# 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 September 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 November 4, 2004, the registrant
had 18,285,811 shares of common stock, $.01 par value per share, outstanding.

---

# PART I - FINANCIAL
INFORMATION

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

# PART II - OTHER
INFORMATION

|Item 1 -      | Legal Proceedings                                           | 41
|------------- | ----------------------------------------------------------- | --
|Item 2 -      | Unregistered Sales of Equity Securities and Use of Proceeds | 41
|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                                                    | 42
|Signatures    |                                                             | 43
|Exhibit Index |                                                             | 44

2

---

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

|(Dollars in thousands, except per share data)                   | September 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 $8,109 and $7,083 at |                    |                  
|September 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                                     |                    |                  
|Goodwill                                                        |                    |                  
|Other intangible assets, net                                    |                    |                  
|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      |                    |                  
|September 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      |                    |                  
|September 30, 2004 and December 31, 2003, respectively          |                    |                  
|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
September 30, | For the Nine Months Ended
September 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 (loss) 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 IncomeNine Months Ended September 30, 2004 and September 30, 2003
 (Unaudited)

|(Dollars in thousands)                  | Common Stock | Additional Paid-In Capital | Retained Earnings, SubstantiallyRestricted | Treasury Stock | Unallocated Common StockHeld by theEmployee StockOwnership Plan | Unearned Common StockHeld by theManagementRecognition andRetention Plan | Accumulated OtherComprehensiveIncome (Loss), Net | TotalShareholders'Equity
|--------------------------------------- | ------------ | -------------------------- | ------------------------------------------ | -------------- | --------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------ | ------------------------
|Balance at December 31, 2002            |              |                            | $                                          | 226            |                                                                 | $                                                                       | 355,741                                          |                         
|                                       
|Common stock earned by                  |              |                           
|employees in Employee                   |              |                           
|Stock Ownership Plan                    |              |                            |                                            | --             |                                                                 |                                                                         | 1,010                                            |                         
|Common stock purchased by the           |              |                           
|Management Recognition and              |              |                           
|Retention Plan                          |              |                            |                                            | --             |                                                                 |                                                                         | (3,198                                           | )                       
|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 September 30, 2003           |              |                            | $                                          | 226            |                                                                 | $                                                                       | 353,553                                          |                         
|                                       
|Balance at December 31, 2003            |              |                            | $                                          | 226            |                                                                 | $                                                                       | 354,054                                          |                         
|                                       
|Common stock earned by                  |              |                           
|employees in Employee                   |              |                           
|Stock Ownership Plan                    |              |                            |                                            | --             |                                                                 |                                                                         | 1,335                                            |                         
|Amortization of awards under            |              |                           
|the Management Recognition              |              |                           
|and Retention Plan                      |              |                            |                                            | --             |                                                                 |                                                                         | 83                                               |                         
|Repurchase of common                    |              |                           
|stock (2,031,757 shares)                |              |                            |                                            | (44,687        | )                                                               |                                                                         | (44,687                                          | )                       
|Dividends paid ($0.15 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 September 30, 2004           |              |                            | $                                          | 226            |                                                                 | $                                                                       | 355,472                                          |                         
|                                       

See accompanying notes to
consolidated financial statements.

5

---

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

|                                                                                    | September 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                                                       |              
|Amortization of intangible assets                                                   |              
|Amortization of premium on Federal Home Loan Bank advances                          |              
|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 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:                                               |              
|Acquisition of United Nebraska Financial Co., net of cash acquired                  |              
|Purchase of investment and mortgage-backed securities, available for sale           |              
|Proceeds from sale of investment and mortgage-backed securities, available for sale |              
|Proceeds from maturities of investment securities, available for sale               |              
|Proceeds from principal repayments of investment                                    |              
|and mortgage-backed securities available for sale and held to maturity              |              
|Increase in loans receivable                                                        |              
|Purchase of Federal Home Loan Bank stock                                            |              
|Sale of Federal Home Loan Bank stock                                                |              
|Additions to premises and equipment                                                 |              
|Proceeds from sale of 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)  Nine Months Ended
September 30, 2004 and September 30, 2003(Unaudited)

|                                                                               | September 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 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 increase 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
September 30, 2004, TierOne Bank operated from 68 banking offices located in Nebraska,
Iowa and Kansas and four loan production offices located in Colorado and Minnesota.

# Note 2  Basis of
Consolidation

The accompanying consolidated
financial statements include the accounts of the Bank and its wholly owned subsidiaries
TMS Corporation of the Americas (TMS) and United Farm & Ranch Management,
Inc. (UFARM). TMS is the holding company of TierOne Investments and Insurance,
Inc., 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. UFARM, which was acquired as part of the United
Nebraska Financial Co. (UNFC) acquisition, provides farm and ranch real estate
management services in the state of Nebraska and in the neighboring states of Iowa, South
Dakota, Kansas, Colorado and Wyoming.

