled $102.2
million at June 30, 2009, a decrease of $35.4 million, or 25.7%, compared to $137.7
million at December 31, 2008. During the six months ended June 30, 2009, maturities of
investment securities totaled $123.3 million which were partially offset by security
purchases of $88.2 million. The securities purchased during 2009 were primarily agency
obligations that were purchased to collateralize deposits.

36

---

Mortgage-Backed
Securities. Our mortgage-backed securities, all of which are recorded as
available for sale, totaled $6.9 million at June 30, 2009, an increase of $3.7 million, or
119.1%, compared to $3.1 million at December 31, 2008. The increase in our mortgage-backed
securities was the result of a $5.9 million security purchase partially offset by $2.1
million of principal payments received during the six months ended June 30, 2009.

Loans
Receivable. Net loans totaled $2.6 billion at June 30, 2009, a decrease of
$176.2 million, or 6.3%, compared to $2.8 billion at December 31, 2008. The decrease in
net loans at June 30, 2009 was primarily attributable to a decrease in loan originations
related to our tightening of credit policies and our reduction of exposure in selected
business lines and geographic markets due to the continued deterioration in these real
estate markets and the economy in general. The following table details the composition of
our loan portfolio at the dates indicated:

|(Dollars in thousands)                                                                              | June 30, 2009 | December 31, 2008 | Increase (Decrease) | % Change 
|--------------------------------------------------------------------------------------------------- | ------------- | ----------------- | ------------------- | ---------
|One-to-four family residential (1)                                                                  |               |                   | $                   | 352,576  
|Second mortgage residential                                                                         |               |                   |                     | 67,680   
|Multi-family residential                                                                            |               |                   |                     | 207,638  
|Commercial real estate                                                                              |               |                   |                     | 351,846  
|Land and land development                                                                           |               |                   |                     | 353,973  
|Residential construction                                                                            |               |                   |                     | 162,199  
|Commercial construction                                                                             |               |                   |                     | 308,691  
|Agriculture - real estate                                                                           |               |                   |                     | 86,142   
|Business                                                                                            |               |                   |                     | 245,389  
|Agriculture - operating                                                                             |               |                   |                     | 80,241   
|Warehouse mortgage lines of credit                                                                  |               |                   |                     | 158,813  
|Consumer                                                                                            |               |                   |                     | 347,894  
|                                                                                                   
|Total loans                                                                                         |               |                   |                     | 2,723,082
|                                                                                                   
|Unamortized premiums, discounts                                                                     |               |                  
|and deferred loan fees                                                                              |               |                   |                     | 9,129    
|Loans in process (2):                                                                               |               |                  
|Land and land development                                                                           |               |                   |                     | (40,352  
|Residential construction                                                                            |               |                   |                     | (18,551  
|Commercial construction                                                                             |               |                   |                     | (67,320  
|                                                                                                   
|Net loans                                                                                           |               |                   | $                   | 2,605,988
|                                                                                                   
|(1) Includes loans held for sale                                                                    |               |                   | $                   | 16,856   
|                                                                                                   
|(2) Loans in process represents the undisbursed portion of construction and land development loans.
|                                                                                                   

At
June 30, 2009, the outstanding balance (net of loans in process) of our residential
construction loans was $143.6 million, a decrease of $53.0 million, or 27.0%, compared to
$196.7 million at December 31, 2008. The outstanding balance (net of loans in process) of
our land and land development loans was $313.6 million at June 30, 2009, a decrease of
$32.2 million, or 9.3%, compared to $345.9 million at December 31, 2008. The outstanding
balance (net of loans in process) of our commercial construction loans was $241.4 million
at June 30, 2009, a decrease of $13.8 million, or 5.4%, compared to $255.1 million at
December 31, 2008.

37

---

Loan
 Portfolio  Activity.  The  following  table shows  total loans  originated,
 purchased,  sold and repaid  during the periods indicated:

|                                                                                                                | Three Months Ended June 30, | Six Months Ended June 30,
|--------------------------------------------------------------------------------------------------------------- | --------------------------- | -------------------------
|
|Net loans after allowance for loan                                                                              |                             |                          
|losses at beginning of period                                                                                   |                             |                          
|                                                                                                               
|Loan originations:                                                                                              |                             |                          
|One-to-four family residential                                                                                  |                             |                          
|Second mortgage residential                                                                                     |                             |                          
|Multi-family residential                                                                                        |                             |                          
|Commercial real estate                                                                                          |                             |                          
|Land and land development                                                                                       |                             |                          
|Residential construction                                                                                        |                             |                          
|Commercial construction                                                                                         |                             |                          
|Agriculture - real estate                                                                                       |                             |                          
|Business                                                                                                        |                             |                          
|Agriculture - operating                                                                                         |                             |                          
|Warehouse mortgage lines of credit (1)                                                                          |                             |                          
|Consumer                                                                                                        |                             |                          
|                                                                                                               
|Total loan originations                                                                                         |                             |                          
|                                                                                                               
|Loan purchases:                                                                                                 |                             |                          
|One-to-four family residential (2)                                                                              |                             |                          
|Second mortgage residential                                                                                     |                             |                          
|Residential construction                                                                                        |                             |                          
|Commercial construction                                                                                         |                             |                          
|Agriculture - real estate                                                                                       |                             |                          
|Business                                                                                                        |                             |                          
|Agriculture - operating                                                                                         |                             |                          
|Consumer                                                                                                        |                             |                          
|                                                                                                               
|Total loan purchases                                                                                            |                             |                          
|                                                                                                               
|Total loan originations and purchases                                                                           |                             |                          
|                                                                                                               
|Sales and loan principal repayments:                                                                            |                             |                          
|Loan sales:                                                                                                     |                             |                          
|One-to-four family residential                                                                                  |                             |                          
|Land and land development                                                                                       |                             |                          
|Residential construction                                                                                        |                             |                          
|Consumer                                                                                                        |                             |                          
|Loan principal reductions:                                                                                      |                             |                          
|Real estate, business, agriculture-                                                                             |                             |                          
|operating and consumer                                                                                          |                             |                          
|Warehouse mortgage lines of credit (1)                                                                          |                             |                          
|                                                                                                               
|Total loan sales and principal repayments                                                                       |                             |                          
|                                                                                                               
|Increase due to other items (3)                                                                                 |                             |                          
|                                                                                                               
|Net loans after allowance for loan losses at end of period                                                      |                             |                          
|                                                                                                               
|(1) Reflects amounts advanced and repaid under such lines of credit during the periods presented.              
|(2) Substantially all of these fixed-rate loans were acquired from loan correspondents and mortgage brokers    
|and sold to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation              
|or the FHLBank Topeka with servicing retained.                                                                 
|(3) Other items consist of loans in process, unamortized premiums, discounts and deferred loan fees and changes
|in the allowance for loan losses.                                                                              
|                                                                                                               

38

---

Redefining
our Primary Lending Market Area.On June 30, 2008 we announced the closing
of all nine of our loan production offices in an effort to focus our lending activity in
our primary market area of Nebraska, Iowa and Kansas.

Total
 Loans by State.  The following  table details the  concentration  of our total loan
 portfolio by state at the dates indicated:

|(Dollars in thousands)                            | At June 30, 2009 | % | At December 31, 2008 | %         | At June 30, 2008 | %
|------------------------------------------------- | ---------------- | - | -------------------- | --------- | ---------------- | -
|Within Nebraska, Iowa and Kansas:                 |                  |   |                      |           |                  |  
|Nebraska                                          |                  |   | $                    | 1,285,035 |                  |  
|Iowa                                              |                  |   |                      | 120,890   |                  |  
|Kansas                                            |                  |   |                      | 80,825    |                  |  
|                                                 
|Total within Nebraska, Iowa and Kansas            |                  |   |                      | 1,486,750 |                  |  
|                                                 
|Within Former Loan Production Office States:      |                  |  
|Nevada                                            |                  |   |                      | 157,213   |                  |  
|Colorado                                          |                  |   |                      | 158,591   |                  |  
|Arizona                                           |                  |   |                      | 132,626   |                  |  
|Minnesota                                         |                  |   |                      | 110,774   |                  |  
|North Carolina                                    |                  |   |                      | 51,241    |                  |  
|Florida                                           |                  |   |                      | 54,566    |                  |  
|                                                 
|Total within former loan production office states |                  |   |                      | 665,011   |                  |  
|                                                 
|Other States:                                     |                  |  
|South Carolina                                    |                  |   |                      | 49,093    |                  |  
|California                                        |                  |   |                      | 73,436    |                  |  
|Texas                                             |                  |   |                      | 74,884    |                  |  
|Illinois                                          |                  |   |                      | 50,182    |                  |  
|Oregon                                            |                  |   |                      | 30,024    |                  |  
|Washington                                        |                  |   |                      | 37,629    |                  |  
|Other States                                      |                  |   |                      | 256,073   |                  |  
|                                                 
|Total other states                                |                  |   |                      | 571,321   |                  |  
|                                                 
|Total loans                                       |                  |   | $                    | 2,723,082 |                  |  
|                                                 

39

---

Net
Loan Concentration by State and Type.The following table details the
concentration of our net loan portfolio by state and loan type at June 30, 2009:

|(Dollars in thousands)           | One-to-Four Family Residential | Second MortgageResidential | Multi-Family Residential | Land and Land Development | Commercial Real Estate | Residential Construction
|-------------------------------- | ------------------------------ | -------------------------- | ------------------------ | ------------------------- | ---------------------- | ------------------------
|Nebraska, Iowa and Kansas        |                                |                            | $                        | 194,003                   |                        | $                       
|Nevada                           |                                |                            |                          | 1,666                     |                        |                         
|Colorado                         |                                |                            |                          | 4,244                     |                        |                         
|Arizona                          |                                |                            |                          | 10,415                    |                        |                         
|Minnesota                        |                                |                            |                          | 9,833                     |                        |                         
|California                       |                                |                            |                          | 31,963                    |                        |                         
|Florida                          |                                |                            |                          | 30,995                    |                        |                         
|Texas                            |                                |                            |                          | 5,792                     |                        |                         
|South Carolina                   |                                |                            |                          | 911                       |                        |                         
|Missouri                         |                                |                            |                          | 6,599                     |                        |                         
|North Carolina                   |                                |                            |                          | 2,775                     |                        |                         
|Illinois                         |                                |                            |                          | 9,323                     |                        |                         
|Washington                       |                                |                            |                          | 1,440                     |                        |                         
|Oregon                           |                                |                            |                          | 544                       |                        |                         
|Ohio                             |                                |                            |                          | 1,461                     |                        |                         
|Arkansas                         |                                |                            |                          | 773                       |                        |                         
|All Other States                 |                                |                            |                          | 42,990                    |                        |                         
|                                
|Net loans at June 30, 2009       |                                |                            |                          | 355,727                   |                        |                         
|Net loans at December 31, 2008   |                                |                            |                          | 388,017                   |                        |                         
|                                
|Increase (decrease) in net loans |                                |                            | $                        | (32,290                   | )                      | $                       
|                                

