# UNITED
STATESSECURITIES AND EXCHANGE COMMISSION

Washington, DC 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, 2004

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 X  No

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes X  No

At August 3, 2004, the registrant had
18,285,811 shares of common stock, $.01 par value per share, outstanding.

---

|              |                                                             |     
|------------- | ----------------------------------------------------------- | ----
|              | PART I - FINANCIAL INFORMATION                              |     
|              |                                                             | Page
|Item 1 -      | Financial Statements                                        | 3   
|Item 2 -      | Management's Discussion and Analysis of Financial Condition
|              | and Results of Operations                                   | 22  
|Item 3 -      | Quantitative and Qualitative Disclosures About Market Risk  | 39  
|Item 4 -      | Controls and Procedures                                     | 39  
|              | PART II - OTHER INFORMATION                                 |     
|Item 1 -      | Legal Proceedings                                           | 40  
|Item 2 -      | Changes in Securities, Use of Proceeds and Issuer Purchases
|              | of Equity Securities                                        | 40  
|Item 3 -      | Defaults Upon Senior Securities                             | 41  
|Item 4 -      | Submission of Matters to a Vote of Security Holders         | 42  
|Item 5 -      | Other Information                                           | 42  
|Item 6 -      | Exhibits and Reports on Form 8-K                            | 43  
|Signatures    |                                                             | 44  
|Exhibit Index |                                                             | 45  

2

---

# TierOne Corporation
and SubsidiariesConsolidated Balance Sheets June 30, 2004 (Unaudited) and December 31,
2003

|(Dollars in thousands, except per share data)                    | June 30, 2004 | December 31, 2003
|---------------------------------------------------------------- | ------------- | -----------------
|ASSETS                                                           |               |                  
|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 $10,864 and $7,083 at |               |                  
|June 30, 2004 and December 31, 2003, respectively)               |               |                  
|Allowance for loan losses                                        |               |                  
|                                                                
|Net loans after allowance for loan losses                        |               |                  
|                                                                
|Federal Home Loan Bank stock                                     |               |                  
|Premises and equipment, net                                      |               |                  
|Accrued interest receivable                                      |               |                  
|Other assets                                                     |               |                  
|                                                                
|Total assets                                                     |               |                  
|                                                                
|LIABILITIES AND SHAREHOLDERS' EQUITY                             |               |                  
|Liabilities:                                                     |               |                  
|Deposits                                                         |               |                  
|Advances from Federal Home Loan Bank and other borrowings        |               |                  
|Advance payments from borrowers for taxes, insurance and         |               |                  
|other escrow funds                                               |               |                  
|Accrued interest payable                                         |               |                  
|Accrued expenses and other liabilities                           |               |                  
|                                                                
|Total liabilities                                                |               |                  
|                                                                
|Shareholders' 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;    |               |                  
|18,285,811 and 20,317,568 shares issued and outstanding at       |               |                  
|June 30, 2004 and December 31, 2003, respectively                |               |                  
|Additional paid-in capital                                       |               |                  
|Retained earnings, substantially restricted                      |               |                  
|Treasury stock, at cost; 4,289,264 and 2,257,507 shares at       |               |                  
|June 30, 2004 and December 31, 2003                              |               |                  
|Unallocated common stock held by Employee Stock                  |               |                  
|Ownership Plan                                                   |               |                  
|Unearned common stock held by Management                         |               |                  
|Recognition and Retention Plan                                   |               |                  
|Accumulated other comprehensive income (loss), net               |               |                  
|                                                                
|Total shareholders' equity                                       |               |                  
|                                                                
|Commitments and contingent liabilities                           |               |                  
|                                                                
|Total liabilities and shareholders' equity                       |               |                  
|                                                                

See accompanying notes to
consolidated financial statements.

3

---

# TierOne Corporation
and SubsidiariesConsolidated Statements of Income (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                                            |                                     |                                  
|Advances from Federal Home Loan Bank and other      |                                     |                                  
|borrowings                                          |                                     |                                  
|                                                   
|Total interest expense                              |                                     |                                  
|                                                   
|Net interest income                                 |                                     |                                  
|Provision for loan losses                           |                                     |                                  
|                                                   
|Net interest income after provision for loan losses |                                     |                                  
|                                                   
|Noninterest income:                                 |                                     |                                  
|Fees and service charges                            |                                     |                                  
|Income (loss) from real estate operations, net      |                                     |                                  
|Net gain on sales of:                               |                                     |                                  
|Investment securities                               |                                     |                                  
|Loans held for sale                                 |                                     |                                  
|Real estate owned                                   |                                     |                                  
|Gain on pension plan curtailment                    |                                     |                                  
|Other operating income                              |                                     |                                  
|                                                   
|Total noninterest income                            |                                     |                                  
|                                                   
|Noninterest expense:                                |                                     |                                  
|Salaries and employee benefits                      |                                     |                                  
|Occupancy, net                                      |                                     |                                  
|Data processing                                     |                                     |                                  
|Advertising                                         |                                     |                                  
|Other operating expense                             |                                     |                                  
|                                                   
|Total noninterest expense                           |                                     |                                  
|                                                   
|Income before income taxes                          |                                     |                                  
|Income tax expense                                  |                                     |                                  
|                                                   
|Net income                                          |                                     |                                  
|                                                   
|Net income per common share, basic                  |                                     |                                  
|                                                   
|Net income 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.

4

---

# TierOne Corporation
and Subsidiaries Consolidated Statements of Changes in Shareholders Equity and
Comprehensive IncomeSix Months Ended June 30, 2004 and June 30, 2003  (Unaudited)

|(Dollars in thousands)                  | Common
Stock | Additional
Paid-In
Capital | Retained
Earnings,
Substantially
Restricted | Treasury
Stock | Unallocated
Common Stock
Held by the
Employee
Stock
Ownership
Plan | Unearned
Common Stock
Held by the
Management
Recognition
and
Retention
Plan | Accumulated
Other
Comprehensive
Income (Loss),
Net | Total
Shareholders'
Equity
|--------------------------------------- | ------------ | -------------------------- | ------------------------------------------- | -------------- | ------------------------------------------------------------------ | --------------------------------------------------------------------------- | -------------------------------------------------- | --------------------------
|Balance at December 31, 2002            |              |                            | $                                           | 226            |                                                                    | $                                                                           | 355,741                                            |                           
|                                       
|Common stock earned by                  |              |                           
|employees in Employee                   |              |                           
|Stock Ownership Plan                    |              |                            |                                             | --             |                                                                    |                                                                             | 557                                                |                           
|Common stock purchased by the           |              |                           
|Management Recognition and              |              |                           
|Retention Plan                          |              |                            |                                             | --             |                                                                    |                                                                             | (97                                                | )                         
|Amortization of awards under the        |              |                           
|Management Recognition and              |              |                           
|Retention Plan                          |              |                            |                                             | --             |                                                                    |                                                                             | --                                                 |                           
|Comprehensive income:                   |              |                           
|Net income                              |              |                            |                                             | --             |                                                                    |                                                                             | --                                                 |                           
|Change in unrealized loss on            |              |                           
|available for sale securities,          |              |                           
|net of tax and                          |              |                           
|reclassification  adjustment            |              |                            |                                             | --             |                                                                    |                                                                             | --                                                 |                           
|                                       
|Total comprehensive income              |              |                            |                                             | --             |                                                                    |                                                                             | --                                                 |                           
|                                       
|Balance at June 30, 2003                |              |                            | $                                           | 226            |                                                                    | $                                                                           | 356,201                                            |                           
|                                       
|Balance at December 31, 2003            |              |                            | $                                           | 226            |                                                                    | $                                                                           | 354,054                                            |                           
|                                       
|Common stock earned by                  |              |                           
|employees in Employee                   |              |                           
|Stock Ownership Plan                    |              |                            |                                             | --             |                                                                    |                                                                             | 914                                                |                           
|Amortization of awards under            |              |                           
|the Management Recognition              |              |                           
|and Retention Plan                      |              |                            |                                             | --             |                                                                    |                                                                             | 83                                                 |                           
|Repurchase of common                    |              |                           
|stock (2,031,757 shares)                |              |                            |                                             |                |                                                                    |                                                                             |                                                    |                           
|Dividends paid ($0.10 per common share) |              |                            |                                             | --             |                                                                    |                                                                             | --                                                 |                           
|Comprehensive income:                   |              |                           
|Net income                              |              |                            |                                             | --             |                                                                    |                                                                             | --                                                 |                           
|Change in additional minimum            |              |                           
|pension liability, net of tax           |              |                            |                                             | --             |                                                                    |                                                                             | --                                                 |                           
|Change in unrealized gain on            |              |                           
|available for sale securities,          |              |                           
|net of tax and                          |              |                           
|reclassification adjustment             |              |                            |                                             | --             |                                                                    |                                                                             | --                                                 |                           
|                                       
|Total comprehensive income              |              |                            |                                             | --             |                                                                    |                                                                             | --                                                 |                           
|                                       
|Balance at June 30, 2004                |              |                            | $                                           | 226            |                                                                    | $                                                                           | 355,051                                            |                           
|                                       

See accompanying notes to
consolidated financial statements.