The accompanying interim consolidated
financial statements as of September 30, 2004 and for the three and nine months ended
September 30, 2004 and September 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 unaudited consolidated financial
statements should be read in conjunction with the audited consolidated 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 nine months
ended September 30, 2004 are not necessarily indicative of the results which may be
expected for the entire calendar year 2004.

Goodwill represents the excess of
costs over fair value of assets of businesses acquired.  The Company adopted the
provisions of FASB Statement No. 142, Goodwill and Other Intangible Assets, on August 27,
2004 when it completed the acquisition of UNFC.  Pursuant to Statement 142, goodwill and
intangible assets acquired in a purchase business combination and determined to have an
indefinite useful life are not amortized, but instead tested for impairment at least
annually in accordance with the provisions of Statement 142.  Statement 142 also requires
that intangible assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for impairment in
accordance with FASB Statement No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets.

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 September 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
September 30, 2004 | Nine Months Ended
September 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 Retention 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

The following table shows the
composition of our investment and mortgage-backed securities portfolio at the dates
indicated:

|                                                  | September 30, 2004
|------------------------------------------------- | ------------------
|
|
|Held to maturity:                                 |                   
|Municipal obligations                             |                   
|                                                 
|Available for sale:                               |                   
|Mortgage-backed securities                        |                   
|U.S. Government securities and agency obligations |                   
|Corporate securities                              |                   
|Municipal obligations                             |                   
|Marketable equity 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:

|                                          | September 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                   |                    |                  
|Agriculture                               |                    |                  
|                                         
|Total real estate loans                   |                    |                  
|                                         
|Business loans                            |                    |                  
|                                         
|Agriculture - operating                   |                    |                  
|                                         
|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
September 30, | At or for the Nine Months Ended
September 30,
|--------------------------------------------------- | ---------------------------------------------- | ---------------------------------------------
|
|Allowance for loan losses, beginning of period      |                                                |                                              
|Allowance for loan losses acquired from acquisition |                                                |                                              
|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

---

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 $1.3 million and $864,000 at September 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 September 30, 2004 and December 31, 2003, respectively.

|(Dollars in thousands)                                        | September 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                                       |                    |                  
|Agriculture real estate                                       |                    |                  
|Business                                                      |                    |                  
|Agriculture - operating                                       |                    |                  
|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
September 30, | Nine Months Ended
September 30,
|--------------------------------------------------- | -------------------------------- | -------------------------------
|
|Balance at beginning of period                      |                                  |                                
|Mortgage servicing rights capitalized               |                                  |                                
|Mortgage servicing rights acquired from acquisition |                                  |                                
|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
September 30, | Nine Months Ended
September 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 September
30, 2004 and December 31, 2003:

|(Dollars in thousands)             | September 30, 2004 | December 31, 2003
|---------------------------------- | ------------------ | -----------------
|Serviced loan portfolio balance    | $1,092,352         | $956,744         
|Fair value                         | $11,619            | $9,173           
|Prepayment speed                   | 8.72% - 72.23%     | 7.56% - 76.44%   
|Weighted average prepayment speed  | 17.13              | 23.08            
|Fair value with 10% adverse change | $11,126            | $8,673           
|Fair value with 20% adverse change | $10,611            | $8,218           
|Discount rate                      | 10.00% - 15.00%    | 9.00% - 15.00%   
|Weighted average discount rate     | 11.21%             | 10.74%           
|Fair value with 10% adverse change | $11,320            | $8,863           
|Fair value with 20% adverse change | $10,987            | $8,575           
|                                  

14

---

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:

|                                                                    
|--------------------------------------------------------------------
|Common shares authorized to be awarded by the Management Recognition
|and Retention Plan                                                  
|Common shares awarded by Management Recognition and Retention Plan  
|Common shares forfeited                                             
|                                                                    
|Shares available for award at September 30, 2004                    
|                                                                    

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 nine months ended September 30, 2004 was
$682,000 and $2.0 million, respectively, compared to $682,000 and $1.2 million,
respectively, for the three and nine month periods ended September 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 September 30, 2004, 1,846,250 stock options were outstanding at an exercise
price of $17.83. There were 6,500 stock options forfeited and no stock options exercised
during the three and nine months ended September 30, 2004.