|(Dollars in thousands)           | Commercial Construction | Agricultural | Business | Warehouse MortgageLines of Credit | Consumer | Net Loan Balance atJune 30,2009 | Net Loan Balance atDecember31, 2008 | Increase (Decrease) in Net Loans
|-------------------------------- | ----------------------- | ------------ | -------- | --------------------------------- | -------- | ------------------------------- | ----------------------------------- | --------------------------------
|Nebraska, Iowa and Kansas        |                         |              | $        | 68,531                            |          | $                               | 162,003                             |                                 
|Nevada                           |                         |              |          | 51,570                            |          |                                 | 618                                 |                                 
|Colorado                         |                         |              |          | 16,234                            |          |                                 | 149                                 |                                 
|Arizona                          |                         |              |          | 25,504                            |          |                                 | --                                  |                                 
|Minnesota                        |                         |              |          | 350                               |          |                                 | 29                                  |                                 
|California                       |                         |              |          | --                                |          |                                 | --                                  |                                 
|Florida                          |                         |              |          | --                                |          |                                 | 178                                 |                                 
|Texas                            |                         |              |          | 29,094                            |          |                                 | 963                                 |                                 
|South Carolina                   |                         |              |          | --                                |          |                                 | --                                  |                                 
|Missouri                         |                         |              |          | 14,953                            |          |                                 | 200                                 |                                 
|North Carolina                   |                         |              |          | 181                               |          |                                 | 156                                 |                                 
|Illinois                         |                         |              |          | 21,340                            |          |                                 | --                                  |                                 
|Washington                       |                         |              |          | --                                |          |                                 | 481                                 |                                 
|Oregon                           |                         |              |          | --                                |          |                                 | 458                                 |                                 
|Ohio                             |                         |              |          | --                                |          |                                 | --                                  |                                 
|Arkansas                         |                         |              |          | 13,266                            |          |                                 | --                                  |                                 
|All Other States                 |                         |              |          | --                                |          |                                 | 1,315                               |                                 
|                                
|Net loans at June 30, 2009       |                         |              |          | 241,023                           |          |                                 | 166,550                             |                                 
|Net loans at December 31, 2008   |                         |              |          | 254,643                           |          |                                 | 201,717                             |                                 
|                                
|Increase (decrease) in net loans |                         |              | $        | (13,620                           | )        | $                               | (35,167                             | )                               
|                                

40

---

# Loan Quality and
Nonperforming Assets

Reports
listing all delinquent loans (loans 30 or more days delinquent), classified assets and
other real estate owned are reviewed monthly by management and by our Board of Directors
as part of its regular board meetings. The procedures we take with respect to
delinquencies vary depending on the nature of the loan, period and cause of delinquency
and whether the borrower is habitually delinquent. When a borrower fails to make a
required payment on a loan, we take a number of steps to have the borrower cure the
delinquency and restore the loan to current status. In the event payment is not then
received or the loan not otherwise satisfied, collection letters are sent and telephone
calls are generally made. If the loan is still not brought current or satisfied and it
becomes necessary for us to take legal action, which typically occurs after a loan is 90
days or more delinquent, we will commence recovery proceedings against the property
securing the loan. If a legal action is instituted and the loan is not brought current,
paid in full, or refinanced before the recovery sale, the property securing the loan
generally is sold and, if purchased by us, becomes other real estate owned or a
repossessed asset.

During
2007 and 2008 and for the first six months of 2009, our levels of delinquent loans,
nonperforming loans (loans 90 or more days delinquent), impaired loans and other real
estate owned increased reflecting, among other factors, the deterioration in the
nations economic conditions. The real estate market has continued to decline in 2009
placing continued financial stress on customers, particularly those engaged in residential
development. The downturn in the residential housing market has greatly reduced demand and
market prices for developed residential lots and vacant land as well as completed homes.
Where there is reduced demand for new homes, certain residential developers may be
required to hold their properties for longer periods of time or be forced to sell their
properties at a significantly reduced price which may result in greater holding costs and
lower or deferred cash inflows. These factors have resulted in, and may continue to result
in, greater credit risks for lenders. Additionally, significantly tightened credit
standards have made it more difficult for potential borrowers to obtain financing and for
current borrowers to refinance existing loans.

Our
current levels of delinquent, nonperforming and impaired loans are primarily attributable
to the continued deterioration in the real estate market and the economy in general. We
have been further impacted by the erosion of property values and an overall increase in
housing inventory (both developed lots and completed houses) in many of the areas of the
country in which we do business and where the collateral for our loans resides. In
response to these conditions, we have tightened credit policies and reduced our exposure
in selected business lines and geographic markets.

41

---

Delinquent
 Loans.  The following  table shows loans  delinquent  30 - 89 days in our loan
 portfolio as of the dates indicated:

|(Dollars in thousands)           | June 30, 2009 | March 31, 2009 | December 31, 2008 | June 30, 2008
|-------------------------------- | ------------- | -------------- | ----------------- | -------------
|One-to-four family residential   |               |                | $                 | 5,871        
|Second mortgage residential      |               |                |                   | 1,512        
|Multi-family residential         |               |                |                   | 3,929        
|Commercial real estate           |               |                |                   | 1,005        
|Land and land development        |               |                |                   | 18,467       
|Residential construction         |               |                |                   | 11,192       
|Commercial construction          |               |                |                   | 340          
|Agriculture - real estate        |               |                |                   | 624          
|Business                         |               |                |                   | 2,404        
|Agriculture - operating          |               |                |                   | 373          
|Consumer                         |               |                |                   | 3,914        
|                                
|Total delinquent loans           |               |                | $                 | 49,631       
|                                
|Delinquent loans as a percentage |               |               
|of net loans before allowance    |               |               
|for loan losses                  |               |                |                   | 1.90         
|                                

The
decrease in delinquent loans at June 30, 2009 compared to
March 31, 2009 primarily resulted from the transfer of two Minnesota land development
loans and one Kansas City area condominium project from delinquent to nonperforming
status.

42

---

Nonperforming
Loans and Other Real Estate Owned.The following table sets forth information
regarding nonperforming loans (90 or more days delinquent), other real estate owned and
repossessed assets. It is our policy to cease accruing interest on loans contractually
delinquent 90 days or more and fully reserve all accrued interest. We did not have any
accruing loans 90 days or more past due at the dates shown.

|(Dollars in thousands)                                                                                         | June 30, 2009 | March 31, 2009 | December 31, 2008 | June 30, 2008
|-------------------------------------------------------------------------------------------------------------- | ------------- | -------------- | ----------------- | -------------
|Nonperforming loans:                                                                                           |               |                |                   |              
|One-to-four family residential                                                                                 |               |                | $                 | 15,595       
|Second mortgage residential                                                                                    |               |                |                   | 803          
|Multi-family residential                                                                                       |               |                |                   | 391          
|Commercial real estate                                                                                         |               |                |                   | 9,908        
|Land and land development                                                                                      |               |                |                   | 80,109       
|Residential construction                                                                                       |               |                |                   | 59,540       
|Commercial construction                                                                                        |               |                |                   | 37,284       
|Agriculture - real estate                                                                                      |               |                |                   | 342          
|Business                                                                                                       |               |                |                   | 1,335        
|Agriculture - operating                                                                                        |               |                |                   | 84           
|Consumer                                                                                                       |               |                |                   | 2,226        
|                                                                                                              
|Total nonperforming loans                                                                                      |               |                |                   | 207,617      
|Other real estate owned and                                                                                    |               |               
|repossessed assets, net (1)                                                                                    |               |                |                   | 68,265       
|                                                                                                              
|Total nonperforming assets                                                                                     |               |                |                   | 275,882      
|Troubled debt restructurings                                                                                   |               |                |                   | 62,077       
|                                                                                                              
|Total nonperforming assets and                                                                                 |               |               
|troubled debt restructurings                                                                                   |               |                | $                 | 337,959      
|                                                                                                              
|Total nonperforming loans as a                                                                                 |               |               
|percentage of net loans                                                                                        |               |                |                   | 7.97         
|                                                                                                              
|Total nonperforming assets as a                                                                                |               |               
|percentage of total assets                                                                                     |               |                |                   | 8.73         
|                                                                                                              
|Total nonperforming assets and                                                                                 |               |               
|troubled debt restructurings                                                                                   |               |               
|as a percentage of total assets                                                                                |               |                |                   | 10.69        
|                                                                                                              
|(1) Other real estate owned and repossessed assets balances are shown net of related loss allowances. Includes
|both real property and other repossessed collateral consisting primarily of automobiles.                      
|                                                                                                              

43

---

Delinquent and Nonperforming Loans by State.The following table details
our delinquent and nonperforming loans by state, on a net loan basis, as of June 30, 2009:

|(Dollars in thousands)                            | Net Loan Balance at June 30, 2009 | Loans 30 - 89 Days Delinquent | Nonperforming Loans | Total Delinquent and Nonperforming Loans
|------------------------------------------------- | --------------------------------- | ----------------------------- | ------------------- | ----------------------------------------
|Within Nebraska, Iowa and Kansas:                 |                                   |                               |                     |                                         
|Nebraska                                          |                                   |                               | $                   | 1,253,485                               
|Iowa                                              |                                   |                               |                     | 110,601                                 
|Kansas                                            |                                   |                               |                     | 66,679                                  
|                                                 
|Total within Nebraska, Iowa and Kansas            |                                   |                               |                     | 1,430,765                               
|                                                 
|Within Former Loan Production Office States:      |                                   |                              
|Nevada                                            |                                   |                               |                     | 143,454                                 
|Colorado                                          |                                   |                               |                     | 143,627                                 
|Arizona                                           |                                   |                               |                     | 120,244                                 
|Minnesota                                         |                                   |                               |                     | 109,751                                 
|Florida                                           |                                   |                               |                     | 54,225                                  
|North Carolina                                    |                                   |                               |                     | 48,211                                  
|                                                 
|Total within former loan production office states |                                   |                               |                     | 619,512                                 
|                                                 
|Other States:                                     |                                   |                              
|South Carolina                                    |                                   |                               |                     | 46,050                                  
|California                                        |                                   |                               |                     | 73,436                                  
|Texas                                             |                                   |                               |                     | 68,480                                  
|Illinois                                          |                                   |                               |                     | 37,487                                  
|Oregon                                            |                                   |                               |                     | 30,024                                  
|Washington                                        |                                   |                               |                     | 37,629                                  
|Other States                                      |                                   |                               |                     | 262,605                                 
|                                                 
|Total other states                                |                                   |                               |                     | 555,711                                 
|                                                 
|Total net loans                                   |                                   |                               | $                   | 2,605,988                               
|                                                 

Nonperforming
Loans. At June 30, 2009, our nonperforming loans totaled $207.6 million of which $50.1
million, or 24.1%, was secured by property located in our primary market area of Nebraska,
Iowa and Kansas. Former loan production office states had $131.5 million, or 63.3%, of
total nonperforming loans at June 30, 2009. Other states comprised the remaining $26.0
million, or 12.5%, of nonperforming loans at June 30, 2009.