5

---

# TierOne Corporation
and SubsidiariesConsolidated Statements of Cash Flows Six Months Ended June 30, 2004 and
June 30, 2003(Unaudited)

|                                                                           | June 30,
|-------------------------------------------------------------------------- | --------
|
|Reconciliation of net income to net cash provided by operating activities: |         
|Net income                                                                 |         
|Adjustments to reconcile net income to net cash provided by                |         
|operating activities:                                                      |         
|Net premium amortization of investment and mortgage-backed securities      |         
|Depreciation and amortization                                              |         
|Employee Stock Ownership Plan expense                                      |         
|Management Recognition and Retention Plan expense                          |         
|Amortization of premiums on net loans                                      |         
|Federal Home Loan Bank stock dividend                                      |         
|Deferred income tax expense (benefit)                                      |         
|Provision for loan losses                                                  |         
|Proceeds from sales of loans held for sale                                 |         
|Originations and purchases of loans held for sale                          |         
|Net (gain) loss on sales of:                                               |         
|Investment securities                                                      |         
|Loans held for sale                                                        |         
|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 sale of investment 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     |         
|Increase in loans receivable                                               |         
|Purchase of Federal Home Loan Bank stock                                   |         
|Additions to premises and equipment                                        |         
|Proceeds from sale of real estate owned                                    |         
|                                                                          
|Net cash used in investing activities                                      |         
|                                                                          

See accompanying notes to
consolidated financial statements.

6

---

# TierOne Corporation
and SubsidiariesConsolidated Statements of Cash Flows (continued)Six Months Ended June
30, 2004 and June 30, 2003 (Unaudited)

|                                                                               | June 30,
|------------------------------------------------------------------------------ | --------
|
|Cash flows from financing activities:                                          |         
|Net increase in deposits                                                       |         
|Net advances (repayment) on Federal Home Loan Bank line of credit              |         
|and short-term advances and other borrowings                                   |         
|Proceeds from Federal Home Loan Bank long-term advances and other borrowings   |         
|Repayments of Federal Home Loan Bank long-term advances and other borrowings   |         
|Proceeds from junior subordinated debentures                                   |         
|Net increase (decrease) in advances from borrowers for taxes,                  |         
|insurance and other escrow funds                                               |         
|Repurchase of common stock                                                     |         
|Dividends paid on common stock                                                 |         
|Purchase of common stock for Management Recognition and Retention Plan         |         
|                                                                              
|Net cash provided by financing activities                                      |         
|                                                                              
|Net 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 |         
|                                                                              

See accompanying notes to
consolidated financial statements.

7

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 1  Basis of
Presentation

TierOne Corporation (the
Company) is a Wisconsin corporation headquartered in Lincoln, Nebraska.
TierOne Corporation is the holding company for TierOne Bank (the Bank). At
June 30, 2004, TierOne Bank operated from 57 banking offices located in Nebraska, Iowa and
Kansas, three loan production offices located in Colorado and one loan production office
located in Minnesota.

# Note 2  Basis of
Consolidation

The consolidated financial statements
include the accounts of the Bank and its wholly owned subsidiary, TMS Corporation of the
Americas (TMS). TMS is the holding company of TierOne Investments and
Insurance, Inc., a wholly owned subsidiary that administers the sale of insurance and
securities products, and TierOne Reinsurance Company, a wholly owned subsidiary that
reinsures credit life and disability insurance policies.

The accompanying interim consolidated
financial statements as of June 30, 2004 and for the three and six months ended June 30,
2004 and June 30, 2003 have not been audited by independent auditors. 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. The interim consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2003. The
results of operations for the three and six months ended June 30, 2004 are not necessarily
indicative of the results which may be expected for the entire calendar year 2004.

8

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 3  Earnings
Per Share

Basic and diluted earnings per share
(EPS) data are based on the weighted average number of common shares
outstanding during each reporting period. Employee Stock Ownership Plan (ESOP)
and 2003 Management Recognition and Retention Plan (MRRP) shares not committed
to be released are not considered to be outstanding for purposes of EPS calculations. The
basic EPS calculation excludes the dilutive effect of all common stock equivalents.
Diluted EPS is further adjusted for potential common shares that were dilutive and
outstanding during the reporting periods. The Companys potentially dilutive common
shares at June 30, 2004 represent shares issuable under its 2003 Stock Option Plan and
MRRP computed using the treasury stock method. All stock options awarded are assumed to be
100% vested for purposes of the EPS computations.

|                                                    | Three Months Ended
June 30, 2004 | Six Months Ended
June 30, 2004
|--------------------------------------------------- | -------------------------------- | ------------------------------
|
|Net income                                          |                                  |                               
|                                                   
|Weighted average number of common shares            |                                  |                               
|outstanding used in basic earnings per share        |                                  |                               
|calculation (in 000's)                              |                                  |                               
|                                                   
|Common share equivalents - 2003 Stock Option Plan   |                                  |                               
|and 2003 Management Recognition and Retentiion Plan |                                  |                               
|shares (in 000's)                                   |                                  |                               
|                                                   
|Weighted average number of common shares            |                                  |                               
|outstanding used in diluted earnings per share      |                                  |                               
|calculation (in 000's)                              |                                  |                               
|                                                   
|Earnings per share                                  |                                  |                               
|                                                   

9

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 4  Investment
and Mortgage-Backed Securities

Investment and mortgage-backed
securities at June 30, 2004 and December 31, 2003 are summarized in the following table:

|                                     | June 30, 2004
|------------------------------------ | -------------
|
|
|Held to maturity:                    |              
|Municipal obligations                |              
|                                    
|Available for sale:                  |              
|Mortgage-backed securities           |              
|U.S. Government agency obligations   |              
|Corporate securities                 |              
|Asset Management Fund - ARM Fund     |              
|                                    
|Total investment and mortgage-backed |              
|securities, available for sale       |              
|                                    
|
|
|
|Held to maturity:                    |              
|Municipal obligations                |              
|                                    
|Available for sale:                  |              
|Mortgage-backed securities           |              
|U.S. Government agency obligations   |              
|Corporate securities                 |              
|Asset Management Fund - ARM Fund     |              
|                                    
|Total investment and mortgage-backed |              
|securities, available for sale       |              
|                                    

10

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 5  Loan
Portfolio Composition

The following table shows the
composition of the Banks loan portfolio by type of loan at the dates indicated:

|                                          | June 30, 2004 | December 31, 2003
|----------------------------------------- | ------------- | -----------------
|
|Real estate loans:                        |               |                  
|One-to-four family residential (1)        |               |                  
|Second mortgage residential               |               |                  
|Multi-family residential                  |               |                  
|Commercial real estate and land           |               |                  
|Residential construction                  |               |                  
|Commercial construction                   |               |                  
|                                         
|Total real estate loans                   |               |                  
|                                         
|Business loans                            |               |                  
|                                         
|Warehouse mortgage lines of credit        |               |                  
|                                         
|Consumer loans:                           |               |                  
|Home equity                               |               |                  
|Home equity line of credit                |               |                  
|Home improvement                          |               |                  
|Automobile                                |               |                  
|Other                                     |               |                  
|                                         
|Total consumer loans                      |               |                  
|                                         
|Total loans                               |               |                  
|                                         
|Unamortized premiums, discounts and       |               |                  
|deferred loan fees                        |               |                  
|Undisbursed portion of construction and   |               |                  
|land development loans in process         |               |                  
|                                         
|Net loans                                 |               |                  
|Allowance for loan losses                 |               |                  
|                                         
|Net loans after allowance for loan losses |               |                  
|                                         
|(1) Includes loans held for sale          |               |                  
|                                         