At September 30, 2004, 20% of the
options granted were exercisable, the weighted-average remaining contractual life of
outstanding options was 8.56 years, and there were 411,258 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. 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
September 30, | Nine Months Ended
September 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:

|                             | September 30, 2004 | December 31, 2003
|---------------------------- | ------------------ | -----------------
|
|Transaction accounts:        |                    |                  
|Noninterest-bearing checking |                    |                  
|Savings                      |                    |                  
|Interest-bearing checking    |                    |                  
|Money market                 |                    |                  
|                            
|Total transaction accounts   |                    |                  
|                            
|Time deposits:               |                    |                  
|0.00% 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 September 30, 2004 and December
31, 2003, the Company was indebted on notes as shown in the following table:

|(Dollars in thousands)                  | September 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 October 2004 to January 2008. The line of
credit with the FHLB expires in November 2004 which the Company expects to be renewed in
the ordinary course of business.

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 $30.9 million of junior subordinated
debentures issued by the Company. The junior debentures mature in 2034. The Companys
obligation under the junior subordinated debentures constitutes 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.

In connection with the Companys
acquisition of UNFC on August 27, 2004 (see Note 14), the Company assumed $7.0 million of
variable rate junior subordinated debentures (debentures) that had been
issued on November 28, 2001 by United Nebraska Capital Trust, a trust formed by UNFC. The
debentures, due December 8, 2031, are the sole asset of the United Nebraska Capital Trust.

19

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

The Companys obligation under
the debentures constitutes a full and unconditional guarantee by the Company of United
Nebraska Capital Trusts obligations under the debentures. In accordance with FIN
46R, United Nebraska Capital Trust is not consolidated and related amounts are treated as
debt of the Company.

# 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 No. 105), Loan Commitments Accounted for
as Derivative Instruments. The requirements of SAB No. 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 No.
105 must be applied to mortgage loan commitments that are accounted for as derivatives and
are entered into after March 31, 2004. SAB No. 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 No. 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. 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.

The Exposure Draft provides that the
proposed statement would be applied to public entities

20

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

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 has delayed implementation until the
third quarter of 2005.

# Note 14  Business
Combinations

On August 27, 2004, the Company
completed the acquisition of UNFC, the parent company of United Nebraska Bank.

The following is UNFCs
condensed balance sheet showing the fair values of the assets acquired and liabilities
assumed as of the date of the acquisition:

|(Dollars in thousands)                               | August 27, 2004
|---------------------------------------------------- | ---------------
|Cash and cash equivalents                            |                
|Investment and mortgage-backed securities            |                
|Net loans                                            |                
|Other intangible assets                              |                
|Other assets                                         |                
|                                                    
|Total assets                                         |                
|                                                    
|Deposits                                             |                
|Federal Home Loan Bank advances and other borrowings |                
|Accrued expenses and other liabilities               |                
|                                                    
|Total liabilities                                    |                
|                                                    
|Net assets acquired                                  |                
|Cash paid                                            |                
|                                                    
|Goodwill (cash paid to United Nebraska Financial Co. |                
|shareholders less net assets acquired)               |                
|                                                    

Assuming the acquisition of UNFC
occurred on January 1, 2004, the following summarizes the unaudited pro forma combined
operating results for the three and nine months ended September 30, 2004 and September 30,
2003:

|                                       | For the Three Months EndedSeptember 30, | For the Nine Months EndedSeptember 30,
|-------------------------------------- | --------------------------------------- | --------------------------------------
|
|Pro forma interest income              |                                         |                                       
|Pro forma net income, after tax        |                                         |                                       
|Pro forma earnings per share - basic   |                                         |                                       
|Pro forma earnings per share - diluted |                                         |                                       

The Company is obtaining third-party
valuations of certain intangible assets; thus, the allocation of the purchase price is
subject to change.

21

---

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

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

# General

TierOne Bank (Bank), a
subsidiary of TierOne Corporation (Company), is a $2.9 billion federally
chartered stock savings bank headquartered in Lincoln, Nebraska. Established in 1907, the
Bank offers customers a wide variety of full-service consumer, commercial and agricultural
banking products and services through a geographically diverse network of 68 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, commercial and agricultural real estate loans; consumer, construction,
business and agricultural operating loans; warehouse mortgage lines of credit; consumer
and business checking and savings plans; investment and insurance services; and telephone
and internet banking.

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 August 27, 2004, the Company
acquired all of the issued and outstanding capital stock of United Nebraska Financial Co.
(UNFC), the holding company of United Nebraska Bank (UNB),
headquartered in Grand Island, Nebraska. The Company acquired UNFC as a means to
strategically strengthen its market share position in several regional growth center
markets throughout Nebraska, expand its growing banking office network and profitably
leverage its combined product and service mix to increase earnings performance. The
purchase price of the acquisition was approximately $97.3 million and was funded through
available cash and Federal Home Loan Bank (FHLB) advances. UNB had assets in
excess of $500 million and 16 banking offices located primarily in regional growth centers
in Nebraska.

