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

# FORM 10-Q

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

# FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 2008

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

Large accelerated filer |_|
Accelerated filer |X| Non-accelerated filer |_| Smaller reporting company |_|

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

As of May 12, 2008 there were
18,036,134 issued and outstanding shares of the Registrants common stock.

---

# PART I - FINANCIAL
INFORMATION

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

# PART II - OTHER
INFORMATION

|Item 1 -      | Legal Proceedings                                           | 64
|------------- | ----------------------------------------------------------- | --
|Item 1A -     | Risk Factors                                                | 64
|Item 2 -      | Unregistered Sales of Equity Securities and Use of Proceeds | 71
|Item 3 -      | Defaults Upon Senior Securities                             | 71
|Item 4 -      | Submission of Matters to a Vote of Security Holders         | 71
|Item 5 -      | Other Information                                           | 71
|Item 6 -      | Exhibits                                                    | 71
|Signatures    | 72                                                         
|Exhibit Index | 73                                                         

2

---

# Forward-Looking
Statements

Statements
contained in this Quarterly Report on Form 10-Q which are not historical facts may be
forward-looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties
which could cause actual results to differ materially from those currently anticipated due
to a number of factors. In addition to the risk factors described in Part 2, Item 1A. of
this Quarterly Report on Form 10-Q, factors that could result in material variations
include, but are not limited to:

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

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

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

| |  | Changes
in the quality or composition of our loan portfolio;
| | - | ------------------------------------------------------------

| |  | Changes
in our underlying assumptions and judgment regarding our allowance and provisions for
loan losses;
| | - | ----------------------------------------------------------------------------------------------------------

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

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

| |  | Borrower
bankruptcies, claims and assessments;
| | - | ----------------------------------------------

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

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

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

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

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

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

| |  | Unanticipated
 issues  relating to the recovery of insurance  proceeds for claims arising out of our
prior  relationship  with          TransLand Financial Services, Inc.; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

3

---

# Item 1  Financial
Statements

# TierOne Corporation
and SubsidiariesConsolidated Statements of Financial Condition  March 31, 2008
(Unaudited) and December 31, 2007

|(Dollars in thousands, except per share data)                    | March 31, 2008 | December 31, 2007
|---------------------------------------------------------------- | -------------- | -----------------
|ASSETS                                                           |                |                  
|Cash and due from banks                                          |                |                  
|Federal funds sold                                               |                |                  
|                                                                
|Total cash and cash equivalents                                  |                |                  
|                                                                
|Investment securities:                                           |                |                  
|Held to maturity, at cost which approximates fair value          |                |                  
|Available for sale, at fair value                                |                |                  
|Mortgage-backed securities, available for sale, at fair value    |                |                  
|Loans receivable:                                                |                |                  
|Net loans (includes loans held for sale of $38,693 and $9,348 at |                |                  
|March 31, 2008 and December 31, 2007, respectively)              |                |                  
|Allowance for loan losses                                        |                |                  
|                                                                
|Net loans after allowance for loan losses                        |                |                  
|                                                                
|FHLBank Topeka stock, at cost                                    |                |                  
|Premises and equipment, net                                      |                |                  
|Accrued interest receivable                                      |                |                  
|Goodwill                                                         |                |                  
|Other intangible assets, net                                     |                |                  
|Mortgage servicing rights (lower of cost or market), net         |                |                  
|Other assets                                                     |                |                  
|                                                                
|Total assets                                                     |                |                  
|                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                             |                |                  
|Liabilities:                                                     |                |                  
|Deposits                                                         |                |                  
|FHLBank Topeka advances and other borrowings                     |                |                  
|Advance payments from borrowers for taxes, insurance and         |                |                  
|other escrow funds                                               |                |                  
|Accrued interest payable                                         |                |                  
|Accrued expenses and other liabilities                           |                |                  
|                                                                
|Total liabilities                                                |                |                  
|                                                                
|Stockholders equity:                                            |                |                  
|Preferred stock, $0.01 par value. 10,000,000 shares authorized;  |                |                  
|none issued                                                      |                |                  
|Common stock, $0.01 par value. 60,000,000 shares authorized;     |                |                  
|18,059,946 and 18,058,946 shares issued at                       |                |                  
|March 31, 2008 and December 31, 2007, respectively               |                |                  
|Additional paid-in capital                                       |                |                  
|Retained earnings, substantially restricted                      |                |                  
|Treasury stock, at cost; 4,515,129 and 4,516,129 shares at       |                |                  
|March 31, 2008 and December 31, 2007, respectively               |                |                  
|Unallocated common stock held by Employee Stock                  |                |                  
|Ownership Plan                                                   |                |                  
|Accumulated other comprehensive loss, net                        |                |                  
|                                                                
|Total stockholders equity                                       |                |                  
|                                                                
|Total liabilities and stockholders equity                       |                |                  
|                                                                