The
change in the nonperforming loans was primarily attributable to the following:

| | Residential
Construction Loans.  At June 30, 2009, our nonperforming residential
construction loans totaled $59.5 million and consisted of 129 loans for residential
properties. At June 30, 2009, nonperforming residential construction loans consisted of
65 loans for properties located in South Carolina totaling $18.9 million, 24 loans for
properties located in North Carolina totaling $15.9 million, seven loans for properties
located in Nevada totaling $10.5 million, 10 loans for properties in Arizona totaling
$5.7 million, 16 loans for properties in Nebraska totaling $4.2 million and seven loans
for properties in other states totaling $4.4 million.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

44

---

| | Land
and Land Development. At June 30, 2009, nonperforming land development
loans totaled $80.1 million which consisted of 65 land development properties. At June
30, 2009, nonperforming land and land development loans primarily consisted of 11
residential properties in Nevada totaling $31.7 million, two residential properties in
Minnesota totaling $26.9 million, eight residential properties in Nebraska totaling $6.2
million, eight residential properties in Arizona totaling $5.1 million, three residential
properties in Colorado totaling $3.8 million, 14 residential properties in Florida
totaling $3.6 million and 15 residential properties in North Carolina totaling $2.2
million.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Commercial
Construction. Nonperforming commercial construction loans totaled $37.3
million at June 30, 2009. These loans are primarily secured by one condominium
development located in suburban Las Vegas and one condominium project located in a Kansas City suburb.
Construction to complete the first phase of the Las
Vegas property remains on schedule for an expected completion by late summer and any
remaining unsold units became available for sale in July. The Kansas City area project is
a 220-unit, multi-phase condominium development with all infrastructure and the first
phase already completed, phase two condo buildings nearing substantial completion and the
remaining portions of the project are currently underway. The Bank has entered into an
agreement with the borrower to renegotiate the loan terms allowing for continued
completion of the project and sale of individual condominium units.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Impaired
Loans. A loan is considered impaired when, based on current information and
events, it is probable that we will be unable to collect the scheduled payments of
principal and interest when due according to the contractual terms of the loan agreement.
Impairment is measured by: (a) the fair value of the collateral if the loan is collateral
dependent; (b) the present value of expected future cash flows; or (c) the loans
observable market price. Loans classified as impaired totaled $289.1 million and $185.9
million at June 30, 2009 and December 31, 2008, respectively. Our allowance for loan
losses related to impaired loans totaled $17.9 million and $16.4 million at June 30, 2009
and December 31, 2008, respectively. At June 30, 2009 we had $57.2 million of our total
$289.1 million of impaired loans for which no allowance for loan losses was deemed
necessary as the fair value of the collateral exceeded the carrying value of the impaired
loans. At December 31, 2008, we had $29.4 million of impaired loans for which no allowance
for loan losses was deemed necessary. Impaired loans at June 30, 2009 consisted primarily
of $137.8 million of land and land development loans, $72.0 million of residential
construction loans and $39.0 million of commercial construction loans.

Potential
Problem Loans. As part of our asset classification process, we identify
loans that carry relative levels of risk which may be considered higher than normal due to
possible deterioration of the borrowers financial condition or the value of the
underlying collateral. Since these loans remain performing in accordance with the terms of
the loan agreement, they are not included in impaired, delinquent or nonperforming loans
or troubled debt restructurings; however, management is aware of circumstances which may
raise concern as to the ability of the borrower to comply with present repayment terms.
These potential problem loans totaled $215.5 million and $285.6 million at June 30, 2009
and December 31, 2008, respectively, with the June 30, 2009 composition of loans primarily
consisting of $59.0 million of land and land development, $37.0 million of commercial
construction, $33.0 million of business, $31.8 million of multi-family loans and $26.4
million of commercial real estate loans. The decrease in potential problem loans from
December 31, 2008 was primarily the result of loans moving to nonperforming and other real estate owned status.

45

---

Other
Real Estate Owned and Repossessed Assets. When we acquire other real estate
owned property or other assets through foreclosure, deed in lieu of foreclosure or
repossession, it is initially recorded at the lower of the recorded investment in the
corresponding loan or the fair value of the related assets at the date of foreclosure,
less costs to sell. If there is a further deterioration in value, we record a loss
provision for other real estate owned for the decline in value. We generally obtain an
appraisal or brokers price opinion on all real estate subject to foreclosure
proceedings prior to the time of foreclosure.

Other
Real Estate Owned and Repossessed Assets Activity. The following table sets
forth the activity of our other real estate owned and repossessed assets for the periods
indicated:

|                                      | Three Months Ended June 30, | Six Months Ended June 30,
|------------------------------------- | --------------------------- | -------------------------
|
|Balance at beginning of period        |                             |                          
|Loan foreclosures and other additions |                             |                          
|Sales                                 |                             |                          
|Provisions for losses                 |                             |                          
|Net loss on disposal                  |                             |                          
|                                     
|Balance at end of period              |                             |                          
|                                     

At
June 30, 2009, other real estate owned and repossessed assets consisted primarily of 176
residential properties totaling $40.3 million and 10 commercial properties totaling $27.9
million. Our level of other real estate owned and repossessed assets may continue to
increase in future periods. Additionally, our holding period and provision for losses on
other real estate owned may increase in future periods due to continued deterioration of
the real estate market and the economy in general.

46

---

Allowance
for Loan Losses.The activity in the allowance for loan losses during the three
and six months ended June 30, 2009 and 2008 is summarized in the
following table:

|                                                 | At or for the Three Months Ended
June 30, | At or for the Six Months Ended
June 30,
|------------------------------------------------ | ----------------------------------------- | ---------------------------------------
|
|Allowance for loan losses at beginning of period |                                           |                                        
|Charge-offs:                                     |                                           |                                        
|One-to-four family residential                   |                                           |                                        
|Second mortgage residential                      |                                           |                                        
|Multi-family residential                         |                                           |                                        
|Land and land development                        |                                           |                                        
|Residential construction                         |                                           |                                        
|Commercial construction                          |                                           |                                        
|Business                                         |                                           |                                        
|Consumer                                         |                                           |                                        
|                                                
|Total charge-offs                                |                                           |                                        
|Recoveries on loans previously charged-off       |                                           |                                        
|Change in reserve for unfunded loan commitments  |                                           |                                        
|Provision for loan losses                        |                                           |                                        
|                                                
|Allowance for loan losses at end of period       |                                           |                                        
|                                                
|Allowance for loan losses as a percentage        |                                           |                                        
|of net loans                                     |                                           |                                        
|Allowance for loan losses as a percentage of     |                                           |                                        
|nonperforming loans                              |                                           |                                        
|Ratio of net charge-offs during the period as a  |                                           |                                        
|percentage of average loans outstanding          |                                           |                                        
|during the period                                |                                           |                                        
|                                                

We
generally discontinue funding of loans which become nonperforming or are deemed impaired
unless additional funding is required to protect the asset. In addition, due to certain
laws and regulations in some states, additional funding may be required. Our reserve for
unfunded loan commitments at June 30, 2009 and 2008 was $300,000 and $289,000,
respectively, which represents potential future losses associated with these unfunded
commitments.

During
2007 and 2008 and for the first six months of 2009, our levels of delinquent,
nonperforming and impaired loans increased primarily due to deterioration in the
nations economic conditions which resulted in continued financial stress on
customers. A continued deterioration of the economy and further erosion of real estate
values may cause us to experience increased levels of delinquent, nonperforming and
impaired loans. The decrease in our allowance for loan losses at June 30, 2009 was
primarily attributable to $37.6 million of charge-offs of allowances associated with
impaired loans. Impaired loans totaled $289.1 million at June 30, 2009, an increase of
$103.2 million, or 55.5%, compared to $185.9 million at December 31, 2008. Our allowance
for loan losses related to impaired loans was $17.9 million and $16.4 million at June 30,
2009 and December 31, 2008, respectively. When a loan is deemed impaired, we are required
to perform an analysis in order to measure the level of impairment. When the impairment
measurement indicates that the fair value of the loan is less than its carrying amount, we
are required to establish additional provisions for loan losses and/or we are required to
record a charge-off for the difference. During 2008 and the six months ended June 30,
2009, impaired loans increased and as a result we were required to record charge-offs due
to the results of our loan impairment measurements.

47

---

FHLBank
Topeka Stock. FHLBank stock totaled $39.7 million at June 30, 2009, a
decrease of $7.3 million, or 15.5%, compared to $47.0 million at December 31, 2008. The
decrease was attributable to FHLBank stock redemptions totaling $7.8 million partially
offset by FHLBank dividends paid in stock received during the six months ended June 30,
2009 totaling $532,000.

Premises
and Equipment.Premises and equipment decreased $1.5 million, or 4.3%, to
$33.8 million at June 30, 2009 compared to $35.3 million at December 31, 2008. The
decrease was primarily attributable to $1.9 million of depreciation and amortization
expense which was partially offset by $559,000 in asset additions.

Other
Real Estate Owned and Repossessed Assets. Other real estate owned and
repossessed assets totaled $68.3 million at June 30, 2009, an increase of $31.0 million,
or 83.3%, compared to $37.2 million at December 31, 2008. The increase was primarily
attributable to $36.3 million in additions (primarily loan foreclosures) partially offset
by $4.3 million in proceeds from the sale of foreclosed properties. The increase at June
30, 2009 compared to March 31, 2009 was primarily attributable to the foreclosure of three
Las Vegas land development projects and two other land development projects located in
South Carolina and Nebraska. At June 30, 2009, other real estate owned and repossessed
assets primarily consisted of 176 residential properties totaling $40.3 million and 10
commercial properties aggregating $27.9 million. Our provision for other real estate owned
losses totaled $385,000 and $861,000 for the three and six months ended June 30, 2009,
respectively. We anticipate that our level of other real estate owned and repossessed
assets may continue to increase in 2009 due to the current economic environment. The
significantly depressed real estate market in many areas of the United States has resulted
in increased supplies of properties, depressed market values and longer holding periods.
Our provision for other real estate owned losses may continue to increase if our levels of
other real estate owned increase and real estate market values continue to face downward
pressure.

Other
Intangible Assets. Other intangible assets totaled $4.1 million at June 30,
2009, a decrease of $642,000, or 13.6%, compared to $4.7 million at December 31, 2008 and
relates to the core deposit intangible assets recorded as a result of the United Nebraska Financial Co. (UNFC) acquisition
and the Marine Bank transaction. The decrease was attributable to amortization during the
six months ended June 30, 2009.

Mortgage
Servicing Rights. Mortgage servicing rights totaled $18.5 million at June
30, 2009, an increase of $3.7 million, or 25.2%, compared to $14.8 million at December 31,
2008. Mortgage servicing rights capitalized during the six months ended June 30, 2009
totaled $9.4 million and were partially offset by $4.5 million in amortization expense. In
addition, we have established a valuation allowance related to our mortgage servicing
rights totaling $2.5 million at June 30, 2009 due to increased mortgage loan refinancing
activity related to the declining mortgage loan interest rate environment.

48

---

Other
Assets.Other assets declined $10.6 million, or 20.2%, to $41.7 million at
June 30, 2009 compared to $52.3 million at December 31, 2008. Other assets consist
primarily of prepaid expenses, miscellaneous receivables and other assets. At June 30,
2009, other assets included income taxes receivable of $20.8 million.