On September 15, 2004, the Company
announced that it had entered into a definitive asset purchase agreement to acquire all
non-Indiana residential construction loan production offices from First Indiana Bank of
Indianapolis, Indiana. The acquisition included the purchase of $134.4 million of
outstanding residential construction loans against forward commitments of $264.5 million
and four loan production offices located in Phoenix, Arizona; Orlando, Florida; and
Charlotte and Raleigh, North Carolina. The First Indiana transaction closed on November 1,
2004 and was funded by FHLB advances.

22

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Condition  and
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.

23

---

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

# 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 integration of UNFC and UNB;
unanticipated issues related to the integration of the transaction with First Indiana
Bank; 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.

24

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Condition  and
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.

25

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Condition  and
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.

# Goodwill and Other
Intangible Assets

Goodwill represents the excess of
costs over fair value of assets of businesses acquired.  The Company adopted the
provisions of FASB Statement No. 142, Goodwill and Other Intangible Assets, on August 27,
2004 when it completed the acquisition of UNFC.  Pursuant to Statement 142, goodwill and
intangible assets acquired in a purchase business combination and determined to have an
indefinite useful life are not amortized, but instead tested for impairment at least
annually in accordance with the provisions of Statement 142. Statement 142 also requires
that intangible assets with estimable useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for impairment in
accordance with FASB Statement No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets.

26

---

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

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

Our total assets were $2.9 billion at
September 30, 2004, a $647.1 million, or 29.3%, increase from December 31, 2003, due
primarily to the UNFC acquisition and continued loan portfolio growth. Our available for
sale investment securities amounted to $155.7 million at September 30, 2004, a $112.2
million, or 257.8%, increase from December 31, 2003. The increase in our available for
sale investment securities was primarily due to $118.5 million of securities acquired from
UNFC and security purchases of $12.0 million during the nine months ended September 30,
2004 partially offset by the sale of four securities resulting in $13.8 million in
proceeds (including $312,000 in net gains on sales) and maturities of $4.6 million.

Our mortgage-backed securities
portfolio, all of which are recorded as available for sale, amounted to $40.2 million at
September 30, 2004, a $24.5 million, or 156.0%, increase from December 31, 2003. The
increase in our mortgage-backed securities portfolio was primarily the result of $29.8
million of mortgage-backed securities acquired from UNFC partially offset by principal
payments received in the amount of $5.1 million during the nine months ended September 30,
2004.

Net loans, including loans held for
sale, totaled $2.4 billion at September 30, 2004, a $403.3 million, or 19.8%, increase
from December 31, 2003. The increase in net loans at September 30, 2004 is primarily
attributable to $300.0 million in net loans acquired from UNFC. At September 30, 2004 our
one-to-four family residential loans, including loans held for sale, totaled $445.4
million, an $113.7 million, or 20.3%, 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. Second mortgage
residential loans totaled $285.7 million at September 30, 2004, a $27.6 million, or 10.7%,
increase from December 31, 2003. During the nine months ended September 30, 2004, we
purchased $120.4 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 $547.2 million, a $98.0 million, or 21.8%, increase compared to $449.2
million at December 31, 2003 due primarily to loans acquired from the UNFC acquisition.
Our residential construction loans totaled $333.9 million, an $88.1 million, or 35.9%,
increase compared to $245.8 million at December 31, 2003. During the nine months ended
September 30, 2004, we purchased $208.5 million of adjustable-rate residential
construction loans which were partially offset by payoffs on completed construction.
Commercial construction loans increased $61.3 million, or 39.8%, to $215.6 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). At September 30, 2004 we had $65.8 million and
$68.6 million of agricultural real estate and agricultural operating loans, respectively,
which were acquired from the UNFC acquisition. Warehouse mortgage lines of credit amounted
to $102.3 million, a $23.6 million, or 29.9%, increase at September 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 financing activity and additional
broker relationships established during 2004. Our consumer loan portfolio totaled $370.8
million at September 30, 2004, a $61.1 million, or 19.7%, increase compared to $309.7
million at December 31, 2003 due primarily to loans acquired from the UNFC acquisition.