11

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 6  Allowance
for Loan Losses

The following table sets forth the
activity in the allowance for loan losses during the periods indicated:

|                                               | At or for the Three Months Ended
June 30, | At or for the Six Months Ended
June 30,
|---------------------------------------------- | ----------------------------------------- | ---------------------------------------
|
|Allowance for loan losses, beginning of period |                                           |                                        
|Provision for loan losses                      |                                           |                                        
|Charge-offs                                    |                                           |                                        
|Recoveries on loans previously charged-off     |                                           |                                        
|                                              
|Allowance for loan losses, end of period       |                                           |                                        
|                                              
|Allowance for loan losses as a                 |                                           |                                        
|percentage of net loans                        |                                           |                                        
|                                              

12

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 7 
Nonperforming Assets

The following table sets forth information
with respect to nonperforming assets and troubled debt restructurings at the dates
indicated. It is the Banks policy to cease accruing interest on loans 90 days or
more past due and to charge off accrued interest. Total impaired loans amounted to
approximately $1.1 million and $864,000 at June 30, 2004 and December 31, 2003,
respectively. There was an allowance for loan loss of $0 and $50,000 specifically
allocated to impaired loans at June 30, 2004 and December 31, 2003, respectively.

|(Dollars in thousands)                                                                      | June 30, 2004 | December 31, 2003
|------------------------------------------------------------------------------------------- | ------------- | -----------------
|Non-accruing loans:                                                                         |               |                  
|One-to-four family residential                                                              |               |                  
|Second mortgage residential                                                                 |               |                  
|Multi-family residential                                                                    |               |                  
|Commercial real estate and land                                                             |               |                  
|Residential construction                                                                    |               |                  
|Commercial construction                                                                     |               |                  
|Business                                                                                    |               |                  
|Warehouse mortgage lines of credit                                                          |               |                  
|Consumer                                                                                    |               |                  
|                                                                                           
|Total non-accruing loans                                                                    |               |                  
|Real estate owned, net (1)                                                                  |               |                  
|                                                                                           
|Total nonperforming assets                                                                  |               |                  
|Troubled debt restructurings                                                                |               |                  
|                                                                                           
|Total nonperforming assets and troubled debt restructurings                                 |               |                  
|                                                                                           
|Total nonperforming loans as a percent of net loans                                         |               |                  
|                                                                                           
|Total nonperforming assets as a percent of total assets                                     |               |                  
|                                                                                           
|Total nonperforming assets and troubled debt restructurings                                 |               |                  
|as a percent of total assets                                                                |               |                  
|                                                                                           
|Allowance for loan losses as a percent of net loans                                         |               |                  
|                                                                                           
|Allowance for loan losses as a percent of nonperforming loans                               |               |                  
|                                                                                           
|(1) Real estate owned balances are shown net of related loss allowances. Includes both real |               |                  
|property and other repossessed collateral consisting primarily of automobiles.              |               |                  
|                                                                                           

13

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 8  Mortgage
Servicing Rights

Mortgage servicing rights are
included in the consolidated balance sheets under the caption Other Assets.
The activity of mortgage servicing rights during the periods presented is summarized in
the following table:

|                                      | 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              |                             |                          
|                                     

The activity of 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                        |                             |                          
|                                               

The following table compares the key
assumptions used in measuring the fair values of mortgage servicing rights at June 30,
2004 and December 31, 2003:

|(Dollars in thousands)             | June 30, 2004   | December 31, 2003
|---------------------------------- | --------------- | -----------------
|Serviced loan portfolio balance    | $1,009,659      | $956,744         
|Fair value                         | $11,350         | $9,173           
|Prepayment speed                   | 5.46% - 63.96%  | 7.56% - 76.44%   
|Weighted average prepayment speed  | 13.56%          | 23.08%           
|Fair value with 10% adverse change | $10,856         | $8,673           
|Fair value with 20% adverse change | $10,372         | $8,218           
|Discount rate                      | 10.00% - 15.50% | 9.00% - 15.00%   
|Weighted average discount rate     | 11.58%          | 10.74%           
|Fair value with 10% adverse change | $10,925         | $8,863           
|Fair value with 20% adverse change | $10,510         | $8,575           
|                                  

14

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 9 
Stock-Based Benefit Plans

The Company has in effect the MRRP,
which is a stock-based incentive plan. The following table summarizes shares of the
Companys common stock which were subject to award and were granted in April 2003
pursuant to the MRRP:

|                                                                     | June 30, 2004
|-------------------------------------------------------------------- | -------------
|Common shares authorized to be awarded by the Management Recognition |              
|and Retention Plan                                                   | 903,003      
|Common shares awarded by Management Recognition and Retention Plan   | (764,850)    
|Common shares forfeited                                              | --           
|                                                                    
|Shares available for award at June 30, 2004                          | 138,153      
|                                                                    

The shares awarded under the MRRP
vest at the rate of 20% per year. As a result, expense for MRRP awards is being recorded
over a 60-month period from the date of grant and is based on the market value of the
Companys stock as of the date the awards were made. The remaining unamortized cost
of the MRRP shares awarded to date is reflected as a reduction in shareholders
equity. Expense under the MRRP for the three and six months ended June 30, 2004 was
$682,000 and $1.4 million, respectively, compared to $500,000 for the three and six month
periods ended June 30, 2003.

The Company established the 2003
Stock Option Plan (SOP) under which 2,257,508 shares of Company common stock
are reserved for issuance pursuant to the grant of stock options to directors, officers
and employees. Stock options awarded under the SOP vest at the rate of 20% per year. The
exercise price of the options is equal to the fair market value of the common stock on the
grant date. At June 30, 2004, 1,852,750 stock options had been granted at an exercise
price of $17.83. There were no stock options exercised or forfeited during the three and
six months ended June 30, 2004.

At June 30, 2004, 20% of the options
granted were exercisable, the weighted-average remaining contractual life of outstanding
options was 8.82 years, and there were 404,758 shares remaining available for future
grants under the terms of the SOP.

The Company accounts for its stock
options in accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB No. 25). Under the provisions of APB No.
25, since the exercise price of the Companys employees stock options equals
the market price of the underlying stock on the date of grant, no compensation expense is
recognized. Compensation expense for shares granted under the MRRP is ratably recognized
over the period of service, usually the vesting period, based on the fair value of the
stock on the date of grant. See Note 13 for a discussion of a proposed new statement
issued by the Financial Accounting Standards Board (FASB) which would result
in a change in the accounting for equity-based compensation.

15

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

Pursuant to FASB Statement No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123), pro forma net
income and pro forma EPS are presented in the following table as if the fair value method
of accounting for stock-based compensation plans had been utilized:

|                                         | Three Months Ended June 30, | Six Months Ended June 30,
|---------------------------------------- | --------------------------- | -------------------------
|
|Net income (as reported)                 |                             |                          
|Add:  stock-based employee compensation  |                             |                          
|expense included in reported net income, |                             |                          
|net of related tax effects               |                             |                          
|Deduct: total stock-based employee       |                             |                          
|compensation expense determined under    |                             |                          
|fair value based method for all awards,  |                             |                          
|net of related tax effects               |                             |                          
|                                        
|Pro forma net income                     |                             |                          
|                                        
|Basic earnings per share (as reported)   |                             |                          
|Pro forma basic earnings per share       |                             |                          
|Diluted earnings per share (as reported) |                             |                          
|Pro forma diluted earnings per share     |                             |                          
|                                        

The pro forma results above may not
be representative of the effect on net income in future periods.

The fair value of the option grants was
estimated using the Black Scholes option value model, with the following assumptions:
dividend yield of 1.00%, expected volatility of 13.2%, risk-free interest rate of 3.5% and
an original expected life of ten years for all options granted.

16

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 10  Defined
Benefit Pension Plan

On March 31, 2004, the Company merged
its single-employer defined benefit pension plan and transferred all pension plan assets
and future plan obligations to an unrelated third party plan. This transaction resulted in
a $1.5 million pre-tax gain for the three months ended March 31, 2004 from the curtailment
of the liability associated with the plan.