See accompanying notes to
consolidated financial statements.

4

---

# TierOne Corporation
and SubsidiariesConsolidated Statements of Operations  (Unaudited)

|                                                           | For the Three Months Ended
March 31,
|---------------------------------------------------------- | ------------------------------------
|
|Interest income:                                           |                                     
|Loans receivable                                           |                                     
|Investment securities                                      |                                     
|Other interest-earning assets                              |                                     
|                                                          
|Total interest income                                      |                                     
|                                                          
|Interest expense:                                          |                                     
|Deposits                                                   |                                     
|FHLBank Topeka advances and other borrowings               |                                     
|                                                          
|Total interest expense                                     |                                     
|                                                          
|Net interest income                                        |                                     
|Provision for loan losses                                  |                                     
|                                                          
|Net interest income (loss) after provision for loan losses |                                     
|                                                          
|Noninterest income:                                        |                                     
|Fees and service charges                                   |                                     
|Debit card fees                                            |                                     
|Loss from real estate operations, net                      |                                     
|Net gain (loss) on sales of:                               |                                     
|Loans held for sale                                        |                                     
|Real estate owned                                          |                                     
|Other operating income                                     |                                     
|                                                          
|Total noninterest income                                   |                                     
|                                                          
|Noninterest expense:                                       |                                     
|Salaries and employee benefits                             |                                     
|Goodwill impairment                                        |                                     
|Occupancy, net                                             |                                     
|Data processing                                            |                                     
|Advertising                                                |                                     
|Other operating expense                                    |                                     
|                                                          
|Total noninterest expense                                  |                                     
|                                                          
|Income (loss) before income taxes                          |                                     
|Income tax expense (benefit)                               |                                     
|                                                          
|Net income (loss)                                          |                                     
|                                                          
|Net income (loss) per common share, basic                  |                                     
|                                                          
|Net income (loss) per common share, diluted                |                                     
|                                                          
|Dividends declared per common share                        |                                     
|                                                          
|Average common shares outstanding, basic (000s)           |                                     
|                                                          
|Average common shares outstanding, diluted (000s)         |                                     
|                                                          

See accompanying notes to
consolidated financial statements.

5

---

# TierOne Corporation
and Subsidiaries  Consolidated Statements of Changes in Stockholders Equity and
Comprehensive IncomeFor the Three Months Ended March 31, 2008 and 2007  (Unaudited)