Other
assets include deferred tax benefits of $11.6 million and $1.8 million at June 30, 2009
and December 31, 2008, respectively. We have established a valuation allowance related to
our deferred tax benefits of $11.6 million and $1.8 million at June 30, 2009 and December
31, 2008, respectively. In assessing the realizability of our deferred tax assets, we
consider whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. We consider the scheduled reversals of deferred tax liabilities
and carryback opportunities in making the assessment of the necessity of a valuation
allowance. At June 30, 2009 and December 31, 2008, the Company determined a valuation
allowance was necessary, largely based on the evidence represented by a cumulative loss in
the most recent three-year period. In addition, general uncertainty surrounding future
economic and business conditions has increased the potential volatility and uncertainty of
projected earnings. We evaluate our deferred tax assets and the related valuation
allowance quarterly.

In
February 2009, we received proceeds from a lawsuit filed in July 2008 on a bond insuring
the Bank for up to $7.5 million against fraudulent losses related to TransLand Financial
Services, a Florida-based mortgage broker. The $7.5 million insurance claim was recorded
as a receivable during the quarter ended September 30, 2007.

# Liabilities and
Stockholders Equity

General.           Our
total liabilities were $2.9 billion at June 30, 2009, a decrease of $131.2
          million, or 4.3%, compared to $3.0 billion at December 31, 2008. The decrease
in           total liabilities was primarily attributable to decreases in FHLBank
advances           and deposits.

Deposits.           Deposits
declined $56.0 million, or 2.4%, to $2.3 billion at June 30, 2009           compared to
December 31, 2008.

|(Dollars in thousands)       | June 30, 2009 | December 31, 2008 | Increase (Decrease) | % Change 
|---------------------------- | ------------- | ----------------- | ------------------- | ---------
|Noninterest-bearing checking |               |                   | $                   | 163,620  
|Savings                      |               |                   |                     | 223,118  
|Interest-bearing checking    |               |                   |                     | 346,712  
|Money market                 |               |                   |                     | 252,726  
|Time deposits                |               |                   |                     | 1,265,165
|                            
|Total deposits               |               |                   | $                   | 2,251,341
|                            

Our
transaction accounts (checking, savings and money market) totaled $986.2 million at June
30, 2009, an increase of $55.0 million, or 5.9%, compared to $931.2 million at December
31, 2008. The weighted average interest rate of our transaction accounts was 0.51% at June
30, 2009 compared to 0.91% at December 31, 2008. The decrease in time deposits was the
result of a less aggressive pricing strategy intended to manage the Banks overall
cost of funds. The weighted average interest rate of our time deposits was 3.12% at June
30, 2009 compared to 3.43% at December 31, 2008.

49

---

FHLBank
Advances and Other Borrowings. Our FHLBank advances and other borrowings
totaled $580.3 million at June 30, 2009, a decrease of $88.6 million, or 13.2%, compared
to $668.8 million at December 31, 2008. The decrease in FHLBank advances and other
borrowings at June 30, 2009 was primarily attributable to the repayment of three FHLBank
fixed-rate notes payable totaling $80.0 million as they matured during the six months
ended June 30, 2009. We did not have an outstanding balance on our FHLBank line of credit
at both June 30, 2009 and December 31, 2008. The weighted average interest rate on our
FHLBank advances and other borrowings was 4.12% at June 30, 2009, a decrease of 18 basis
points compared to 4.30% at December 31, 2008.

Accrued
Expenses and Other Liabilities. Our accrued expenses and other liabilities
totaled $26.9 million at June 30, 2009, a decrease of $5.0 million, or 15.7%, compared to
$32.0 million at December 31, 2008. The primary items comprising accrued expenses and
other liabilities are deferred compensation agreements, accrued salaries and vacation,
loan servicing payments and other miscellaneous accrued expenses.

Stockholders
Equity. At June 30, 2009, stockholders equity totaled $244.4 million,
a decrease of $26.2 million, or 9.7%, compared to $270.6 million at December 31, 2008. The
decrease in stockholders equity was primarily the result of a net loss of $25.9
million during the six months ended June 30, 2009. We have suspended the payment of our
quarterly cash dividend in order to preserve our capital and to comply with the provisions
of our supervisory agreement with the OTS.

On
March 20, 2008, we announced that our Board of Directors had authorized the repurchase of
up to 1,797,592 shares of our outstanding common stock. There is no stated expiration date
for this authorization. We repurchased 404 shares of our outstanding common stock to
support employee benefit programs during the six months ended June 30, 2009. We
repurchased 25,068 shares of our outstanding common stock to support employee benefit
programs during the year ended December 31, 2008. At June 30, 2009, the total remaining
common stock repurchase authority was 1,772,120 shares. In accordance with our supervisory
agreement with the OTS, we are prohibited from repurchasing our common stock, excluding
repurchases to support existing stock-based employee benefit plans, until we receive a
written notice of non-objection from the OTS.

50

---

Comparison of Operating Results
for the Three and Six Months Ended June 30, 2009 and 2008

Net
Loss. Net loss for the three months ended June 30, 2009 was $16.1 million,
or $0.95 per diluted and basic share, compared to a net loss of $12.7 million, or $0.75
per diluted and basic share, for the three months ended June 30, 2008. Net loss for the
six months ended June 30, 2009 was $25.9 million, or $1.53 per diluted and basic share,
compared to a net loss of $73.6 million, or $4.36 per diluted and basic share, for the six
months ended June 30, 2008. The net loss for the six months ended June 30, 2008 included a
non-cash, after-tax charge of $42.1 million for the write-off of goodwill originally
recorded in connection with the acquisition of UNFC. Our results for the three and six
month periods ended June 30, 2009 were negatively impacted by provisions for loan losses
totaling $21.7 million and $33.8 million, respectively, and our $1.5 million share of an industry-wide
special FDIC assessment. Financial performance for the three and six months ended June 30, 2009 was
also negatively impacted by a decline in net interest income due to the tightening of
interest rate margins and the nonaccrual of interest on nonperforming loans.

Net
Interest Income. Net interest income is the most significant component of
our earnings and consists of interest income on interest-earning assets offset by interest
expense on interest-bearing liabilities. Changes in net interest income result from
changes in volume, net interest spread and net interest margin. Volume relates to the
level of interest-earning assets and interest-bearing liabilities. Net interest spread
refers to the difference between the yield on interest-earning assets and the rate paid on
interest-bearing liabilities. Net interest margin refers to net interest income divided by
total interest-earning assets and is influenced by the level and mix of interest-earning
assets and interest-bearing liabilities.

Net
interest income, average interest rate spread and net interest margin for the three and
six months ended June 30, 2009 were negatively affected by the decrease in the average
yield earned on loans receivable, the decrease in the average balance of loans receivable
and the increased balance of our nonperforming loans as we do not recognize interest
income on nonperforming loans (loans 90 days or more past due).

Net
interest income before provision for loan losses totaled $16.9 million for the three
months ended June 30, 2009, a decrease of $5.9 million, or 25.9%, compared to $22.8
million for the three months ended June 30, 2008. The decrease in net interest income for
the three months ended June 30, 2009 compared to the three months ended June 30, 2008 was
primarily attributable to a 100 basis point decrease in the average yield earned on loans
receivable and a $159.8 million decline in the average balance of loans receivable. For
the six months ended June 30, 2009, our net interest income totaled $33.5 million, a
decrease of $12.5 million, or 27.1%, compared to $45.9 million for the six months ended
June 30, 2008. The decrease in net interest income for the six months ended June 30, 2009
compared to the same period in 2008 was primarily attributable to a 117 basis point
decline in the average yield earned on loans receivable and a $157.1 million decrease in
the average balance of loans receivable. The decrease in the average yield earned on loans
receivable for the three and six months ended June 30, 2009 was negatively affected by
foregone interest on nonperforming loans.

51

---

Our
average interest rate spread for the three months ended June 30, 2009 and 2008 was 1.96%
and 2.66%, respectively. Our average interest rate spread was 1.90% for the six months
ended June 30, 2009 compared to 2.56% for the six months ended June 30, 2008. The decrease
in our average interest rate spread was primarily attributable to the decrease in the
average yield earned on loans receivable, the decrease in the average balance of loans
receivable and an increased balance of nonperforming loans.

The
average yield on interest-earning assets was 4.64% for the three months ended June 30,
2009, a 133 basis point decrease compared to 5.97% for the three months ended June 30,
2008. The average yield on interest-earning assets was 4.68% for the six months ended June
30, 2009, a 147 basis point decrease compared to 6.15% for the six months ended June 30,
2008. The decrease in the average yield earned on interest-earning assets for the three
and six months ended June 30, 2009 was primarily related to a decrease in the average
yield earned on loans receivable. Our average yield earned on loans receivable for the
three months ended June 30, 2009 and 2008 was 5.31% and 6.31%, respectively. Our average
yield earned on loans receivable for the six months ended June 30, 2009 and 2008 was 5.32%
and 6.49%, respectively.

Our
net interest margin (net interest income (annualized) divided by average interest-earning
assets) declined to 2.21% for the three months ended June 30, 2009 compared to 2.97% for
the three months ended June 30, 2008. Our net interest margin was 2.15% for the six months
ended June 30, 2009 compared to 2.91% for the six months ended June 30, 2008. The decrease
in our net interest margin was attributable to the factors described above.

52

---

Average
Balances, Net Interest Income, Yields Earned and Cost of Funds.The following
tables show for the periods indicated the total dollar amount of interest from average
interest-earning assets and the resulting yields, as well as the interest expense on
average interest-bearing liabilities, expressed both in dollars and rates, net interest
margin and average interest rate spread. All average balances are based on daily balances.

|                                                                                                                                     | Three Months Ended June 30,
|------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------
|
|
|Interest-earning assets:                                                                                                             |                            
|Federal funds sold                                                                                                                   |                            
|Funds held at Federal Reserve Bank                                                                                                   |                            
|Investment securities (1)                                                                                                            |                            
|Mortgage-backed securities                                                                                                           |                            
|Loans receivable (2)                                                                                                                 |                            
|                                                                                                                                    
|Total interest-earning assets                                                                                                        |                            
|Noninterest-earning assets                                                                                                           |                            
|                                                                                                                                    
|Total assets                                                                                                                         |                            
|                                                                                                                                    
|Interest-bearing liabilities:                                                                                                        |                            
|Interest-bearing checking accounts                                                                                                   |                            
|Savings accounts                                                                                                                     |                            
|Money market accounts                                                                                                                |                            
|Time deposits                                                                                                                        |                            
|                                                                                                                                    
|Total interest-bearing deposits                                                                                                      |                            
|FHLBank Topeka advances and                                                                                                          |                            
|other borrowings                                                                                                                     |                            
|                                                                                                                                    
|Total interest-bearing liabilities                                                                                                   |                            
|Noninterest-bearing accounts                                                                                                         |                            
|Other liabilities                                                                                                                    |                            
|                                                                                                                                    
|Total liabilities                                                                                                                    |                            
|Stockholders equity                                                                                                                 |                            
|                                                                                                                                    
|Total liabilities and stockholders equity                                                                                           |                            
|                                                                                                                                    
|Net interest-earning assets                                                                                                          |                            
|Net interest income; average                                                                                                         |                            
|interest rate spread                                                                                                                 |                            
|Net interest margin (3)                                                                                                              |                            
|Average interest-earning assets to average                                                                                           |                            
|interest-bearing liabilities                                                                                                         |                            
|                                                                                                                                    
|(1) Includes securities available for sale and held to maturity. Investment securities also include FHLBank Topeka stock.           
|(2) Includes nonperforming loans during the respective periods. Calculated net of unamortized premiums, discounts and deferred fees,
|loans in process and allowance for loan losses.                                                                                     
|(3) Equals net interest income (annualized) divided by average interest-earning assets.                                             
|                                                                                                                                    