27

---

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

Our total liabilities were $2.6
billion at September 30, 2004, a $672.3 million, or 35.1%, increase compared to $1.9
billion at December 31, 2003 due primarily to the UNFC acquisition. Our total deposits
increased by $585.6 million, or 48.1%, to $1.8 billion at September 30, 2004 compared to
$1.2 billion at December 31, 2003. The increase in deposits at September 30, 2004 was
primarily the result of $430.1 million in deposits acquired from UNFC. Time deposits
increased $318.9 million, or 54.4%, to $904.7 million at September 30, 2004 compared to
$585.8 million at December 31, 2003. Brokered time deposits (included in our time
deposits) increased $13.5 million, or 20.7%, to $79.1 million at September 30, 2004
compared to $65.5 million at December 31, 2003. We utilized brokered time deposits as an
alternative source of funds for loan origination and purchase activity. Our
interest-bearing checking accounts totaled $401.4 million, a $106.3 million, or 36.0%,
increase compared to $295.1 million at December 31, 2003. Noninterest-bearing checking
accounts increased $56.3 million, or 124.3%, to $101.6 million at September 30, 2004
compared to $45.3 million at December 31, 2003. Our money market accounts totaled $307.8
million, a $36.8 million, or 13.6%, increase compared to $270.9 million at December 31,
2003. We utilized our increased deposits to fund loan origination and purchase activities.
Our FHLB advances and other borrowings amounted to $729.2 million at September 30, 2004,
an $83.5 million, or 12.9%, increase from December 31, 2003. The increase in FHLB advances
and other borrowings at September 30, 2004 is primarily attributable to $52.4 million in
FHLB advances and other borrowings assumed in connection with the UNFC acquisition. The
issuance of $30.0 million of trust preferred securities at a variable interest rate
indexed to the three-month LIBOR rate was completed during the second quarter of 2004. 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 September 30, 2004, shareholders equity
totaled $269.9 million, a decrease of $25.2 million, or 8.5%, 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 $2.6 million in dividends paid to the
Companys shareholders partially offset by net income of $17.1 million for the nine
months ended September 30, 2004, $2.5 million related to common stock earned by
participants in the Employee Stock Ownership Plan (ESOP) and $2.1 million
related to the amortization of awards under the 2003 Management Recognition and Retention
Plan (MRRP). The Company paid cash dividends of $0.05 per common share
payable on March 31, 2004, June 30, 2004 and September 30, 2004 to shareholders of record
on March 15, 2004, June 15, 2004 and September 15, 2004. For further discussion regarding
the Companys common stock repurchases, see Part II, Item 2 Unregistered Sales
of Equity Securities and Use of Proceeds.

28

---

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

# Comparison of
Operating Results for the Three and Nine Months Ended September 30, 2004 and September
30, 2003

General.          Net
income for the three months ended September 30, 2004 was $5.5 million, or           $0.34
per diluted and basic share, compared to net income of $6.3 million, or           $0.30
per diluted share ($0.31 per basic share) for the three months ended           September
30, 2003. Net income for the nine months ended September 30, 2004 was           $17.1
million, or $0.99 per diluted share ($1.01 per basic share) compared to           net
income of $18.1 million, or $0.87 per diluted share ($0.88 per basic share)           for
the nine months ended September 30, 2003. While net income for the three and
          nine months ended September 30, 2004 declined when compared to the same periods
          in 2003, earnings per share for the comparative periods increased due to the
          Companys repurchases of common stock.

The average interest rate spread
increased to 3.00% for the three months ended September 30, 2004 compared to 2.84% for the
three months ended September 30, 2003. The average interest rate spread declined to 2.95%
for the nine months ended September 30, 2004 compared to 3.07% for the nine months ended
September 30, 2003. Net interest margin was 3.25% for the three month periods ended
September 30, 2004 and September 30, 2003. Net interest margin declined to 3.25% for the
nine months ended September 30, 2004 compared to 3.52% for the three months ended
September 30, 2003. The decline in the average interest rate spread and net interest
margin for the nine months ended September 30, 2004 reflected 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 5.47% and 5.34% for the three and nine months ended September 30, 2004
compared to 5.49% and 5.82% for the three and nine months ended September 30, 2003. The
ratio of average interest-earning assets to average interest-bearing liabilities declined
to 112.06% and 114.97% for the three and nine months ended September 30, 2004 compared to
120.89% and 121.91% for the three and nine months ended September 30, 2003. These
decreases were the result of $113.8 million and $72.5 million declines in the average
balance of net interest earning assets at September 30, 2004 and September 30, 2003,
respectively, resulting primarily from the Companys stock repurchase program.

Interest Income.Our total
interest income for the three months ended September 30, 2004 was $31.1 million, a $3.9
million, or 14.5%, increase compared to $27.2 million for the three months ended September
30, 2003. For the nine months ended September 30, 2004 our interest income totaled $87.2
million, a $3.6 million, or 4.3%, increase compared to $83.6 million for the nine months
ended September 30, 2003. The average balance of loans receivable during the three months
ended September 30, 2004 was $2.2 billion compared to $1.9 billion for the three months
ended September 30, 2003. The weighted average yield earned on the loan portfolio was
5.47% and 5.49% for the three months ended September 30, 2004 and September 30, 2003,
respectively. The average balance of loans receivable for the nine months ended September
30, 2004 was $2.1 billion compared to $1.9 billion for the nine months ended September 30,
2003. The weighted average yield earned on the loan portfolio was 5.34% and 5.82% for the
nine months ended September 30, 2004 and September 30, 2003, respectively. The declines in
the yields on loans receivable during the three and nine months ended September 30, 2004
compared to the three and nine months ended September 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.