|(Dollars in thousands)                   | Common Stock | AdditionalPaid-In Capital | Retained Earnings,SubstantiallyRestricted | Treasury Stock | UnallocatedCommon Stock HeldBy the EmployeeStock OwnershipPlan | Accumulated OtherComprehensive Loss,Net | Total Stockholders Equity
|---------------------------------------- | ------------ | ------------------------- | ----------------------------------------- | -------------- | -------------------------------------------------------------- | --------------------------------------- | --------------------------
|Balance at December 31, 2006             |              |                           | $                                         | 226            |                                                                | $                                       | 358,733                   
|                                        
|Common stock earned by employees         |              |                          
|in Employee Stock Ownership Plan         |              |                           |                                           | --             |                                                                |                                         | 713                       
|Amortization of awards under the         |              |                          
|Management Recognition and               |              |                          
|Retention Plan                           |              |                           |                                           | --             |                                                                |                                         | 726                       
|Amortization of stock options  under     |              |                          
|2003 Stock Option Plan                   |              |                           |                                           | --             |                                                                |                                         | 420                       
|Treasury stock reissued under 2003       |              |                          
|Stock Option Plan                        |              |                           |                                           | --             |                                                                |                                         | (88                       
|Excess tax benefit realized from stock-  |              |                          
|based compensation plans                 |              |                           |                                           | --             |                                                                |                                         | 49                        
|Dividends paid ($0.07 per common share)  |              |                           |                                           | --             |                                                                |                                         | --                        
|Cumulative effect of adoption of FASB    |              |                          
|Interpretation No. 48 on January 1, 2007 |              |                           |                                           | --             |                                                                |                                         | --                        
|Comprehensive income:                    |              |                          
|Net income                               |              |                           |                                           | --             |                                                                |                                         | --                        
|Change in unrealized loss on             |              |                          
|available for sale securities, net of    |              |                          
|tax and reclassification adjustment      |              |                           |                                           | --             |                                                                |                                         | --                        
|                                        
|Total comprehensive income               |              |                           |                                           | --             |                                                                |                                         | --                        
|                                        
|Balance at March 31, 2007                |              |                           | $                                         | 226            |                                                                | $                                       | 360,553                   
|                                        
|Balance at December 31, 2007             |              |                           | $                                         | 226            |                                                                | $                                       | 366,042                   
|                                        
|Common stock earned by employees         |              |                          
|in Employee Stock Ownership Plan         |              |                           |                                           | --             |                                                                |                                         | 248                       
|Amortization of awards under the         |              |                          
|Management Recognition and               |              |                          
|Retention Plan                           |              |                           |                                           | --             |                                                                |                                         | 726                       
|Amortization of stock options under      |              |                          
|2003 Stock Option Plan                   |              |                           |                                           | --             |                                                                |                                         | 513                       
|Treasury stock reissued under 2003       |              |                          
|Stock Option Plan                        |              |                           |                                           | --             |                                                                |                                         | (5                        
|Excess tax benefit realized from stock-  |              |                          
|based compensation plans                 |              |                           |                                           | --             |                                                                |                                         | 10                        
|Dividends paid ($0.08 per common share)  |              |                           |                                           | --             |                                                                |                                         | --                        
|Comprehensive loss:                      |              |                          
|Net loss                                 |              |                           |                                           | --             |                                                                |                                         | --                        
|Change in unrealized loss on             |              |                          
|available for sale securities, net of    |              |                          
|tax                                      |              |                           |                                           | --             |                                                                |                                         | --                        
|                                        
|Total comprehensive loss                 |              |                           |                                           | --             |                                                                |                                         | --                        
|                                        
|Balance at March 31, 2008                |              |                           | $                                         | 226            |                                                                | $                                       | 367,534                   
|                                        

See accompanying notes to
consolidated financial statements.