53

---

|                                                                                                                                     | Six Months Ended June 30,
|------------------------------------------------------------------------------------------------------------------------------------ | -------------------------
|
|
|Interest-earning assets:                                                                                                             |                          
|Federal funds sold                                                                                                                   |                          
|Funds held at Federal Reserve Bank                                                                                                   |                          
|Investment securities (1)                                                                                                            |                          
|Mortgage-backed securities                                                                                                           |                          
|Loans receivable (2)                                                                                                                 |                          
|                                                                                                                                    
|Total interest-earning assets                                                                                                        |                          
|Noninterest-earning assets                                                                                                           |                          
|                                                                                                                                    
|Total assets                                                                                                                         |                          
|                                                                                                                                    
|Interest-bearing liabilities:                                                                                                        |                          
|Interest-bearing checking accounts                                                                                                   |                          
|Savings accounts                                                                                                                     |                          
|Money market accounts                                                                                                                |                          
|Time deposits                                                                                                                        |                          
|                                                                                                                                    
|Total interest-bearing deposits                                                                                                      |                          
|FHLBank Topeka advances and                                                                                                          |                          
|other borrowings                                                                                                                     |                          
|                                                                                                                                    
|Total interest-bearing liabilities                                                                                                   |                          
|Noninterest-bearing accounts                                                                                                         |                          
|Other liabilities                                                                                                                    |                          
|                                                                                                                                    
|Total liabilities                                                                                                                    |                          
|Stockholders equity                                                                                                                 |                          
|                                                                                                                                    
|Total liabilities and stockholders equity                                                                                           |                          
|                                                                                                                                    
|Net interest-earning assets                                                                                                          |                          
|Net interest income; average                                                                                                         |                          
|interest rate spread                                                                                                                 |                          
|Net interest margin (3)                                                                                                              |                          
|Average interest-earning assets to average                                                                                           |                          
|interest-bearing liabilities                                                                                                         |                          
|                                                                                                                                    
|(1) Includes securities available for sale and held to maturity. Investment securities also include FHLBank Topeka stock.           
|(2) Includes nonperforming loans during the respective periods. Calculated net of unamortized premiums, discounts and deferred fees,
|loans in process and allowance for loan losses.                                                                                     
|(3) Equals net interest income (annualized) divided by average interest-earning assets.                                             
|                                                                                                                                    

54

---

Rate/Volume Analysis. The following table shows the extent to which changes
in interest rates and changes in the volume of interest-related assets and liabilities
affected our interest income and expense during the periods indicated. For each category
of interest-earning assets and interest-bearing liabilities, information is provided on
changes attributable to: (1) changes in rate (change in rate multiplied by prior year
volume), and (2) changes in volume (change in volume multiplied by prior year rate). The
combined effect of changes in both rate and volume has been allocated proportionately to
the change due to rate and the change due to volume.

|                                                                                                                         | Three Months Ended June 30, 2009
Compared to
Three Months Ended June 30, 2008 | Six Months Ended June 30, 2009
Compared to
Six Months Ended June 30, 2008
|------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------- | -------------------------------------------------------------------------
|
|
|Interest income:                                                                                                         |                                                                               |                                                                          
|Federal funds sold                                                                                                       |                                                                               |                                                                          
|Funds held at Federal Reserve Bank                                                                                       |                                                                               |                                                                          
|Investment securities                                                                                                    |                                                                               |                                                                          
|Mortgage-backed securities                                                                                               |                                                                               |                                                                          
|Loans receivable (1)                                                                                                     |                                                                               |                                                                          
|                                                                                                                        
|Total interest income                                                                                                    |                                                                               |                                                                          
|                                                                                                                        
|Interest expense:                                                                                                        |                                                                               |                                                                          
|Interest-bearing                                                                                                         |                                                                               |                                                                          
|checking accounts                                                                                                        |                                                                               |                                                                          
|Savings accounts                                                                                                         |                                                                               |                                                                          
|Money market accounts                                                                                                    |                                                                               |                                                                          
|Time deposits                                                                                                            |                                                                               |                                                                          
|                                                                                                                        
|Total interest expense                                                                                                   |                                                                               |                                                                          
|on deposits                                                                                                              |                                                                               |                                                                          
|FHLBank Topeka advances and                                                                                              |                                                                               |                                                                          
|other borrowings                                                                                                         |                                                                               |                                                                          
|                                                                                                                        
|Total interest expense                                                                                                   |                                                                               |                                                                          
|                                                                                                                        
|Net change in net interest income                                                                                        |                                                                               |                                                                          
|                                                                                                                        
|(1) Calculated net of unamortized premiums, discounts and deferred fees, loans in process and allowance for loan losses. |                                                                               |                                                                          
|                                                                                                                        

55

---

Interest
Income.Our total interest income for the three months ended June 30, 2009 was
$35.5 million, a decrease of $10.4 million, or 22.6%, compared to $45.9 million for the
three months ended June 30, 2008. Interest income on loans receivable totaled $34.7
million for the three months ended June 30, 2009, a decrease of $9.1 million, or 20.8%,
compared to $43.8 million for the three months ended June 30, 2008. The average balance of
loans receivable decreased $159.8 million, or 5.8%, to $2.6 billion for the three months
ended June 30, 2009 compared to $2.8 billion for the three months ended June 30, 2008. The
average yield earned on loans receivable declined to 5.31% for the three months ended June
30, 2009 compared to 6.31% for the three months ended June 30, 2008.

For
the six months ended June 30, 2009 our total interest income was $72.7 million, a decrease
of $24.5 million, or 25.2%, compared to $97.2 million for the six months ended June 30,
2008. Interest income on loans receivable totaled $70.7 million for the six months ended
June 30, 2009, a decrease of $20.6 million, or 22.5%, compared to $91.3 million for the
six months ended June 30, 2008. The average balance of loans receivable decreased $157.1
million, or 5.6%, to $2.7 billion for the six months ended June 30, 2009 compared to $2.8
billion for the six months ended June 30, 2008. The average yield earned on loans
receivable declined to 5.32% for the six months ended June 30, 2009 compared to 6.49% for
the six months ended June 30, 2008.

The
decrease in interest income for the three and six months ended June 30, 2009 compared to
the same periods one year ago was primarily attributable to the decline in the average
yield earned on loans receivable. Additionally, interest income on loans receivable was
negatively affected by an increased balance of nonperforming loans as we do not recognize
interest income on loans 90 days or more past due. At June 30, 2009 our nonperforming
loans totaled $207.6 million, an increase of $74.7 million, or 56.2%, compared to $132.9
million at June 30, 2008.

Interest
Expense.Our total interest expense for the three months ended June 30, 2009 was
$18.6 million, a decrease of $4.5 million, or 19.3%, compared to $23.1 million for the
three months ended June 30, 2008. Interest expense on deposits totaled $11.9 million for
the three months ended June 30, 2009, a decrease of $3.8 million, or 24.3%, compared to
$15.7 million for the three months ended June 30, 2008. The average balance of our
interest-bearing deposits increased $29.0 million, or 1.4%, to $2.1 billion for the three
months ended June 30, 2009 compared to the three months ended June 30, 2008. The average
rate paid on interest-bearing deposits was 2.22% and 2.97% for the three months ended June
30, 2009 and 2008, respectively. Interest expense on FHLBank advances and other borrowings
declined $644,000, or 8.7%, to $6.7 million for the three months ended June 30, 2009
compared to $7.4 million for the three months ended June 30, 2008. The average balance of
our FHLBank advances and other borrowings totaled $635.0 million for the three months
ended June 30, 2009, a decrease of $37.6 million, or 5.6%, compared to $672.6 million for
the three months ended June 30, 2008. The average rate paid on FHLBank advances and other
borrowings was 4.24% and 4.39% for the three months ended June 30, 2009 and 2008,
respectively. Additionally, the average balance of our interest-bearing liabilities
totaled $2.8 billion for the three months ended June 30, 2009, a decrease of $8.6 million,
or 0.3%, compared to the three months ended June 30, 2008.

The
decrease in interest expense for the three months ended June 30, 2009 compared to the same
period one year ago was primarily attributable to the decrease in the average rate paid on
deposits.

56

---

Our
total interest expense for the six months ended June 30, 2009 was $39.2 million, a
decrease of $12.0 million, or 23.4%, compared to $51.2 million for the six months ended
June 30, 2008. Interest expense on deposits totaled $25.4 million for the six months ended
June 30, 2009, a decrease of $11.0 million, or 30.2%, compared to $36.4 million for the
six months ended June 30, 2008. The average balance of our interest-bearing deposits
declined $12.9 million, or 0.6%, to $2.2 billion for the six months ended June 30, 2009
compared to the six months ended June 30, 2008. The average rate paid on interest-bearing
deposits was 2.34% and 3.33% for the six months ended June 30, 2009 and 2008,
respectively. Interest expense on FHLBank advances and other borrowings declined $1.0
million, or 6.9%, to $13.8 million for the six months ended June 30, 2009 compared to
$14.8 million for the six months ended June 30, 2008. The average balance of our FHLBank
advances and other borrowings totaled $646.5 million for the six months ended June 30,
2009, a decrease of $21.0 million, or 3.1%, compared to $667.4 million for the six months
ended June 30, 2008. The average rate paid on FHLBank advances and other borrowings was
4.27% and 4.44% for the six months ended June 30, 2009 and 2008, respectively.
Additionally, the average balance of our interest-bearing liabilities totaled $2.8 billion
for the six months ended June 30, 2009, a decrease of $33.9 million, or 1.2%, compared to
$2.9 billion for the six months ended June 30, 2008.

The
decrease in interest expense for the six months ended June 30, 2009 compared to the six
months ended June 30, 2008 was primarily attributable to the decrease in the average rate
paid on deposits.

Provision
for Loan Losses. We establish provisions for loan losses in order to
maintain the allowance for loan losses at a level we believe, to the best of our
knowledge, covers all known and inherent losses in the portfolio that are both probable
and reasonable to estimate at each reporting date. Management performs reviews no less
frequently than monthly in order to identify these inherent losses and to assess the
overall collection probability for the loan portfolio. Our reviews consist of a
quantitative analysis by loan category, using historical loss experience, classifying
loans pursuant to a grading system and consideration of a series of qualitative factors.
These loss factors are developed using our historical loan loss experience for each group
of loans as further adjusted for specific factors, including the following:

| |  | Trends
and levels of delinquent, nonperforming or impaired loans;
| | - | -------------------------------------------------------------------

| |  | Trends
and levels of charge-offs and recoveries;
| | - | ------------------------------------------------

| |  | Underwriting
terms or guarantees for loans;
| | - | -------------------------------------------

| |  | Impact
of changes in underwriting standards, risk tolerances or other changes in lending
practices;
| | - | ---------------------------------------------------------------------------------------------------

| |  | Changes
in the value of collateral securing loans;
| | - | --------------------------------------------------

| |  | Total
loans outstanding and the volume of loan originations;
| | - | ------------------------------------------------------------

| |  | Type,
size, terms and geographic concentration of loans held;
| | - | -------------------------------------------------------------

| |  | Changes
in qualifications or experience of the lending staff;
| | - | -------------------------------------------------------------

| |  | Changes
in local or national economic or industry conditions;
| | - | -------------------------------------------------------------

| |  | Number
of loans requiring heightened management oversight;
| | - | ----------------------------------------------------------

| |  | Changes
in credit concentration; and
| | - | ------------------------------------

| |  | Changes
in regulatory requirements.
| | - | -----------------------------------

57

---

In
addition, we use information about specific borrower situations, including their financial
position, work-out plans and estimated collateral values under various liquidation
scenarios to estimate the risk and amount of potential loss. This evaluation is inherently
subjective as it requires estimates that are susceptible to significant revision as more
information becomes available or as future events occur.