29

---

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

Interest Expense.Our total
interest expense for the three months ended September 30, 2004 was $12.3 million, a $2.1
million, or 21.1%, increase compared to $10.1 million for the three months ended September
30, 2003. The average balance of our interest-bearing deposits increased $315.0 million,
or 28.1%, to $1.4 billion for the three months ended September 30, 2004 compared to $1.1
billion for the three months ended September 30, 2003. Additionally, the average rate paid
on interest-bearing deposits increased to 1.93% for the three months ended September 30,
2004 compared to 1.90% for the three months ended September 30, 2003, an increase of three
basis points. Interest expense on FHLB advances and other borrowings increased $527,000 to
$5.3 million for the three months ended September 30, 2004 compared to $4.8 million during
the three months ended September 30, 2003. The average balance of our FHLB advances and
other borrowings was $633.2 million for the three months ended September 30, 2004, a $14.5
million, or 2.3%, increase compared to $618.7 million for the three months ended September
30, 2003. Additionally, the average rate paid on FHLB advances and other borrowings was
3.37% for the three months ended September 30, 2004 compared to 3.10% for the three months
ended September 30, 2003, an increase of 27 basis points or 8.7%.

Total interest expense for the nine
months ended September 30, 2004 was $33.4 million, a $2.6 million, or 8.6%, increase
compared to $30.8 million for the nine months ended September 30, 2003. The average
balance of our interest-bearing deposits increased $194.2 million, or 17.5%, to $1.3
billion for the nine months ended September 30, 2004 compared to $1.1 billion for the nine
months ended September 30, 2003. The average rate paid on interest-bearing deposits
declined to 1.89% for the nine months ended September 30, 2004 compared to 2.10% for the
nine months ended September 30, 2003, a decrease of 21 basis points or 10.0%. Interest
expense on FHLB advances and other borrowings totaled $15.0 million, an increase of $1.6
million, or 11.8%, compared to $13.4 million for the nine months ended September 30, 2003.
The average balance of our FHLB advances and other borrowings was $616.8 million for the
nine months ended September 30, 2004, an $82.1 million, or 15.4%, increase compared to
$534.7 million for the nine months ended September 30, 2003. The average rate paid on FHLB
advances and other borrowings declined to 3.24% for the nine months ended September 30,
2004 compared to 3.34% for the nine months ended September 30, 2003, a decrease of 10
basis points or 3.0%.

30

---

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

Average Balances, Net Interest
Income, Yields Earned and Cost of Funds.The following tables show for the periods
indicated the total dollar amount of interest from average interest-earning assets and the
resulting yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates, 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 September 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 Condition  and
Results of Operations

|                                           | Nine Months Ended September 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.
|--- | -----------------------------------------------------------------------------------
|   

32

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Condition  and
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 September 30, 2004
Compared to
Three Months Ended September 30, 2003 | Nine Months Ended September 30, 2004
Compared to
Nine Months Ended September 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33

---

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

Provision for Loan Losses. We
made a provision for loan losses of $922,000 for the three months ended September 30, 2004
compared to $1.1 million for the three months ended September 30, 2003, a decrease of
$184,000, or 16.6%. For the nine month period ended September 30, 2004, our provision for
loan losses was $3.0 million, an increase of $168,000, or 6.0%, compared to $2.8 million
for the nine months ended September 30, 2003. Our portfolio of commercial real estate and
land, construction (residential and commercial), agricultural (real estate and operating),
business and consumer loans totaled $1.7 billion at September 30, 2004, an increase of
$531.8 million, or 44.4%, compared to $1.2 billion at September 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
September 30, 2004, our total nonperforming loans amounted to $5.8 million, or 0.24% of
net loans, compared to $3.6 million, or 0.18% of net loans, at December 31, 2003. Our
total nonperforming assets totaled $7.3 million, or 0.26%, of total assets at September
30, 2004, compared to $4.3 million, or 0.19%, of total assets at December 31, 2003. The
increase in nonperforming loans and nonperforming assets was primarily attributable to the
acquisition of UNFC. During the three and nine months ended September 30, 2004, we
charged-off, net of recoveries, $427,000 and $1.2 million, respectively, primarily related
to automobile and other consumer-related loans compared to $646,000 and $1.1 million for
the three and nine months ended September 30, 2003, respectively. At September 30, 2004,
December 31, 2003 and September 30, 2003, our allowance for loan losses amounted to 1.05%,
0.96% and 1.00%, respectively, of net loans.