17

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 11  Deposits

The following table shows the
composition of the Banks deposits by type at the dates indicated:

|                             | June 30, 2004 | December 31, 2003
|---------------------------- | ------------- | -----------------
|
|                            
|Transaction accounts:        |               |                  
|Noninterest-bearing checking |               |                  
|Savings                      |               |                  
|Interest-bearing checking    |               |                  
|Money market                 |               |                  
|                            
|Total transaction accounts   |               |                  
|                            
|Time deposits:               |               |                  
|1.00% to 2.99%               |               |                  
|3.00% to 4.99%               |               |                  
|5.00% to 6.99%               |               |                  
|                            
|Total time deposits          |               |                  
|                            
|Total deposits               |               |                  
|                            

18

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 12  Federal
Home Loan Bank Advances and Other Borrowings

At June 30, 2004 and December 31,
2003, the Company was indebted on notes as shown in the following table:

|(Dollars in thousands)                  | June 30, 2004 | December 31, 2003
|--------------------------------------- | ------------- | -----------------
|Permanent fixed-rate notes payable to   |               |                  
|the Federal Home Loan Bank              |               |                  
|Convertible fixed-rate notes payable to |               |                  
|the Federal Home Loan Bank              |               |                  
|Line of credit with the                 |               |                  
|Federal Home Loan Bank                  |               |                  
|Adjustable-rate note payable to the     |               |                  
|Federal Home Loan Bank                  |               |                  
|Retail repurchase agreements            |               |                  
|Junior subordinated debentures          |               |                  
|                                       
|Total Federal Home Loan Bank            |               |                  
|advances and other borrowings           |               |                  
|                                       

The convertible fixed-rate notes are
convertible to adjustable-rate notes at the option of the Federal Home Loan Bank
(FHLB), with call dates ranging from August 2004 to January 2008. The line of
credit with the FHLB expires in November 2004.

On April 26, 2004, the Company formed
a trust (TierOne Capital Trust I) which issued capital securities (Trust
Preferred Securities) to investors. The proceeds from the sale of the Trust
Preferred Securities were used to purchase junior subordinated debentures issued by the
Company. The Companys obligations under the junior subordinated debentures
constitute a full and unconditional guarantee by the Company of TierOne Capital
Trusts obligations under the Trust Preferred Securities. In accordance with
Interpretation No. 46 (Revised), Consolidation of Variable Interest
Entities (FIN 46R), the trust is not consolidated and related
amounts are treated as debt of the Company.

19

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

# Note 13  Recent
Accounting Pronouncements

For discussion regarding accounting
pronouncements, interpretations, exposure drafts and other formal accounting guidance and
the impact on the Company, reference is made to the Companys Annual Report on Form
10-K for the year ended December 31, 2003. The following discussion identifies accounting
guidance issued during 2004.

In March 2004, the FASB issued Staff
Accounting Bulletin No. 105 (SAB 105), Loan Commitments Accounted for as
Derivative Instruments. The requirements of SAB 105 require entities that enter into
mortgage loan commitments to disclose their accounting policy for such commitments and
include the methods and assumptions used to estimate the fair value of loan commitments in
the financial statements. Additionally, any hedging strategy associated with mortgage loan
commitments is required to be disclosed. The requirements of SAB 105 must be applied to
mortgage loan commitments that are accounted for as derivatives and are entered into after
March 31, 2004. SAB 105 permits entities to continue using previously applied accounting
policies to loan commitments entered into on or before March 31, 2004. The adoption of SAB
105 did not have a material impact on the Companys consolidated financial
statements.

On March 31, 2004, the FASB published
an Exposure Draft, Share-Based Payment, an Amendment of FASB Statements No. 123 and No.
95 (the Exposure Draft). FASB is proposing, among other things, amendments
to SFAS No. 123 and thus, the manner in which share-based compensation, such as stock
options, will be accounted for by both public and non-public companies. For public
companies, the cost of employee services received in exchange for equity instruments
including options and restricted stock awards generally would be measured at fair value at
the grant date. The grant date fair value would be estimated using option-pricing models
adjusted for the unique characteristics of those options and instruments (unless
observable market prices for the same or similar options are available). The cost would be
recognized over the requisite service period (often the vesting period). The cost of
employee services received in exchange for liabilities would be measured initially at the
fair value (rather than the previously allowed intrinsic value under APB Opinion No. 25,
Accounting for Stock Issued to Employees) of the liabilities and would be
remeasured subsequently at each reporting date through settlement date.

The proposed changes in accounting
would replace existing requirements under SFAS No. 123, Accounting for Stock-Based
Compensation, and would eliminate the ability to account for share-based compensation
transactions using APB Opinion No. 25 which did not require companies to expense options.
Under the terms of the Exposure Draft, the accounting for similar transactions involving
parties other than employees or the accounting for employee stock ownership plans that are
subject to AICPA Statement of Position 93-6, Employers Accounting for Employee
Stock Ownership Plans, would remain unchanged.

20

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements(Unaudited)

The Exposure Draft provides that the
proposed statement would be applied to public entities prospectively for fiscal years
beginning after December 31, 2004, as if all share-based compensation awards vesting,
granted, modified, or settled after December 15, 1994 had been accounted for using the
fair value-based method of accounting.

The FASB solicited comments on the
Exposure Draft through June 30, 2004 and is expected to issue the final statement in the
fourth quarter of 2004.

21

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

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

# General

The Bank, a subsidiary of the
Company, is a $2.3 billion federally chartered stock savings bank headquartered in
Lincoln, Nebraska. Established in 1907, the Bank offers customers a wide variety of
full-service consumer and commercial banking products and services through a
geographically diverse network of 57 banking offices located in Nebraska, Iowa and Kansas,
three loan production offices located in Colorado and one loan production office located
in Minnesota. Product offerings include residential and commercial real estate loans;
consumer, construction and business loans; warehouse mortgage lines of credit; consumer
and business checking and savings plans; investment and insurance services; and telephone
and internet banking.

The Companys results of
operations depend, to a large extent, on net interest income, which is the difference
between the income earned on its loan and investment securities portfolios and the cost of
funds, consisting of the interest paid on deposits and borrowings. Noninterest income,
noninterest expense and provisions for loan losses also affect results of operations.
Noninterest income consists primarily of fees and service charges related to deposit and
lending activities and gains on loans held for sale. Noninterest expense consists of
compensation and employee benefits, office occupancy and equipment, data processing,
advertising and other operating expense. The Companys results of operations are also
significantly affected by general economic and competitive conditions, particularly
changes in interest rates, government policies and actions of regulatory authorities.
Future changes in applicable law, regulations or government policies may materially impact
the Companys financial condition and results of operations.

On March 31, 2004, the Company
announced that it had entered into a definitive agreement to acquire United Nebraska
Financial Co. (UNFC), the holding company of United Nebraska Bank
(UNB) headquartered in Grand Island, Nebraska. The reported assets of UNFC
also include an investment in a national bank subsidiary in suburban Phoenix, Arizona,
United Arizona Bank (UAB), which will be sold prior to the completion of the
transaction. The Company will pay $97.3 million in cash, subject to a post-closing
adjustment, to acquire UNFC. The purchase price represents approximately 1.9 times
UNFCs December 31, 2003 stated book value of $51.8 million. At December 31, 2003,
UNB operated from 16 banking offices located in Broken Bow, Burwell, Callaway, Columbus,
Grand Island, Holdrege, Lexington, North Platte, Omaha, ONeill and Ord, Nebraska. At
March 31, 2004, UNB had total assets of $506.3 million. The Company received regulatory
approvals to acquire UNFC on July 26, 2004 with closing anticipated in the third quarter
of 2004.

22

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

As used in this report, unless the
context otherwise requires, the terms we, us, or our
refer to TierOne Corporation, a Wisconsin corporation, and our wholly owned subsidiary,
TierOne Bank, a federally chartered stock savings bank.