We
recorded a provision for loan losses of $21.7 million for the three months ended June 30,
2009 compared to $27.7 million for the three months ended June 30, 2008, a decrease of
$6.0 million or 21.7%. For the six months ended June 30, 2009 our provision for loan
losses totaled $33.8 million, a decrease of $33.8 million, or 50.0%, compared to $67.6
million for the six months ended June 30, 2008. The decline in our provision for loan
losses for both of the three and six month periods ended June 30, 2009 compared to the
same periods in 2008 was attributable to a decline in charge-offs. We charged off, net of
recoveries, $21.6 million and $41.4 million during the three months ended June 30, 2009
and 2008, respectively. For the six months ended June 30, 2009 and 2008, we charged off
$37.6 million and $69.8 million, respectively. During the three months ended March 31,
2008 we charged off $24.4 million of our allowance for loan losses related to loans which
were reclassified to loans held for sale. Our provision for loan losses for the three and
six months ended June 30, 2009 was primarily attributable to the following:

| |  | Nonperforming
Loans  Nonperforming loans (loans 90 or more days delinquent)
totaled $207.6 million at June 30, 2009, an increase of $74.7 million , or 56.2%,
compared to $132.9 million at June 30, 2008.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Delinquent
Loans Delinquent loans (loans 30-89 days delinquent) totaled $49.6
million at June 30, 2009, an increase of $1.5 million, or 3.2%, compared to $48.1 million
at June 30, 2008.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Impaired
Loans  Impaired loans totaled $289.1 million at June 30, 2009, an
increase of $141.1 million, or 95.3%, compared to $148.0 million at June 30, 2008. The
decrease in our allowance for loan losses at June 30, 2009 was primarily attributable to
$37.6 million of charge-offs of allowances associated with impaired loans.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Qualitative
Factors  As discussed above, our analysis of the allowance for loan
losses and the associated provision for loan losses includes several qualitative factors.
During 2007 and 2008 and for the first six months of 2009, our provision for loan losses
has been negatively affected by the economic conditions prevalent in most areas of the
United States which has in many cases negatively affected the value of the collateral
securing loans. Our provision for loan losses has also been affected by the upward
trending of delinquent, nonperforming and impaired loans as well as our levels of
charge-offs and recoveries.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
anticipate that our provision for loan losses may continue to have a negative effect on
earnings due to general economic conditions which have had a significant impact on real
estate values. With further deterioration of general economic conditions, we would also
expect that our current levels of delinquent, nonperforming and impaired loans may
increase in 2009 which would result in additional provisions for loan losses.

58

---

Noninterest
Income.Noninterest income for the three months ended June 30, 2009 was $11.7
million, an increase of $4.7 million, or 67.3%, compared to the three months ended June
30, 2008.

|                                                | Three Months Ended
June 30, | Increase |  
|----------------------------------------------- | --------------------------- | -------- | -
|
|Deposit account fees and service charges        |                             |          | $
|Debit card fees                                 |                             |          |  
|Lending fees and service charges                |                             |          |  
|Amortization of mortgage servicing rights       |                             |          |  
|Mortgage servicing rights valuation adjustments |                             |          |  
|Commissions and management fee income           |                             |          |  
|Loss from real estate operations, net           |                             |          |  
|Loss on impairment of securities                |                             |          |  
|Net gain (loss) on sales of:                    |                             |         
|Loans held for sale                             |                             |          |  
|Other real estate owned                         |                             |          |  
|Other operating income                          |                             |          |  
|                                               
|Total noninterest income                        |                             |          | $
|                                               

Noninterest
income for the three months ended June 30, 2009 includes a $4.1 million increase in gains
on the sale of loans held for sale and a $910,000 adjustment in our mortgage servicing
right valuation allowance. The increase in the amortization of mortgage servicing rights
was primarily attributable to increased prepayments on serviced loans due to increased
refinancing activity.

59

---

Noninterest
income for the six months ended June 30, 2009 was $19.9 million, an increase of $4.7
million, or 30.6%, compared to the six months ended June 30, 2008.

|                                                | Six Months Ended
June 30, | Increase |  
|----------------------------------------------- | ------------------------- | -------- | -
|
|Deposit account fees and service charges        |                           |          | $
|Debit card fees                                 |                           |          |  
|Lending fees and service charges                |                           |          |  
|Amortization of mortgage servicing rights       |                           |          |  
|Mortgage servicing rights valuation adjustments |                           |          |  
|Commissions and management fee income           |                           |          |  
|Loss from real estate operations, net           |                           |          |  
|Loss on impairment of securities                |                           |          |  
|Net gain (loss) on sales of:                    |                           |         
|Loans held for sale                             |                           |          |  
|Other real estate owned                         |                           |          |  
|Other operating income                          |                           |          |  
|                                               
|Total noninterest income                        |                           |          | $
|                                               

Noninterest
income for the six months ended June 30, 2009 includes a $7.3 million increase in gains on
the sale of loans held for sale which was partially offset by a $1.1 million increase in
our mortgage servicing right valuation allowance. The increase in the amortization of
mortgage servicing rights was primarily attributable to increased prepayments on serviced
loans due to increased refinancing activity.

60

---

Noninterest Expense.Our noninterest expense increased by $1.0 million, or 4.6%,
to $23.1 million for the three months ended June 30, 2009 compared to $22.1 million for
the three months ended June 30, 2008.

|                                                        | Three Months Ended
June 30, | Increase |  
|------------------------------------------------------- | --------------------------- | -------- | -
|
|Employee compensation                                   |                             |          | $
|Employee benefits                                       |                             |          |  
|Payroll taxes                                           |                             |          |  
|Management Recognition and Retention Plan               |                             |          |  
|Employee Stock Ownership Plan                           |                             |          |  
|2003 Stock Option Plan                                  |                             |          |  
|Occupancy, net                                          |                             |          |  
|Data processing                                         |                             |          |  
|Advertising                                             |                             |          |  
|Federal Deposit Insurance Corporation insurance premium |                             |          |  
|Legal services                                          |                             |          |  
|Core deposit intangible asset amortization              |                             |          |  
|Professional services                                   |                             |          |  
|Other                                                   |                             |          |  
|                                                       
|Total noninterest expense                               |                             |          | $
|                                                       

The
increase in our FDIC insurance premium was primarily attributable to increased deposit
insurance assessments rates set forth by the FDIC to replenish the Deposit Insurance Fund
and increase the deposit insurance reserve ratio. Additionally, our FDIC insurance premium
expense for the three months ended June 30, 2009 included our $1.5 million share of an industry-wide
special FDIC assessment.

61

---

Our
noninterest expense decreased by $41.2 million, or 47.6%, to $45.4 million for the six
months ended June 30, 2009 compared to $86.7 million for the six months ended June 30,
2008.

|                                                        | Six Months Ended
June 30, | Increase |  
|------------------------------------------------------- | ------------------------- | -------- | -
|
|Employee compensation                                   |                           |          | $
|Employee benefits                                       |                           |          |  
|Payroll taxes                                           |                           |          |  
|Management Recognition and Retention Plan               |                           |          |  
|Employee Stock Ownership Plan                           |                           |          |  
|2003 Stock Option Plan                                  |                           |          |  
|Goodwill impairment                                     |                           |          |  
|Occupancy, net                                          |                           |          |  
|Data processing                                         |                           |          |  
|Advertising                                             |                           |          |  
|Federal Deposit Insurance Corporation insurance premium |                           |          |  
|Legal services                                          |                           |          |  
|Core deposit intangible asset amortization              |                           |          |  
|Professional services                                   |                           |          |  
|Other                                                   |                           |          |  
|                                                       
|Total noninterest expense                               |                           |          | $
|                                                       

The
decrease in noninterest expense for the six months ended June 30, 2009 compared to the
same period one year ago was primarily attributable to a $42.1 million goodwill impairment
charge recognized during the three months ended March 31, 2008. The increase in our FDIC
insurance premium was primarily attributable to increased deposit insurance assessments
rates set forth by the FDIC to replenish the Deposit Insurance Fund and increase the
deposit insurance reserve ratio. Additionally, our FDIC insurance premium expense for the
six months ended June 30, 2009 included our $1.5 million share of an industry-wide special FDIC
assessment.

Income
Tax Expense(Benefit).Our income tax expense was $7,000 for the three months ended
June 30, 2009 compared to an income tax benefit of $7.2 million for the three months ended
June 30, 2008. Our income tax expense was $15,000 for the six months ended June 30, 2009
compared to an income tax benefit of $19.5 million for the six months ended June 30, 2008.
The increase in our income tax expense for the three and six month periods ended June 30,
2009 was primarily associated to no tax benefit being realized due to the current net
operating loss carry-back rules. Tax benefits are not available to the Company as long as
we remain in a net loss position.

62

---

# Liquidity and Capital
Resources

Our
primary sources of funds are deposits; amortization of loans; loan prepayments and
maturity of loans; repayment, maturity or sale of investment and mortgage-backed
securities; and other funds provided from operations. While scheduled payments from the
amortization of loans and mortgage-backed securities and maturing investment securities
are relatively predictable sources of funds, deposit flows and loan prepayments can be
greatly influenced by general interest rates, economic conditions and competition. We
utilize FHLBank advances and other borrowings as additional funding sources.

We
actively manage our liquidity in an effort to maintain an adequate liquidity margin over
the level necessary to support expected and potential loan fundings and deposit
withdrawals. Our liquidity level may vary throughout the year, depending on economic
conditions, deposit fluctuations and loan funding needs. As of June 30, 2009, we believe
we have adequate liquidity to fund the daily operations of the Bank for the foreseeable
future.

During
the six months ended June 30, 2009, net cash provided by operating activities was $14.3
million. Net cash provided by investing activities during the six months ended June 30,
2009 was $147.4 million and primarily related to cash inflows from matured investment
securities, loan payoffs and periodic payments and the redemption of FHLBank Topeka stock
partially offset by the purchase of available for sale investment and mortgage-backed
securities. Net cash used in financing activities was $126.1 million for the six months
ended June 30, 2009 and consisted primarily of cash outflows from deposits and the
repayment FHLBank advances.