Noninterest Income.Our
noninterest income decreased by $1.2 million, or 18.7%, to $5.3 million for the three
months ended September 30, 2004 compared to $6.5 million for the three months ended
September 30, 2003. The decrease during the three month period ended September 30, 2004
compared to the same period in 2003 was primarily the result of a $2.2 million reduction
in gains on loans held for sale which was partially offset by a $1.1 million increase in
deposit account fees.

For the nine months ended September
30, 2004, noninterest income totaled $17.0 million, a $3.0 million, or 21.3%, increase
compared to $14.0 million for the nine months ended September 30, 2003. The increase
during the nine months ended September 30, 2004 compared to the nine months ended
September 30, 2003 was related to a $2.8 million reduction in our mortgage servicing
rights (MSR) amortization expense, a $2.7 million increase in deposit account
fees, a $2.0 million net decline in the Banks MSR valuation allowance and a $1.5
million gain associated with the merger of the Banks defined benefit pension plan
partially offset by a $5.8 million reduction in gains on loans held for sale.

34

---

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

Noninterest Expense.Our
noninterest expense increased by $2.1 million, or 17.1%, to $14.5 million for the three
months ended September 30, 2004 compared to $12.4 million for the three months ended
September 30, 2003. The increase during the three month period ended September 30, 2004
compared to the three month period ended September 30, 2003 resulted primarily from a $1.4
million increase in compensation expense primarily related to the UNFC acquisition and
normal annual salary adjustments. Additionally, occupancy and other operating expenses
increased a combined $587,000 which primarily related to the UNFC acquisition.

Noninterest expense for the nine
months ended September 30, 2004 increased $5.3 million, or 15.0%, to $40.5 million
compared to $35.2 million for the nine months ended September 30, 2003. The increase
during the nine months ended September 30, 2004 compared to the same period in 2003
resulted primarily from a $2.4 million increase in compensation expense primarily related
to annual salary adjustments and staff increases resulting from the UNFC acquisition. The
increase for the period also included $1.6 million of additional occupancy, data
processing and other operating expenses associated with the Companys growing
business development activities and the UNFC acquisition and a $1.2 million increase in
expense relating to the Companys 2003 Management Recognition and Retention Plan and
Employee Stock Ownership Plan. Our amortization of core deposit intangible asset was
$142,000 for the three and nine month periods ended September 30, 2004. This represents
one month of amortization expense related to core deposit intangible asset using an
estimated ten year life.

Goodwill arising from business
combinations represents the value attributable to unidentifiable intangible elements in
the business acquired. The Companys goodwill relates to value inherent in the
banking business and the value is dependent upon the Companys ability to provide
quality, cost effective services in a competitive marketplace. As such, goodwill value is
supported ultimately by revenue that is generated by the volume of business transacted. A
decline in earnings as a result of a lack of growth or the inability to deliver cost
effective services over sustained periods can lead to impairment of goodwill that could
adversely impact earnings in future periods.

Income Tax Expense.Our income
tax expense decreased by $553,000 to $3.2 million for the three months ended September 30,
2004 compared to $3.8 million for the same period in 2003 due to a decline in income and a
decline in our effective income tax rate. The effective income tax rate for the three
months ended September 30, 2004 was 37.1% compared to 37.6% for the three months ended
September 30, 2003.

Income tax expense for the nine month
period ended September 30, 2004 was $10.2 million, a $505,000, or 4.7%, decrease compared
to the same period in 2003. The effective income tax rate for the nine months ended
September 30, 2004 was 37.3% compared to 37.1% for the nine months ended September 30,
2003.

35

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Condition  and
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 FHLB advances 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 September 30,
2004, we had time deposits maturing within the next 12 months totaling $495.4 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 $633.2 million and $618.7 million for the three months
ended September 30, 2004 and September 30, 2003, respectively. The average balance of our
FHLB advances and other borrowings was $616.8 million and $534.7 million for the nine
months ended September 30, 2004 and September 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,
commercial construction and agricultural real estate loans as collateral for such
advances. Other qualifying collateral can be pledged in the event additional borrowing
capacity is required.

36

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Condition  and
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 September 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                         |       
|                                       

37

---

# TierOne Corporation
and SubsidiariesManagements Discussion and Analysis of Financial Condition  and
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 September 30, 2004, the maximum total dollar amount of such
recourse was approximately $12.9 million. Based on historical experience, at September 30,
2004, we had established a liability of $692,000 with respect to this recourse obligation.

# Regulatory Capital

At September 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
September 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.