# 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. Factors which could result in material variations include, but are not limited
to, changes in interest rates which could affect net interest margins and net interest
income; competitive factors which could affect net interest income and noninterest income;
changes in demand for loans, deposits and other financial services in the Companys
market area; unanticipated issues that could negatively impact the historic redeposit rate
of maturing time deposits; changes in asset quality and general economic conditions;
unanticipated issues associated with the execution of the Companys strategic plan;
unanticipated difficulties in realizing the growth opportunities and cost savings from the
acquisition of UNFC, unanticipated issues related to the completion of the acquisition and
the resultant integration of UNFC. and UNB; as well as other factors discussed in
documents filed by the Company 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. The Company assumes no obligation,
and disclaims any obligation, to update information contained in this quarterly report on
Form 10-Q, including forward-looking statements, to reflect events or circumstances that
occur after the date on which such statements were made.

23

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

# Critical Accounting
Policies

# Allowance for Loan Losses

We have identified the evaluation of the
allowance for loan losses as a critical accounting policy where amounts are sensitive to
material variation. This policy is significantly affected by our judgment and
uncertainties and there is a likelihood that materially different amounts would 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);
| | - | -----------------------------------------------------------------------------------------------------------

| |  | 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 management believes 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 quarterly 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:

| |  | An
analysis of delinquency trends;
| | - | ----------------------------------

| |  | Nonperforming
loan trends;
| | - | --------------------------

| |  | Levels
of charge-offs and recoveries;
| | - | -------------------------------------

| |  | Prior
loss experience;
| | - | ----------------------

| |  | Total
loans outstanding;
| | - | ------------------------

| |  | Volume
of loan originations;
| | - | ----------------------------

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

| |  | Value
of collateral securing loans;
| | - | -----------------------------------

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

| |  | General
economic conditions.
| | - | ----------------------------

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

24

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

The allowance for loan losses
consists of 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.

25

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

# Comparison of Financial
Condition at June 30, 2004 and December 31, 2003

Our total assets were $2.3 billion at
June 30, 2004, a $47.4 million, or 2.1%, increase from December 31, 2003, due primarily to
an increase in net loans. Our available for sale investment securities amounted to $37.7
million at June 30, 2004, a $5.8 million, or 13.4%, decrease from December 31, 2003. The
decrease in our available for sale investment securities was primarily due to the sale of
four securities resulting in $13.8 million in proceeds (includes $312,000 in net gains on
sales) and the maturity of a $3.9 million security partially offset by security purchases
of $12.0 million during the six months ended June 30, 2004. Our mortgage-backed securities
portfolio, all of which are recorded as available for sale, amounted to $12.8 million at
June 30, 2004, a $2.9 million, or 18.5%, decrease from December 31, 2003. The decrease in
our mortgage-backed securities portfolio was primarily the result of principal payments
received in the amount of $2.8 million during the six months ended June 30, 2004.

Net loans, including loans held for
sale, totaled $2.1 billion at June 30, 2004, a $52.7 million, or 2.6%, increase from
December 31, 2003. At June 30, 2004 our one-to-four family residential loans, including
loans held for sale, totaled $472.1 million, an $87.1 million, or 15.6%, decrease compared
to December 31, 2003. The decrease in one-to-four family residential loans is primarily
the result of a decline in new loan volume associated with loan purchasing and refinancing
activity. During the six months ended June 30, 2004, we purchased $30.5 million of
adjustable-rate first mortgage loans secured by one-to-four family residential properties
located in geographically diverse markets across the United States in an effort to
reinvest proceeds from loan prepayments. Second mortgage residential loans totaled $267.8
million at June 30, 2004, a $9.7 million, or 3.8%, increase from December 31, 2003. During
the six months ended June 30, 2004, we purchased $72.1 million of fixed-rate second
mortgage residential loans which were partially offset by principal payments and
prepayments. Commercial real estate and land loans amounted to $453.1 million, a $4.0
million, or 0.9%, increase compared to $449.2 million at December 31, 2003. Our
residential construction loans totaled $306.6 million, a $60.8 million, or 24.8%, increase
compared to $245.8 million at December 31, 2003. During the six months ended June 30,
2004, we purchased $132.1 million of adjustable-rate residential construction loans which
was partially offset by payoffs on completed construction. Commercial construction loans
increased $39.6 million, or 25.7%, to $193.9 million compared to $154.2 million at
December 31, 2003. The increase is primarily attributable to increased origination of
commercial construction loans in our primary lending market area (Nebraska, Iowa, Kansas
and Colorado).Warehouse mortgage lines of credit amounted to $111.2 million, a $32.5
million, or 41.2%, increase at June 30, 2004 compared to $78.8 million at December 31,
2003. The increase in our warehouse mortgage lines of credit was attributable to an
increased level of mortgage refinancing and additional broker relationships established
during 2004. Our consumer loan portfolio totaled $320.2 million at June 30, 2004, a $10.5
million, or 3.4%, increase compared to $309.7 million at December 31, 2003.

26

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

Our total liabilities were $2.0
billion at June 30, 2004, a $78.9 million, or 4.1%, increase compared to $1.9 billion at
December 31, 2003. Our total deposits increased by $107.3 million, or 8.8%, to $1.3
billion at June 30, 2004 compared to $1.2 billion at December 31, 2003. Time deposits
increased $115.3 million, or 19.7%, to $701.1 million at June 30, 2004 compared to $585.8
million at December 31, 2003. The increase in time deposits was attributable to special
marketing promotions offering terms of 14- and 19-months. Included in our time deposits at
June 30, 2004 are $65.5 million of brokered time deposits. We utilized brokered time
deposits as an alternative source of funds for loan origination and purchase activity. Our
interest-bearing checking accounts totaled $294.6 million, a $557,000, or 0.2%, decrease
compared to $295.1 million at December 31, 2003. Noninterest-bearing checking accounts
increased $6.8 million, or 15.0%, to $52.1 million at June 30, 2004 compared to $45.3
million at December 31, 2003. Our money market accounts totaled $254.8 million, a $16.1
million, or 5.9%, decrease compared to December 31, 2003. We utilized our increased
deposits to fund loan origination and purchase activities and to repay FHLB advances. Our
FHLB advances and other borrowings amounted to $619.8 million at June 30, 2004, a $25.9
million, or 4.0%, decrease from December 31, 2003. We completed the issuance of $30.0
million of trust preferred securities at a variable interest rate indexed to the
three-month LIBOR rate. The securities, which are callable at par in June 2009 and mature
in June 2034, were issued to provide funding for common stock repurchases and other
general corporate purposes.

At June 30, 2004, shareholdersequity
totaled $263.6 million, a decrease of $31.5 million, or 10.7%, from December 31, 2003.
The decrease in shareholders equity primarily reflects the purchase of 2,031,757
shares of common stock at a cost of $44.7 million and $1.8 million in dividends paid to
the Companys shareholders partially offset by net income of $11.6 million for the
six months ended June 30, 2004, $1.7 million related to common stock earned by
participants in the Employee Stock Ownership Plan (ESOP) and $1.4 million
related to the amortization of awards under the Management Recognition and Retention Plan
(MRRP). The Company paid a cash dividend of $0.05 per common share payable on
both March 31, 2004 and June 30, 2004 to shareholders of record on March 15, 2004 and
June 15, 2004. For further discussion regarding the Companys common stock
repurchases, see Part II, Item 2 Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities.

27

---

# Comparison of
Operating Results for the Three and Six Months Ended June 30, 2004 and June 30, 2003

General.         Net
income for the three months ended June 30, 2004 was $5.6 million, or $0.32           per
diluted share ($0.33 per basic share) , compared to net income of $6.1           million,
or $0.29 per diluted and basic share, for the three months ended June           30, 2003.
Net income for the six months ended June 30, 2004 was $11.6 million ,           or $0.66
per diluted share ($0.67 per basic share) compared to net income of           $11.8
million, or $0.57 per diluted and basic share, for the six months ended           June
30, 2003. While net income for the three and six months ended June 30, 2004
          declined when compared to the same periods in 2003, earnings per share for the
          comparative periods increased due to the Companys fulfillment of its
first           two common stock repurchase programs.