Deposits,
particularly core deposits, provide a more preferable source of funding than FHLBank
advances and other borrowings. However, to the extent that competitive or market factors
do not allow us to meet our funding needs with deposits alone, FHLBank advances and other
borrowings provide a readily available alternative source of liquidity. The following
table details time deposits maturing during the next 12 months:

|(Dollars in thousands)                                 | Amount | Weighted Average Rate
|------------------------------------------------------ | ------ | ---------------------
|Amount Maturing During the Quarter Ended:              |        |                      
|September 30, 2009                                     |        |                      
|December 31, 2009                                      |        |                      
|March 31, 2010                                         |        |                      
|June 30, 2010                                          |        |                      
|                                                      
|Total time deposits maturing during the next 12 months |        |                      
|                                                      

We
anticipate that a large portion of the maturing time deposits will be renewed with us.

The
average balance of our FHLBank advances and other borrowings was $646.5 million for the
six months ended June 30, 2009 compared to $667.4 million for the six months ended June
30, 2008. To date, substantially all of our borrowings have consisted of FHLBank advances.
Pursuant to our collateral agreement with the FHLBank, we have pledged qualifying
residential, multi-family residential and commercial real estate mortgages, residential
construction, commercial construction and agricultural real estate loans as collateral for
our FHLBank advances. Our borrowing
capacity with the FHLBank at June 30, 2009 was $556.4 million. Other collateral can be pledged in the event
additional borrowing capacity is required.

63

---

# Aggregate Contractual
Obligations and Off-Balance Sheet Arrangements

We
believe we have sufficient liquidity to fund existing and future loan commitments, to fund
maturing time deposits and demand deposit withdrawals, to invest in other interest-earning
assets and to meet operating expenses. At June 30, 2009, we had the following contractual
obligations (excluding bank deposits and interest) and lending commitments:

|                                                                                                    |  | Due In
|--------------------------------------------------------------------------------------------------- |  | ------
|
|Contractual obligations:                                                                            |  |       
|FHLBank Topeka advances                                                                             |  |       
|and other borrowings                                                                                |  |       
|Recourse obligations on loans sold                                                                  |  |       
|Annual rental commitments under non-                                                                |  |       
|cancellable operating leases                                                                        |  |       
|                                                                                                   
|Total contractual obligations                                                                       |  |       
|                                                                                                   
|Lending commitments:                                                                                |  |       
|Commitments to originate loans                                                                      |  |       
|Commitments to sell loans                                                                           |  |       
|Commitments to purchase loans                                                                       |  |       
|Loans in process (1)                                                                                |  |       
|Standby letters of credit                                                                           |  |       
|Unused lines of credit:                                                                             |  |       
|Warehouse mortgage lines of credit                                                                  |  |       
|Business loans                                                                                      |  |       
|Consumer loans                                                                                      |  |       
|                                                                                                   
|Total lending commitments and                                                                       |  |       
|unused lines of credit                                                                              |  |       
|                                                                                                   
|Total contractual obligations, lending                                                              |  |       
|commitments and unused lines of credit                                                              |  |       
|                                                                                                   
|(1) Loans in process represents the undisbursed portion of construction and land development loans.
|                                                                                                   

We
have not used, and have no intention to use, any significant off-balance sheet financing
arrangements for liquidity purposes or otherwise. Our primary financial instruments with
off-balance sheet risk are limited to loan servicing for others, our obligations to fund
loans to customers pursuant to existing commitments and commitments to purchase and sell
mortgage loans. In addition, we have certain risks due to limited recourse arrangements
on loans serviced for others and recourse obligations related to loan sales. At June 30,
2009, the maximum total dollar amount of such recourse was approximately $21.4 million.
Based on historical experience, at June 30, 2009, we established a liability of $625,000
with respect to this recourse obligation. There were no loans repurchased during the six
months ended June 30, 2009. In addition, we have not had, and have no intention to have,
any significant transactions, arrangements or other relationships with any
unconsolidated, special purpose entities.

64

---

# Regulatory Capital

We
are subject to various regulatory capital requirements administered by federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if undertaken, could have a
direct material adverse effect on our financial condition and results of operations. Under
capital adequacy guidelines and the regulatory framework for prompt corrective action, we
must meet specific capital guidelines that involve quantitative measures of our assets,
liabilities and certain off-balance sheet items as calculated under regulatory accounting
practices. The capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.

Quantitative
measures that have been established by regulation to ensure capital adequacy require that
we maintain minimum capital amounts and ratios (as set forth in the following table). Our
primary regulatory agency, the OTS, requires that we maintain
minimum ratios of tangible capital (as defined in the regulations) of 1.5%, core capital
(as defined) of 4.0% and total risk-based capital (as defined) of 8.0%.

The
Company has agreed with the OTS to contribute additional capital above levels previously
required for the Bank to be deemed well-capitalized for regulatory purposes.
During the year ended December 31, 2008, the Company contributed $29.1 million to the
Bank. In addition, the OTS has required that the Bank maintain a ratio of 11.0% with
respect to total risk-based capital to risk-weighted assets and a ratio of 8.5% with
respect to core (Tier 1) capital. As of June 30, 2009, the Bank met or exceeded these elevated
ratios mandated by the OTS. The actual capital amounts and ratios at June 30, 2009 and
December 31, 2008 are presented in the following table:

|                            | Actual | For Capital
Adequacy Purposes | Required Capital Per
Office of Thrift Supervision
Directive
|--------------------------- | ------ | ----------------------------- | -----------------------------------------------------------
|
|At June 30, 2009:           |        |                               |                                                            
|Total risk-based capital    |        |                              
|(to risk-weighted assets)   |        |                               | $                                                          
|Tier 1 capital (to adjusted |        |                              
|tangible assets)            |        |                               |                                                            
|Tangible capital (to        |        |                              
|tangible assets)            |        |                               |                                                            
|Tier 1 capital (to risk-    |        |                              
|weighted assets)            |        |                               |                                                            
|At December 31, 2008:       |        |                              
|Total risk-based capital    |        |                              
|(to risk-weighted assets)   |        |                               | $                                                          
|Tier 1 capital (to adjusted |        |                              
|tangible assets)            |        |                               |                                                            
|Tangible capital (to        |        |                              
|tangible assets)            |        |                               |                                                            
|Tier 1 capital (to risk-    |        |                              
|weighted assets)            |        |                               |                                                            
|                           

66

---

In
the event that we continue to incur losses, this will significantly reduce our ability to
satisfy the minimum capital requirements applicable to us. At June 30, 2009, we had $8.4
million and $309,000 of total risk-based capital and Tier 1 capital, respectively, in
excess of the minimum amounts required by the OTS under our supervisory agreement. There
are several actions we could take to further our ability to maintain minimum levels of
regulatory capital in the event of further deterioration in our business. However, there
can be no assurance that any or all of these actions would allow us to satisfy our
capital requirements. For a discussion on the risks related to our failure to maintain
the required ratios, see Item 1A, Risk Factors of our Annual Report on Form
10-K for the year ended December 31, 2008.

67

---

# Selected Financial Data

|(Dollars in thousands, except per share data)   | At
June 30,
2009 | At
March 31,
2009 | At
December 31,
2008 | At
June 30,
2008
|----------------------------------------------- | ---------------- | ----------------- | -------------------- | ----------------
|SELECTED STATEMENT OF FINANCIAL CONDITION DATA: |                  |                   |                      |                 
|Cash and cash equivalents                       |                  |                   | $                    | 285,406         
|Investment securities                           |                  |                   |                      | 102,253         
|Net loans after allowance for loan losses       |                  |                   |                      | 2,546,571       
|Total assets                                    |                  |                   |                      | 3,160,553       
|Deposits                                        |                  |                   |                      | 2,251,341       
|FHLBank Topeka advances and other borrowings    |                  |                   |                      | 580,299         
|Stockholders equity                            |                  |                   |                      | 244,430         
|                                               

|                                                                                                                                 | For the Three Months Ended
|-------------------------------------------------------------------------------------------------------------------------------- | --------------------------
|
|SELECTED STATEMENT OF OPERATIONS DATA:                                                                                           |                           
|Total interest income                                                                                                            |                           
|Total interest expense                                                                                                           |                           
|                                                                                                                                
|Net interest income                                                                                                              |                           
|Provision for loan losses                                                                                                        |                           
|                                                                                                                                
|Net interest income (loss) after provision                                                                                       |                           
|for loan losses                                                                                                                  |                           
|                                                                                                                                
|Total noninterest income                                                                                                         |                           
|Total noninterest expense                                                                                                        |                           
|                                                                                                                                
|Loss before income taxes                                                                                                         |                           
|Income tax expense (benefit)                                                                                                     |                           
|                                                                                                                                
|Net loss                                                                                                                         |                           
|                                                                                                                                
|Net loss per common share, basic                                                                                                 |                           
|Net loss per common share, diluted                                                                                               |                           
|Dividends declared per common share                                                                                              |                           
|                                                                                                                                
|SELECTED OPERATING RATIOS:                                                                                                       |                           
|Average yield on interest-earning assets                                                                                         |                           
|Average rate on interest-bearing liabilities                                                                                     |                           
|Average interest rate spread                                                                                                     |                           
|Net interest margin                                                                                                              |                           
|Average interest-earning assets to                                                                                               |                           
|average interest-bearing liabilities                                                                                             |                           
|Net interest income (loss) after provision for                                                                                   |                           
|loan losses to noninterest expense                                                                                               |                           
|Total noninterest expense to average assets                                                                                      |                           
|Efficiency ratio (1)                                                                                                             |                           
|Return on average assets                                                                                                         |                           
|Return on average equity                                                                                                         |                           
|Average equity to average assets                                                                                                 |                           
|                                                                                                                                
|SELECTED ASSET QUALITY RATIOS:                                                                                                   |                           
|Nonperforming loans as a percentage of net loans                                                                                 |                           
|Nonperforming assets as a percentage of total assets                                                                             |                           
|Allowance for loan losses as a percentage of net loans                                                                           |                           
|                                                                                                                                
|(1) Efficiency ratio is calculated as total noninterest expense, less amortization expense of intangible assets, as a percentage
|of the sum of net interest income and noninterest income.                                                                       
|                                                                                                                                

68

---

# Recent Accounting
Developments

For
a discussion regarding accounting pronouncements, interpretations, exposure drafts and
other formal accounting guidance and the impact of these on our financial condition and
results of operations, reference is made to our Annual Report on Form 10-K for the year
ended December 31, 2008. The following discussion identifies certain recently issued
accounting guidance.

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51(SFAS No. 160). The
objective of this statement is to improve the relevance, comparability and transparency of
the financial information that a reporting entity provides in its consolidated financial
statements by establishing accounting and reporting standards. SFAS No. 160 is effective
for fiscal years beginning after December 15, 2008. The adoption of SFAS No. 160 did not
have a material impact on our consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 141R, Business Combinations (SFAS No.
141R). The objective of this statement is to improve the relevance, representational
faithfulness and comparability of the information that a reporting entity provides in its
financial reports about a business combination and its effects. SFAS No. 141R establishes
principles and requirements for how the acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed and any
noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase and determines what information
to disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. SFAS No. 141R applies prospectively to
business combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.

In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133 (SFAS No.
161). The objective of this statement is to enhance disclosures to provide adequate
information about how derivative and hedging activities affect an entitys financial
position, financial performance and cash flows. This statement requires enhanced
disclosures about an entitys derivative and hedging activities and thereby improves
the transparency of financial reporting. Under SFAS No. 161, entities will be required to
provide enhanced disclosures about how and why an entity utilizes derivative instruments,
how derivative instruments and related hedged items are accounted for under SFAS No. 133
and its related interpretations and how derivative instruments and related hedged items
affect an entitys financial position, financial performance and cash flows. SFAS No.
161 is effective for financial statements issued for fiscal years beginning after November
15, 2008. The adoption of SFAS No. 161 did not have a material impact on our consolidated
financial statements.