6

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

|                                                                                    | For the Three Months Ended
March 31,
|----------------------------------------------------------------------------------- | ------------------------------------
|
|Cash flows from operating activities:                                               |                                     
|Net income (loss)                                                                   |                                     
|Adjustments to reconcile net income to net cash provided by operating activities:   |                                     
|Net discount accretion of investment and mortgage-backed securities                 |                                     
|Premises and equipment depreciation and amortization                                |                                     
|Amortization of other intangible assets                                             |                                     
|Accretion of discount on FHLBank Topeka advances                                    |                                     
|Employee Stock Ownership Plan compensation expense                                  |                                     
|2003 Management Recognition and Retention Plan compensation expense                 |                                     
|2003 Stock Option Plan compensation expense                                         |                                     
|Net accretion of discounts on net loans                                             |                                     
|FHLBank Topeka stock dividend                                                       |                                     
|Deferred income tax benefit                                                         |                                     
|Goodwill impairment                                                                 |                                     
|Provision for loan losses                                                           |                                     
|Provision for real estate owned losses                                              |                                     
|Mortgage servicing right valuation allowance                                        |                                     
|Proceeds from sales of loans held for sale                                          |                                     
|Originations and purchases of loans held for sale                                   |                                     
|Excess tax benefits from stock-based compensation plans                             |                                     
|Net (gain) loss on sales of:                                                        |                                     
|Loans held for sale                                                                 |                                     
|Real estate owned                                                                   |                                     
|Changes in certain assets and liabilities:                                          |                                     
|Accrued interest receivable                                                         |                                     
|Other assets                                                                        |                                     
|Accrued interest payable                                                            |                                     
|Accrued expenses and other liabilities                                              |                                     
|                                                                                   
|Net cash provided by (used in) operating activities                                 |                                     
|                                                                                   
|Cash flows from investing activities:                                               |                                     
|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                                 |                                     
|Decrease (increase) in loans receivable                                             |                                     
|Additions to premises and equipment                                                 |                                     
|Proceeds from sale of real estate owned                                             |                                     
|                                                                                   
|Net cash provided by (used in) investing activities                                 |                                     
|                                                                                   

See accompanying notes to
consolidated financial statements.

7

---

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

|                                                                               | For the Three Months Ended
March 31,
|------------------------------------------------------------------------------ | ------------------------------------
|
|Cash flows from financing activities:                                          |                                     
|Net increase (decrease) in deposits                                            |                                     
|Net advances (repayment) on FHLBank Topeka line of credit, short-term          |                                     
|advances and other borrowings                                                  |                                     
|Proceeds from FHLBank Topeka long-term advances and other borrowings           |                                     
|Repayments of FHLBank Topeka long-term advances and other borrowings           |                                     
|Net increase (decrease) in advances from borrowers for taxes, insurance and    |                                     
|other escrow funds                                                             |                                     
|Dividends paid on common stock                                                 |                                     
|Excess tax benefit realized from the exercise of stock options                 |                                     
|Excess tax benefit realized from the vesting of Management Recognition and     |                                     
|Retention Plan shares                                                          |                                     
|Proceeds from the exercise of stock options                                    |                                     
|                                                                              
|Net cash used in financing activities                                          |                                     
|                                                                              
|Net decrease in cash and cash equivalents                                      |                                     
|Cash and cash equivalents at beginning of period                               |                                     
|                                                                              
|Cash and cash equivalents at end of period                                     |                                     
|                                                                              
|Supplemental disclosures of cash flow information:                             |                                     
|Cash paid during period for:                                                   |                                     
|Interest                                                                       |                                     
|Income taxes, net of refunds                                                   |                                     
|                                                                              
|Noncash investing activities:                                                  |                                     
|Transfers from loans to real estate owned and other assets through foreclosure |                                     
|                                                                              

See accompanying notes to
consolidated financial statements.

8

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 1  Basis of
Presentation and Consolidation

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

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

The
accompanying interim consolidated financial statements as of March 31, 2008 and for the
three months ended March 31, 2008 and 2007 are unaudited. All significant intercompany
accounts and transactions have been eliminated in consolidation. In the opinion of
management, the accompanying unaudited consolidated financial statements contain all
adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation of the financial position and operating results for interim periods. The
unaudited consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles (GAAP) for interim financial
information, in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X
promulgated by the Securities and Exchange Commission (SEC), and do not
include all of the information and notes required for complete, audited financial
statements. The unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in our
Annual Report on Form 10-K for the year ended December 31, 2007. The results of operations
for the three months ended March 31, 2008 are not necessarily indicative of the results
which may be expected for the entire calendar year 2008.