The average interest rate spread
declined to 2.84% and 2.92% for the three and six months ended June 30, 2004 compared to
3.11% and 3.16% for the three and six months ended June 30, 2003. Net interest margin
declined to 3.15% and 3.25% for the three and six months ended June 30, 2004 compared to
3.57% and 3.65% for the three and six months ended June 30, 2003. The decline in the
average interest rate spread and net interest margin for the three and six months ended
June 30, 2004 reflected the continued compression on net interest income of historically
low interest rates, which have resulted in continued high levels of prepayments on higher
yielding loans. The average yield on loans receivable declined to 5.19% and 5.28% for the
three and six months ended June 30, 2004 compared to 5.90% and 6.00% for the three and six
months ended June 30, 2003. The ratio of average interest-earning assets to average
interest-bearing liabilities decreased to 116.04% and 116.63% for the three and six months
ended June 30, 2004 compared to 122.41% and 123.12% for the three and six months ended
June 30, 2003. These decreases during the three and six months ended June 30, 2004 and
June 30, 2003 were the result of $70.4 million and $61.5 million, respectively, decline in
the average balance of net interest earnings assets resulting primarily from the
Companys stock repurchase program.

Interest Income.Our total
interest income for the three months ended June 30, 2004 was $28.0 million, a $511,000, or
1.8%, decrease compared to $28.5 million for the three months ended June 30, 2003. For the
six months ended June 30, 2004 our interest income totaled $56.1 million, a $345,000, or
0.6%, decrease compared to $56.4 million for the six months ended June 30, 2003. The
average balance of loans receivable during the three months ended June 30, 2004 was $2.1
billion compared to $1.9 billion for the three months ended June 30, 2003. The weighted
average yield earned on the loan portfolio was 5.19% and 5.90% for the three months ended
June 30, 2004 and June 30, 2003, respectively. The average balance of loans receivable for
the six months ended June 30, 2004 was $2.1 billion compared to $1.8 billion for the six
months ended June 30, 2003. The weighted average yield earned on the loan portfolio was
5.28% and 6.00% for the six months ended June 30, 2004 and June 30, 2003, respectively.
The declines in the yields on loans receivable during the three and six months ended June
30, 2004 compared to the three and six months ended June 30, 2003 was the result of a high
level of repayment and refinancing activity that occurred throughout 2003 and 2004 due to
a historically low interest rate environment.

28

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

Interest Expense.Our total
interest expense for the three months ended June 30, 2004 was $10.8 million, a $446,000,
or 4.3%, increase compared to $10.4 million for the three months ended June 30, 2003. The
average balance of our interest-bearing deposits increased $151.5 million, or 13.8%, to
$1.3 billion for the three months ended June 30, 2004 compared to $1.1 billion for the
three months ended June 30, 2003. Additionally, the average rate paid on interest-bearing
deposits declined to 1.88% for the three months ended June 30, 2004 compared to 2.13% for
the three months ended June 30, 2003, a decrease of 25 basis points or 11.7%. Interest
expense on FHLB advances and other borrowings increased $435,000 to $5.0 million for the
three months ended June 30, 2004 compared to $4.5 million during the three months ended
June 30, 2003. The average balance of our FHLB advances and other borrowings was $620.8
million for the three months ended June 30, 2004, a $67.1 million, or 12.1%, increase
compared to $553.7 million for the three months ended June 30, 2003. Additionally, the
average rate paid on FHLB advances and other borrowings was 3.20% for the three months
ended June 30, 2004 compared to 3.27% for the three months ended June 30, 2003, a seven
basis point decline.

Total interest expense for the six
months ended June 30, 2004 was $21.2 million, a $501,000, or 2.4%, increase compared to
$20.7 million for the six months ended June 30, 2003. The average balance of our
interest-bearing deposits increased $134.8 million, or 12.3%, to $1.2 billion for the six
months ended June 30, 2004 compared to $1.1 billion for the six months ended June 30,
2003. The average rate paid on interest-bearing deposits declined to 1.87% for the six
months ended June 30, 2004 compared to 2.20% for the six months ended June 30, 2003, a
decrease of 33 basis points or 15.0%. Interest expense on FHLB advances and other
borrowings totaled $9.7 million, an increase of $1.1 million, or 12.3%, compared to $8.6
million for the six months ended June 30, 2003. The average balance of our FHLB advances
and other borrowings was $608.5 million for the six months ended June 30, 2004, a $116.9
million, or 23.8%, increase compared to $491.6 million for the six months ended June 30,
2003. The average rate paid on FHLB advances and other borrowings declined to 3.17% for
the six months ended June 30, 2004 compared to 3.50% for the six months ended June 30,
2003, a decrease of 33 basis points or 9.4%.

29

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

Average Balances, Net Interest
Income, and 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, interest rate spread and net interest margin. All
average balances are based on monthly balances. Management does not believe that the
monthly averages differ significantly from what the daily averages would be.

|                                           | Three Months Ended June 30,
|------------------------------------------ | ---------------------------
|
|
|                                          
|Interest-earning assets:                   |                            
|Federal funds sold                         |                            
|Investment securities (1)                  |                            
|Mortgage-backed securities (1)             |                            
|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            |                            
|                                          
|Federal Home Loan Bank                     |                            
|advances and other borrowings              |                            
|                                          
|Total interest-bearing liabilities         |                            
|Noninterest-bearing accounts               |                            
|Other liabilities                          |                            
|                                          
|Total liabilities                          |                            
|Shareholders' equity                       |                            
|                                          
|Total liabilities and shareholders' 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
Federal Home Loan Bank stock.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes
nonaccrual loans during the respective periods.  Calculated net of unamortized premiums,
discounts and deferred fees,      undisbursed portion of construction and land
development loans in process and allowance for loan losses.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Equals
net interest income (annualized) divided by average interest-earning assets.
|--- | -----------------------------------------------------------------------------------

---

30

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

|                                           | Six Months Ended June 30,
|------------------------------------------ | -------------------------
|
|
|                                          
|Interest-earning assets:                   |                          
|Federal funds sold                         |                          
|Investment securities (1)                  |                          
|Mortgage-backed securities (1)             |                          
|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            |                          
|                                          
|Federal Home Loan Bank                     |                          
|advances and other borrowings              |                          
|                                          
|Total interest-bearing liabilities         |                          
|Noninterest-bearing accounts               |                          
|Other liabilities                          |                          
|                                          
|Total liabilities                          |                          
|Shareholders' equity                       |                          
|                                          
|Total liabilities and shareholders' 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
Federal Home Loan Bank stock.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes
nonaccrual loans during the respective periods.  Calculated net of unamortized premiums,
discounts and deferred fees,      undisbursed portion of construction and land
development loans in process and allowance for loan losses.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Equals
net interest income (annualized) divided by average interest-earning assets.
|--- | -----------------------------------------------------------------------------------

---

31

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

Rate/Volume Analysis. The
following table shows the extent to which changes in interest rates and changes in the
volume of interest-earning assets and interest-bearing 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 (i) changes in rate (change in rate multiplied by prior year volume) and (ii) 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, 2004
Compared to
Three Months Ended June 30, 2003 | Six Months Ended June 30, 2004
Compared to
Six Months Ended June 30, 2003
|---------------------------------- | ----------------------------------------------------------------------------- | -------------------------------------------------------------------------
|
|
|                                  
|Interest income:                   |                                                                               |                                                                          
|Federal funds sold                 |                                                                               |                                                                          
|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 deposits                     |                                                                               |                                                                          
|Federal Home Loan Bank advances    |                                                                               |                                                                          
|and other borrowings               |                                                                               |                                                                          
|                                  
|Total interest expense             |                                                                               |                                                                          
|                                  
|Net change in net interest income  |                                                                               |                                                                          
|                                  

|(1) | Calculated
net of unamortized premiums, discounts and deferred fees, undisbursed portion of
construction and land       development loans in process and allowance for loan losses.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

32

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

Provision for Loan Losses. We
made a provision for loan losses of $1.1 million for the three months ended June 30, 2004
compared to $515,000 for the three months ended June 30, 2003, an increase of $590,000, or
114.6%. For the six month period ended June 30, 2004, our provision for loan losses was
$2.0 million, an increase of $352,000, or 20.9%, compared to $1.7 million for the six
months ended June 30, 2003. Our portfolio of commercial real estate and land, construction
(residential and commercial), business and consumer loans totaled $1.4 billion at June 30,
2004, an increase of $261.1 million, or 23.9%, compared to $1.1 billion at June 30, 2003.
These loans are deemed to have higher levels of known and inherent losses than one-to-four
family residential loans due to, among other things, the nature of the collateral and the
dependency on economic conditions for successful completion or operation of the project.
As such, we have made provisions 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 the relevant date. At
June 30, 2004, our total nonperforming loans amounted to $3.5 million, or 0.17% of net
loans, compared to $3.6 million, or 0.18% of net loans, at December 31, 2003. Our total
nonperforming assets totaled $4.6 million, or 0.21%, of total assets, compared to $4.3
million, or 0.19%, of total assets at December 31, 2003. There were no material changes in
non-accruing loans or real estate owned during the three and six month periods ended June
30, 2004. During the three and six months ended June 30, 2004, we charged-off, net of
recoveries, $305,000 and $739,000, respectively, primarily related to automobile and other
consumer-related loans compared to $173,000 and $469,000 for the three and six months
ended June 30, 2003, respectively. At June 30, 2004, December 31, 2003 and June 30, 2003,
our allowance for loan losses amounted to 1.00%, 0.96% and 0.90%, respectively, of net
loans.