In
May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS No. 162). SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles. SFAS No. 162 directs the
hierarchy to the entity, rather than the independent auditors, as the entity is
responsible for selecting accounting principles for financial statements that are
presented in conformity with generally accepted accounting principles. SFAS No. 162 is
effective 60 days following SEC approval of the Public Company Accounting Oversight Board
amendments to remove the hierarchy of generally accepted accounting principles from the
auditing standards. We do not anticipate that the adoption of SFAS No. 162 will have a
material impact on our consolidated financial statements.

69

---

In
April 2009, the FASB issued Staff Position 157-4 (FSP 157-4), Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly.The
proposed FASB Staff Position (FSP), while emphasizing that the objective of
fair value measurement described in SFAS No. 157, Fair Value Measurements, remains
unchanged, provides additional guidance for determining whether market activity for a
financial asset or liability has significantly decreased, as well as for identifying
circumstances that indicate that transactions are not orderly. This FSP reiterates that if
a market is determined to be inactive and the related market price is deemed to be
reflective of a distressed sale price, then management judgment may be
required to estimate fair value. This FSP identifies factors to be considered when
determining whether or not a market is inactive. This FSP is effective as of June 30,
2009, with early adoption permitted as of March 31, 2009. The adoption of FSP 157-4 did
not have a material impact on our consolidated financial statements.

In
April 2009, the FASB issued Staff Position No. FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments. This FSP changes existing guidance
for determining whether impairment of debt securities is other-than-temporary. This FSP
requires other-than-temporary impairment to be separated into the amount representing the
decrease in cash flows expected to be collected from a security (referred to as credit
losses), which is recognized in earnings, and the amount related to other factors, which
is recognized in other comprehensive income. The non-credit loss component of the
impairment can only be classified in other comprehensive income if the holder of the
security concludes (a) that it does not intend to sell the security and (b) that it is
more likely than not that it will not be required to sell the security before the security
recovers its value. If these two conditions are not met, the non-credit loss component of
the impairment must also be recognized in earnings. Upon adoption of this FSP, the entity
is required to record a cumulative-effect adjustment, as of the beginning of the period of
adoption, to reclassify the non-credit loss component of previously recognized
other-than-temporary impairment from retained earnings to accumulated other comprehensive
income. This FSP is effective as of June 30, 2009, with early adoption permitted as of
March 31, 2009. We did not elect to early-adopt this FSP. The adoption of FAS 115-2 and
124-2 did not have a material impact on our consolidated financial statements.

In
April 2009, the FASB issued Staff Position No. FAS 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments. This proposed FSP would amend
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, and Accounting
Principles Board Opinion No. 28, Interim Financial Reporting, to require
disclosures about fair value of financial instruments in all interim financial statements.
As FAS 107-1 and APB 28-1 amended only the disclosure requirements about fair value of
financial instruments in interim periods, the adoption had no impact on our consolidated
financial statements. See Note 12 for the disclosures required under the provisions of FAS
107-1 and APB 28-1.

In
May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS No.
165). SFAS No. 165 establishes general standards of accounting for and disclosures
of events that occur after the balance sheet date but before financial statements are
issued or are available to be issued. It requires entities to disclose the date through
which it has evaluated subsequent events and the basis for that date. SFAS No. 165 is
effective for interim and annual periods ending after June 15, 2009. The adoption of SFAS
No. 165 did not have a material impact on our consolidated financial statements.

70

---

In
June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets,
an amendment of FASB Statement No. 140(SFAS No. 166). SFAS No. 166 makes
several significant amendments to SFAS No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, including the removal of the
concept of a qualifying special-purpose entity from SFAS No. 140. SFAS No. 166 also
clarifies that a transferor must evaluate whether it has maintained effective control of a
financial asset by considering its continuing direct or indirect involvement with the
transferred financial asset. The provisions of SFAS No. 166 are effective for financial
asset transfers occurring after December 31, 2009. We do not anticipate that the adoption
of SFAS No. 166 will have a material impact on our consolidated financial statements.

In
June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R)(SFAS No. 167). SFAS No. 167 requires a qualitative rather than a
quantitative analysis to determine the primary beneficiary of a variable interest entity
(VIE) for consolidation purposes. The primary beneficiary of a VIE is the
enterprise that has the power to direct the activities of the VIE that most significantly
impact the VIEs economic performance and also has the obligation to absorb the
losses of the VIE that could potentially be significant to the VIE or the right to receive
benefits of the VIE that could potentially be significant to the VIE. The provisions of
SFAS No. 167 are effective January 1, 2010. We do not anticipate that the adoption of SFAS
No. 167 will have a material impact on our consolidated financial statements.

In
June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement
No. 162 (SFAS No. 168). SFAS No. 168 establishes the FASB Accounting
Standards Codification (Codification) to become the single source of
authoritative GAAP recognized by the FASB to be applied by nongovernmental entities, with
the exception of guidance issued by the U.S. Securities and Exchange Commission
(SEC) and its staff. All guidance contained in Codification carries an equal
level of authority. The provisions of SFAS No. 168 are effective for interim and annual
periods ending after September 15, 2009. As the Codification is not intended to change
GAAP, the adoption of the provisions of SFAS No. 168 is not expected to have any impact on
our consolidated financial statements.

71

---

# Item 3  Quantitative
and Qualitative Disclosures About Market Risk.

For
a discussion of our asset and liability management policies as well as the methods used to
manage our exposure to the risk of loss from adverse changes in market prices and interest
rates, see Managements Discussion and Analysis of Financial Condition and
Results of Operations  Asset and Liability Management and Quantitative
and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for
the year ended December 31, 2008. There has been no material change in our market risk
position since our prior disclosures.

# Item 4  Controls
and Procedures.

Our
management evaluated, with the participation of our Chief Executive Officer and Chief
Financial Officer, the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based on such
evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that
our disclosure controls and procedures were effective as of the date of such evaluation to
ensure that material information relating to us, including our consolidated subsidiaries,
was made known to them in a timely manner by others within those entities, particularly
during the period in which this report was being prepared. There was no change in our
internal control over financial reporting that occurred during the period covered by this
report that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

72

---

# PART II  OTHER
INFORMATION

# Item 1  Legal
Proceedings.

Except
as described herein, we
are not involved in any pending legal proceedings other than routine legal proceedings
occurring in the ordinary course of business. Such routine legal proceedings, in the
aggregate, are believed by management to be immaterial to our consolidated financial
statements. In the second quarter of 2009, the Company received a demand for derivative litigation from
a purported shareholder. The demand relates to, among other matters, issues raised in the OTS
supervisory agreement. As is contemplated by applicable corporate law, the Companys Board
appointed a special committee of independent directors
to review the allegations contained in the demand letter.

# Item 1A  Risk
Factors.

There
have been no material changes in our risk factors from those disclosed in our Annual
Report on Form 10-K for the year ended December 31, 2008.

# Item 2 
Unregistered Sales of Equity Securities and Use of Proceeds.

We
repurchased 404 shares of our outstanding common stock to support employee benefit
programs during the six months ended June 30, 2009. The following table details the
Companys purchases of common stock during the three months ended June 30, 2009:

|                                        | Total Number of Shares Purchased | Average PricePaid PerShare | Total Number of Shares Purchased as Part ofPublicly AnnouncedPlans or Programs* | Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs
|--------------------------------------- | -------------------------------- | -------------------------- | ------------------------------------------------------------------------------- | --------------------------------------------------------------------------
|April 2009                              |                                  |                            |                                                                                 |                                                                           
|Beginning Date - April 1, 2009          |                                  |                           
|Ending Date - April 30, 2009            |                                  |                            |                                                                                 | 404                                                                       
|May 2009                                |                                  |                           
|Beginning Date - May 1, 2009            |                                  |                           
|Ending Date - May 31, 2009              |                                  |                            |                                                                                 | --                                                                        
|June 2009                               |                                  |                           
|Beginning Date - June 1, 2009           |                                  |                           
|Ending Date - June 30, 2009             |                                  |                            |                                                                                 | --                                                                        
|                                       
|Total shares purchased during the three |                                  |                           
|months ended June 30, 2009              |                                  |                            |                                                                                 | 404                                                                       
|                                       

* Information related to our publicly
announced plan authorizing purchases of common stock during the three months ended June
30, 2009, is as follows:

|Date Purchase Plan Announced | Number of Shares Approved for Purchase | Expiration Date of Purchase Plan
|---------------------------- | -------------------------------------- | --------------------------------
|March 20, 2008               | 1,797,592                              | No stated expiration date       
|                            

73

---

# Item 3  Defaults
Upon Senior Securities.

There are no matters required to be
reported under this item.

# Item 4  Submission
of Matters to a Vote of Security Holders.

On
May 21, 2009, we held our Annual Meeting of Stockholders to obtain approval for two
proposals submitted on behalf of our Board of Directors. The following is a brief summary
of each proposal and the result of the vote.

|Proposal                                            | Term Expiration | For        | Withheld / Against | Abstain
|--------------------------------------------------- | --------------- | ---------- | ------------------ | -------
|1. To elect two directors for a three-year term and |                 |            |                    |        
|until their successors are elected and qualified.  
|Gilbert G. Lundstrom                                | 2012            | 13,465,283 | 2,214,461          | N/A    
|Joyce Person Pocras                                 | 2012            | 13,455,990 | 2,223,754          | N/A    
|                                                   
|2. To ratify the appointment of KPMG LLP as the    
|independent auditors for the year ending           
|December 31, 2009.                                  | N/A             | 15,025,292 | 142,594            | 511,858
|                                                   

The
terms of office for the following directors continued after our Annual Meeting of
Stockholders: Charles W. Hoskins and Samuel P. Baird (terms expire in 2010); James A.
Laphen, Campbell R. McConnell and James E. McClurg (terms expire in 2011); and James W. Strand (term expires in 2012).

# Item 5  Other
Information.

There are no matters required to be
reported under this item.

# Item 6  Exhibits.

The exhibits filed or incorporated as
part of this Form 10-Q are specified in the Exhibit Index.

74

---

# SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

|                      | TIERONE CORPORATION                              
|--------------------- | -------------------------------------------------
|Date:  August 5, 2009 | By:/s/ Gilbert G. Lundstrom                      
|                      | Gilbert G. Lundstrom                             
|                      | Chairman of the Board and Chief Executive Officer
|Date:  August 5, 2009 | By:/s/ Eugene B. Witkowicz                       
|                      | Eugene B. Witkowicz                              
|                      | Executive Vice President and                     
|                      | Chief Financial Officer                          

75

---

# EXHIBIT INDEX

|No.  | Exhibits                                                                                          
|---- | --------------------------------------------------------------------------------------------------
|3.1  | Restated Bylaws, as amended and restated effective as of July 22, 2009                            
|31.1 | Section 302 Certification of the Chief Executive Officer                                          
|31.2 | Section 302 Certification of the Chief Financial Officer                                          
|32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|    

76