38

---

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

# Selected Operating Ratios

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

|                                                    | At or for the
Three Months Ended
September 30, | At or for the
Nine Months Ended
September 30,
|--------------------------------------------------- | ---------------------------------------------- | ---------------------------------------------
|
|Selected Operating Ratios:                          |                                                |                                              
|Average yield on interest-earning assets            |                                                |                                              
|Average rate on interest-bearing liabilities        |                                                |                                              
|Average interest rate spread                        |                                                |                                              
|Net interest margin                                 |                                                |                                              
|Average interest-earning assets to average          |                                                |                                              
|interest-bearing liabilities                        |                                                |                                              
|Net interest income after provision for loan        |                                                |                                              
|losses to noninterest expense                       |                                                |                                              
|Total noninterest expense to average assets         |                                                |                                              
|Efficiency ratio (1)                                |                                                |                                              
|Return on average assets                            |                                                |                                              
|Return on average equity                            |                                                |                                              
|Average equity to average assets                    |                                                |                                              
|Other Ratios:                                       |                                                |                                              
|Nonperforming loans as a percent of net loans       |                                                |                                              
|Nonperfoming assets as a percent of total assets    |                                                |                                              
|Allowance for loan losses as a percent of           |                                                |                                              
|nonperforming loans                                 |                                                |                                              
|Allowance for loan losses as a percent of net loans |                                                |                                              
|                                                   

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

39

---

# 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.

40

---

# PART II  OTHER
INFORMATION

# Item 1  Legal
Proceedings.

There have been no substantive
changes with respect to legal proceedings during the three and nine months ended September
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 
Unregistered Sales of Equity Securities and Use of Proceeds.

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. There were no shares
repurchased under this plan as of September 30, 2004. 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 Numberof SharesPurchased | AveragePricePaid PerShare | Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs | Maximum Number ofShares that May YetBe Purchased UnderPlans or Programs
|---------------------------------- | ------------------------------ | ------------------------- | ----------------------------------------------------------------------------- | -----------------------------------------------------------------------
|July 2004                          |                                |                           |                                                                               |                                                                        
|Beginning Date - July 1, 2004     
|Ending Date - July 31, 2004        | --                             | --                        | 4,289,264                                                                     | 1,828,581                                                              
|August 2004                       
|Beginning Date - August 1, 2004   
|Ending Date - August 31, 2004      | --                             | --                        | 4,289,264                                                                     | 1,828,581                                                              
|September 2004                    
|Beginning Date - September 1, 2004
|Ending Date - September 30, 2004   | --                             | --                        | 4,289,264                                                                     | 1,828,581                                                              
|                                  
|Total Shares Purchased             | 2,031,757                      | $21.99                    | 4,289,264                                                                     | 1,828,581                                                              
|                                  

# Item 3  Defaults
Upon Senior Securities.

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

41

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

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

# Item 5  Other
Information.

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

# Item 6  Exhibits.

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

|Date Filed         | Date of Report     | Item and Description                                          
|------------------ | ------------------ | --------------------------------------------------------------
|July 28, 2004      | July 27, 2004      | Items 7 and 12. The Company furnished under Item 12 a         
|                   |                    | press release reporting its earnings for the three and six    
|                   |                    | months ended June 30, 2004.                                   
|August 12, 2004    | August 12, 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 September 15, 2004.                 
|August 31, 2004    | August 30, 2004    | Items 2 and 9. The Company furnished under Item 9 a press     
|                   |                    | release announcing that the Company had completed the         
|                   |                    | acquisition of United Nebraska Financial Co., the parent      
|                   |                    | company of United Nebraska Bank.                              
|September 17, 2004 | September 15, 2004 | Items 1 and 9. The Company furnished under Item 9 a press     
|                   |                    | release announcing that the Company had entered into a        
|                   |                    | definitive asset purchase agreement with First Indiana Bank of
|                   |                    | Indianapolis, Indiana to acquire a portion of First Indiana's 
|                   |                    | active residential construction loan business.                

42

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# 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:  November 4, 2004 | By: /s/ Gilbert G. Lundstrom                     
|                        | Gilbert G. Lundstrom                             
|                        | Chairman of the Board and Chief Executive Officer
|Date:  November 4, 2004 | By: /s/ Eugene B. Witkowicz                      
|                        | Eugene B. Witkowicz                              
|                        | Executive Vice President and                     
|                        | Chief Financial Officer                          

43

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# EXHIBIT INDEX

|No.  | Exhibits                                                                                          
|---- | --------------------------------------------------------------------------------------------------
|4.1  | Asset Purchase Agreement - First Indiana Bank Construction Lending Offices                        
|4.2  | Stock Purchase Agreement, Dated as of March 30, 2004, Among TierOne Corporation, United           
|     | Nebraska Financial Co. and the Shareholders of United Nebraska Financial Co. - Incorporated       
|     | by Reference to Exhibit 2 of the Form 8-K Filed August 31, 2004                                   
|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

44