Noninterest Income.Our
noninterest income increased by $2.4 million, or 61.7%, to $6.3 million for the three
months ended June 30, 2004 compared to $3.9 million for the three months ended June 30,
2003. The increase during the three month period ended June 30, 2004 compared to the same
period in 2003 was primarily the result of a reduction in the valuation allowance of our
mortgage servicing rights (MSR) portfolio of $1.2 million. In the same three
month period ended June 30, 2003, our MSR valuation allowance increased $1.4 million.
Additionally, the increase for the three month period ended June 30, 2004 was impacted by
a $739,000 decline in MSR amortization expense and an $810,000 increase in deposit account
fees partially offset by a $1.9 million decline in gains on loans held for sale. The
decrease in MSR amortization expense was attributable to a stabilized interest rate
environment and decreased loan prepayment and refinancing activity when compared to the
same period in 2003. Amortization expense and valuation allowance adjustments related to
MSR are recorded as adjustments to fee and service charge income.

For the six months ended June 30,
2004, noninterest income totaled $11.7 million, a $4.2 million, or 56.0%, increase
compared to $7.5 million for the six months ended June 30, 2003. The increase during the
six months ended June 30, 2004 compared to the six months ended June 30, 2003 was related
to a $1.2 million reduction in our MSR valuation allowance. In the six month period ended
June 30, 2003, our MSR valuation allowance increased $2.0 million. The increase in
noninterest income during the six month period ended June 30, 2004 was further impacted by
a $1.6 million increase in deposit account fees, a $1.5 million gain associated with the
merger of the Banks defined benefit pension plan with an unrelated third party plan
and a $1.4 million decline in MSR amortization expense partially offset by a $3.6 million
reduction in gains on loans held for sale.

33

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

Noninterest Expense.Our
noninterest expense increased by $1.7 million, or 14.1%, to $13.4 million for the three
months ended June 30, 2004 compared to $11.7 million for the three months ended June 30,
2003. The increase during the three month period ended June 30, 2004 compared to the three
month period ended June 30, 2003 resulted primarily from a $413,000 increase in
compensation expense related to staff additions and annual salary increases, a $254,000
increase in expenses related to consulting services and $244,000 in compensation expense
relating to the Companys MRRP and ESOP.

Noninterest expense for the six
months ended June 30, 2004 increased $3.2 million, or 13.9%, to $26.0 million compared to
$22.8 million for the six months ended June 30, 2003. The increase during the six months
ended June 30, 2004 compared to the same period in 2003 resulted primarily from a $1.0
million increase in compensation expense related to staff additions and annual salary
increases, $1.2 million in compensation expense relating to the Companys MRRP and
ESOP and a $248,000 increase in expenses related to consulting services.

Income Tax Expense.Our income
tax expense decreased by $245,000 to $3.3 million for the three months ended June 30, 2004
compared to $3.6 million for the same period in 2003 due to a decline in income offset in
part by an increase in our effective income tax rate. The effective income tax rate for
the three months ended June 30, 2004 was 37.5% compared to 36.9% for the three months
ended June 30, 2003.

Income tax expense for the six month
period ended June 30, 2004 was $6.9 million, a $48,000, or 0.7%, increase compared to the
same period in 2003. The effective income tax rate for the six months ended June 30, 2004
was 37.4% compared to 36.8% for the six months ended June 30, 2003. The increase in the
effective tax rate for the three and six months ended June 30, 2004 compared to the same
periods in 2003 was primarily attributable to the partially non-deductible nature of
certain expenses related to the Companys ESOP and an increase in state income tax
expense.

34

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

# Liquidity

Our primary sources of funds are
deposits, amortization of loans, loan prepayments and maturity of loans, mortgage-backed
securities and other investments and other funds provided by 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 interest rates, economic conditions and
competition. Additionally, we utilize outside borrowings, primarily from the FHLB and
brokered time deposits, as additional funding sources.

We use our liquidity to fund existing
and future loan commitments, maturing time deposits and demand deposit withdrawals, to
invest in other interest-earning assets and to meet operating expenses. At June 30, 2004,
we had time deposits maturing within the next 12 months totaling $399.2 million. Based
upon historical experience, we anticipate that a significant portion of the maturing time
deposits will be redeposited with us.

In addition to cash flow from loan
and securities payments and prepayments, we have additional borrowing capacity available
to fund our asset growth. We have increased our utilization of borrowings as a cost
efficient complement to deposits as a source of funds. The average balance of our FHLB
advances and other borrowings was $620.8 million and $553.7 million for the three months
ended June 30, 2004 and June 30, 2003, respectively. The average balance of our FHLB
advances and other borrowings was $608.5 million and $491.6 million for the six months
ended June 30, 2004 and June 30, 2003, respectively. To date, substantially all of our
borrowings have consisted of advances from the FHLB. Pursuant to blanket collateral
agreements with the FHLB, the Bank pledged qualifying residential, multi-family
residential and commercial real estate mortgages, residential construction and commercial
construction loans as collateral for such advances. Other qualifying collateral can be
pledged in the event additional borrowing capacity is required.

On April 26, 2004, we completed the
issuance of $30.0 million of trust preferred securities at a variable interest rate
indexed to the three-month LIBOR rate. The securities, which are callable at par in June
2009 and mature in June 2034, were issued to provide funding for common stock repurchases
and other general corporate purposes.

35

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

# Contractual Obligations,
Commitments, Contingent Liabilities and Off-Balance Sheet Arrangements

We use our liquidity to fund existing
and future loan commitments, maturing time deposits and demand deposit withdrawals, to
invest in other interest-earning assets and to meet operating expenses. At June 30, 2004,
we had the following contractual obligations and lending commitments:

|                                        |  | Due In
|--------------------------------------- |  | ------
|
|                                       
|Contractual obligations:                |  |       
|Federal Home Loan Bank advances         |  |       
|and other borrowings                    |  |       
|Recourse obligations on assets          |  |       
|Purchase investment securities          |  |       
|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           |  |       
|Undisbursed portion of construction and |  |       
|land development loans in process       |  |       
|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                         |  |       
|                                       

36

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

We have not used 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, 2004, the maximum total dollar amount of such recourse
was approximately $11.7 million. Based on historical experience, at June 30, 2004, we had
established a liability of $686,000 with respect to this recourse obligation.

# Regulatory Capital

At June 30, 2004, the Banks
regulatory capital exceeded regulatory limits set by the Office of Thrift Supervision. The
current regulatory requirements and the Banks actual levels at June 30, 2004 are set
forth in the following table:

|                         | Required Capital | Actual Capital | Excess Capital
|------------------------ | ---------------- | -------------- | --------------
|
|                        
|Tangible capital         |                  |                | $             
|Tier 1 (core) capital    |                  |                |               
|Total risk-based capital |                  |                |               
|                        

The Bank remains classified as a
well capitalized financial institution under Federal regulatory guidelines.