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

9

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 2 
Termination of Acquisition Agreement

On
May 17, 2007, the Company, CapitalSource Inc. and CapitalSource TRS Inc. entered into an
Agreement and Plan of Merger (Merger Agreement). On March 20, 2008, the
Company terminated the Merger Agreement. Pursuant to the terms of the Merger Agreement,
either party had the right to terminate the Merger Agreement if the proposed merger was
not completed by February 17, 2008. No termination fee was payable by either company as a
result of the termination of the Merger Agreement.

# Note 3  Critical
Accounting Policies

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

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

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

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

| |  | 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
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

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

We
establish provisions for loan losses, which are charges to our operating results, in order
to maintain a level of total allowance for loan losses that, in managements belief,
covers all known and inherent losses that are both probable and reasonably estimable at
each reporting date. Management reviews the loan portfolio no less frequently than
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:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

11

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

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

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

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

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

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

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

Goodwill
and Other Intangible Assets. We had $42.1 million of goodwill that was
recorded as a result of our 2004 acquisition of United Nebraska Financial Co.
(UNFC). We test this goodwill for impairment annually during the third quarter
of each year, or between annual assessment dates whenever events or significant changes in
circumstances indicate that the carrying value may be impaired. We performed a goodwill
impairment test as of March 31, 2008 due to adverse changes in the business climate. As a
result of a decline in the market value of our common stock to levels below our book
value, we determined that the entire amount of our goodwill was impaired, and we recorded
a $42.1 million goodwill impairment charge to write-off our goodwill at March 31, 2008.

The
value of core deposit intangible assets acquired in connection with the UNFC transaction
and our acquisition of Marine Banks banking office in Omaha, Nebraska, which is
subject to amortization, is included in the Consolidated Statements of Financial Condition
as other intangible assets. Determining the amount of identifiable intangible assets and
their average lives involves multiple assumptions and estimates and is typically
determined by performing a discounted cash flow analysis, which involves a combination of
any or all of the following assumptions: customer attrition, account runoff, alternative
funding costs, deposit servicing costs and discount rates. Core deposit intangible assets
are amortized using an accelerated method of amortization which is recorded in the
Consolidated Statements of Operations as other operating expense.

12

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

We
review our core deposit intangible assets for impairment whenever events or changes in
circumstances indicate that we may not recover our investment in the underlying assets or
liabilities which gave rise to the identifiable intangible assets. No events or
circumstances triggered an impairment analysis of our core deposit intangible assets
during the three months ended March 31, 2008.

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

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

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

13

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

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

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

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

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

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

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

14

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

We
utilize estimates of future earnings to support our position that the benefit of our
deferred tax assets will be realized. If future pre-tax income should prove nonexistent or
less than the amount of temporary differences giving rise to the net deferred tax assets
within the tax years to which they may be applied, the assets will not be realized and our
financial results will be adversely affected.

On
January 1, 2007, we adopted Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 requires that we
determine whether a tax position is more likely than not to be sustained upon examination,
including resolution of any related appeals or litigation processes, based on the
technical merits of the position. Once it is determined that a position meets the
recognition threshold, the position is measured to determine the amount of benefit to be
recognized in the financial statements. Any interest and penalties related to uncertain
tax positions are recorded in income tax expense in the Consolidated Statements of
Operations.

15

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 4  Earnings
Per Share

Basic
earnings (loss) per share (EPS) is computed by dividing net income (loss) by
the weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised. Diluted earnings per share is computed after giving
consideration to the weighted average dilutive effect of our 2003 Stock Option Plan shares
and 2003 Management Recognition and Retention Plan shares. All stock options are assumed
to be 100% vested for purposes of EPS computations. Due to our net loss for the three
months ended March 31, 2008, no potentially dilutive shares were included in the loss per
share calculation as including such shares would be anti-dilutive. The following table is
a reconciliation of basic and diluted EPS:

|                                                       | For the Three Months Ended March 31,
|------------------------------------------------------ | ------------------------------------
|
|
|Net income (loss)                                      |                                     
|                                                      
|Total weighted average basic common shares outstanding |                                     
|Effect of dilutive securities:                         |                                     
|2003 Stock Option Plan                                 |                                     
|2003 Management Recognition and Retention Plan         |                                     
|                                                      
|Total weighted average basic and diluted               |                                     
|common shares outstanding                              |                                     
|                                                      
|Net income (loss) per common share                     |                                     
|                                                      

16

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 5 
Stock-Based Benefit Plans

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

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

|                                                | Three Months Ended March 31,
|----------------------------------------------- | ----------------------------
|
|Stock-based employee compensation expense:      |                             
|Employee Stock Ownership Plan                   |                             
|Management Recognition and Retention Plan       |                             
|2003 Stock Option Plan                          |                             
|                                               
|Amount of stock-based compensation expense,     |                             
|before income tax benefit                       |                             
|                                               
|Amount of related income tax benefit recognized |                             
|                                               

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

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

17

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

|                                                               | At or for the
Three Months Ended
March 31,
|-------------------------------------------------------------- | ------------------------------------------
|
|Employee Stock Ownership Plan compensation expense             |                                           
|Employee Stock Ownership Plan shares allocated to employees    |                                           
|Employee Stock Ownership Plan shares unallocated               |                                           
|Fair value of Employee Stock Ownership Plan unallocated shares |                                           
|                                                              

Management
Recognition and Retention Plan. We established the 2003 Management Recognition and
Retention Plan (MRRP) which is a stock-based incentive plan. The shares
awarded by the MRRP vest to participants at the rate of 20% per year. Compensation expense
for this plan is being recorded over a 60-month period, using the straight-line
amortization method adjusted for forfeitures, and is based on the market value of our
stock as of the date the awards were made. Stockholders approved 903,003 shares to be
granted under the MRRP and 100,653 shares are still available for future grants as of
March 31, 2008. The following table summarizes shares of our common stock that were
subject to award and have been granted pursuant to the MRRP as of March 31, 2008 and 2007:

|                                                    | At or for the Three Months Ended
March 31,
|--------------------------------------------------- | ------------------------------------------
|
|Nonvested shares outstanding at beginning of period |                                           
|Shares granted                                      |                                           
|Shares vested                                       |                                           
|Shares forfeited                                    |                                           
|                                                   
|Nonvested shares outstanding at end of period       |                                           
|                                                   

Compensation
expense related to the MRRP totaled $726,000 for each of the three month periods ended
March 31, 2008 and 2007. The weighted average grant date fair value of outstanding shares
awarded by the MRRP was $18.42 and $18.27 at March 31, 2008 and 2007, respectively. As of
March 31, 2008, we had $495,000 of total unrecognized employee compensation expense
related to unvested MRRP shares which are expected to be recognized over a weighted
average period of 15 months. We realized excess tax benefits related to MRRP shares of
$10,000 and $8,000 during the three months ended March 31, 2008 and 2007, respectively.

18

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

Stock
Option Plan. We established the 2003 Stock Option Plan (SOP)
under which 2,257,508 shares of our common stock were reserved for the grant of stock
options to directors, officers and employees. Stock options awarded under the SOP vest to
participants at the rate of 20% per year. Compensation expense for this plan is being
recorded over a 60-month period, using the straight-line amortization method adjusted for
forfeitures, and is based on the fair value of our stock options as of the date the awards
were made. The exercise price of the options is equal to the market price of the common
stock on the grant date. Stockholders approved 2,257,508 stock options to be granted under
the SOP and 359,758 of these stock options remain available for future grants as of March
31, 2008.