37

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Conditionand
Results of Operations

# Selected Operating Ratios

Selected operating and other ratios
(annualized where appropriate) at or for the three and six months ended June 30, 2004 and
June 30, 2003 are presented in the following table:

|                                                    | At or for the
Three Months Ended
June 30, | At or for the
Six Months Ended
June 30,
|--------------------------------------------------- | ----------------------------------------- | ---------------------------------------
|
|                                                   
|Selected Operating Ratios:                          |                                           |                                        
|Average yield on interest-earning assets            |                                           | 5.15                                   
|Average rate on interest-bearing liabilities        |                                           | 2.31                                   
|Average interest rate spread                        |                                           | 2.84                                   
|Net interest margin                                 |                                           | 3.15                                   
|Average interest-earning assets to average          |                                          
|interest-bearing liabilities                        |                                           | 116.04                                 
|Net interest income after provision for loan        |                                          
|losses to noninterest expense                       |                                           | 119.61                                 
|Total noninterest expense to average assets         |                                           | 2.37                                   
|Efficiency ratio (1)                                |                                           | 57.20                                  
|Return on average assets                            |                                           | 0.98                                   
|Return on average equity                            |                                           | 7.93                                   
|Average equity to average assets                    |                                           | 12.42                                  
|Other Ratios:                                       |                                          
|Nonperforming loans as a percent of net loans       |                                           | 0.17                                   
|Nonperfoming assets as a percent of total assets    |                                           | 0.21                                   
|Allowance for loan losses as a percent of           |                                          
|nonperforming loans                                 |                                           | 589.33                                 
|Allowance for loan losses as a percent of net loans |                                           | 1.00                                   
|                                                   

|(1) | Efficiency
ratio is calculated as total noninterest expense divided by the sum of net interest
income       and total noninterest income.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

---

38

---

# 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 rates market, see
Managements Discussion and Analysis of Financial Condition and Results of
Operations  How We Manage Our Risks and Quantitative and Qualitative
Disclosures About Market Risk in the Companys Annual Report on Form 10-K for
the year ended December 31, 2003. 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 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.

39

---

# PART II  OTHER
INFORMATION

# Item 1  Legal
Proceedings.

There have been no changes with
respect to legal proceedings during the three and six months ended June 30, 2004.
Disclosures regarding legal proceedings are incorporated by reference to Business of
TierOne Bank  Legal Proceedings in the Companys Annual Report on Form
10-K for the year ended December 31, 2003.

Item 2  Changes in
Securities, Use of Proceeds and Issuer Purchases of Equity Securities.

On January 28, 2004, the Company
announced a stock repurchase plan providing for the repurchase of up to 2,031,757 shares
of the Companys outstanding common stock in open market or privately negotiated
transactions. This stock repurchase plan was completed during the three month period ended
June 30, 2004. On July 27, 2004, the Company announced a stock repurchase plan providing
for the repurchase of up to 1,828,581 shares of the Companys outstanding common
stock in open market or privately negotiated transactions. Unless terminated earlier by
the Board of Directors of the Company, the plan will expire when the Company has
repurchased all shares authorized for repurchase under the plan.

|                               | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs
|------------------------------ | -------------------------------- | ---------------------------- | -------------------------------------------------------------------------------- | --------------------------------------------------------------------------
|                              
|April 2004                     |                                  |                              |                                                                                  |                                                                           
|Beginning Date - April 1, 2004
|Ending Date - April 30, 2004   | 390,948                          | $22.07                       | 2,648,455                                                                        | 1,640,809                                                                 
|May 2004                      
|Beginning Date - May 1, 2004  
|Ending Date - May 31, 2004     | 1,640,809                        | 21.97                        | 4,289,264                                                                        | --                                                                        
|June 2004                     
|Beginning Date - June 1, 2004 
|Ending Date - June 30, 2004    | --                               | --                           | 4,289,264                                                                        | --                                                                        
|                              
|Total Shares Purchased         | 2,031,757                        | $21.99                       | 4,289,264                                                                        | --                                                                        
|                              

40

---

# Recent Sale of
Unregistered Securities

On April 26, 2004, the Company sold
through a wholly owned statutory business trust (Trust) floating rate trust
preferred securities (Preferred Securities) in an aggregate liquidation amount
of $30.0 million in a private placement. The Preferred Securities have a variable dividend
adjusted quarterly based on the London Interbank Offered Rate (LIBOR) plus
2.8%. The Company has guaranteed the Preferred Securities with respect to distributions
and payments upon liquidation, redemption and otherwise to the extent provided in a
Guarantee Agreement between the Company, as guarantor, and Wilmington Trust Company, as
guarantee trustee. The Trust invested the proceeds from the sale of the Preferred
Securities in an equivalent amount of floating rate junior subordinated debt securities
due in 2034 (Subordinated Debt Securities) of the Company bearing an interest
rate equal to the dividend rate on the Preferred Securities. The terms of the Subordinated
Debt Securities are set forth in an Indenture between the Company and Wilmington Trust
Company, as trustee. The Subordinated Debt Securities, which are the sole assets of the
Trust, are subordinate and junior in right of payment to the Companys present and
future senior debt (as defined in the Indenture) and certain other financial obligations
of the Company.

After the payment of the placement
fee, the Company received approximately $29.8 million in net proceeds from these
transactions. The Company used the net proceeds for the repurchase of common stock and
general corporate purposes. The Company and the Trust issued these securities without
registration under the Securities Act of 1933, as amended (Securities Act) in
reliance upon the exemption from registration thereunder available under Section 4(2) of
the Securities Act.

# Item 3  Defaults
Upon Senior Securities.

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

41

---

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

On May 4, 2004, TierOne Corporation
held its second Annual Meeting of Shareholders to obtain approval for two proxy proposals
submitted on behalf of the Companys Board of Directors. Shareholders of record as of
February 27, 2004 received proxy materials and were considered eligible to vote for these
proposals. Following is a brief summary of each proposal and the result of the vote.

|Proposal                                             | For        | Withheld / Against | Abstain | Broker Non-Votes
|---------------------------------------------------- | ---------- | ------------------ | ------- | ----------------
|1.  To elect two directors for a three-year term and |            |                    |         |                 
|until their successors are elected and qualified.   
|Ann Lindley Spence                                   | 16,774,410 | 700,524            | N/A     | N/A             
|Charles W. Hoskins                                   | 17,212,986 | 261,948            | N/A     | N/A             
|2.  To ratify the appointment of KPMG LLP as the    
|independent auditors for the year ended             
|December 31, 2004.                                   | 17,062,795 | 329,664            | 82,475  | N/A             

The terms of office for the following
directors continued after the Companys Annual Meeting of Shareholders: James A.
Laphen and Campbell R. McConnell, Ph.D. (terms expire in 2005) and Gilbert G. Lundstrom,
Esq. and Joyce Person Pocras (terms expire in 2006).

# Item 5  Other
Information.

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

42

---

# Item 6  Exhibits
and Reports on Form 8-K.

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

|(b) | The
following reports on Form 8-K were filed by the Registrant during the three
          months ended June 30, 2004:
|--- | ---------------------------------------------------------------------------------------------------------------------

|Date Filed     | Date of Report | Item and Description                                     
|-------------- | -------------- | ---------------------------------------------------------
|April 28, 2004 | April 27, 2004 | Items 7 and 12. The Company furnished under Item 12 a    
|               |                | press release reporting its earnings for the three months
|               |                | ended March 31, 2004.                                    
|June 1, 2004   | May 28, 2004   | Items 7 and 9. The Company furnished under Item 9 a      
|               |                | press release announcing that the Company had            
|               |                | declared a cash dividend of $0.05 per common share to    
|               |                | shareholders of record on June 15, 2004.                 

43

---

# 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 3, 2004 | By:  /s/ Gilbert G. Lundstrom                    
|                      | Gilbert G. Lundstrom                             
|                      | Chairman of the Board and Chief Executive Officer
|Date:  August 3, 2004 | By:  /s/ Eugene B. Witkowicz                     
|                      | Eugene B. Witkowicz                              
|                      | Executive Vice President and                     
|                      | Chief Financial Officer                          

44

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# EXHIBIT INDEX

|No.  | Exhibits                                                                                          
|---- | --------------------------------------------------------------------------------------------------
|4.1  | Declaration of Trust of TierOne Capital Trust I                                                   
|4.2  | Guarantee Agreement Between TierOne Corporation and TierOne Capital Trust I                       
|4.3  | Indenture Agreement Between TierOne Corporation and Wilmington Trust Company                      
|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
|    

45