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

Stock
Option Activity. The following table details stock options granted,
exercised and forfeited during the three months ended March 31, 2008:

|(Dollars in thousands, except per share data)  | Number of Shares | Weighted Average Exercise Price | Weighted AverageRemainingContractual Term(In Years) | Aggregate Intrinsic Value
|---------------------------------------------- | ---------------- | ------------------------------- | --------------------------------------------------- | -------------------------
|Stock options outstanding at December 31, 2007 |                  |                                 |                                                     | 1,792,226                
|Stock options granted                          |                  |                                 |                                                     | --                       
|Stock options exercised                        |                  |                                 |                                                     | (1,000                   
|Stock options forfeited                        |                  |                                 |                                                     | (500                     
|                                              
|Stock options outstanding at March 31, 2008    |                  |                                 |                                                     | 1,790,726                
|                                              
|Stock options exercisable at March 31, 2008    |                  |                                 |                                                     | 1,410,676                
|                                              

19

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

The
following table details stock options granted, exercised and forfeited during the three
months ended March 31, 2007:

|(Dollars in thousands, except per share data)  | Number of Shares | Weighted Average Exercise Price | Weighted AverageRemainingContractual Term(In Years) | Aggregate Intrinsic Value
|---------------------------------------------- | ---------------- | ------------------------------- | --------------------------------------------------- | -------------------------
|Stock options outstanding at December 31, 2006 |                  |                                 |                                                     | 1,818,626                
|Stock options granted                          |                  |                                 |                                                     | --                       
|Stock options exercised                        |                  |                                 |                                                     | (16,400                  
|Stock options forfeited                        |                  |                                 |                                                     | --                       
|                                              
|Stock options outstanding at March 31, 2007    |                  |                                 |                                                     | 1,802,226                
|                                              
|Stock options exercisable at March 31, 2007    |                  |                                 |                                                     | 1,047,126                
|                                              

The
following table details the intrinsic value, cash received and tax benefit realized from
the exercise of stock options during the three months ended March 31, 2008 and 2007:

|                                     | Three Months Ended
March 31,
|------------------------------------ | ----------------------------
|
|Intrinsic value (market value on the |                             
|exercise date less the strike price) |                             
|Cash received from the exercise of   |                             
|stock options                        |                             
|Tax benefit realized from the        |                             
|exercise of stock options            |                             
|                                    

At
March 31, 2008, there was $223,000 of total unrecognized compensation expense related to
unvested stock options that will be expensed over a weighted average period of nine
months.

20

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 6  Goodwill
and Other Intangible Assets

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

The
changes in the carrying amount of goodwill for the three months ended March 31, 2008 and
2007 are as follows:

|                                                         | Three Months Ended March 31,
|-------------------------------------------------------- | ----------------------------
|
|Balance at beginning of period                           |                             
|Adjustment due to adoption of FASB Interpretation No. 48 |                             
|Goodwill impairment                                      |                             
|                                                        
|Balance at end of period                                 |                             
|                                                        

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

Other
Intangible Asset Activity.  The changes in the carrying amount of acquired
intangible assets for the three months ended March 31, 2008 and 2007 are as follows:

|                               | Three Months Ended March 31,
|------------------------------ | ----------------------------
|
|Balance at beginning of period |                             
|Amortization expense           |                             
|                              
|Balance at end of period       |                             
|                              

21

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

Other
Intangible Asset Estimated Amortization. Estimated amortization expense
related to our core deposit intangible assets for the year ending December 31, 2008 and
the five years thereafter are as follows:

|(Dollars in thousands)                              | 
|--------------------------------------------------- | 
|Estimated Amortization Expense For the Year Ending: | 
|December 31, 2008                                   | 
|December 31, 2009                                   | 
|December 31, 2010                                   | 
|December 31, 2011                                   | 
|December 31, 2012                                   | 
|December 31, 2013                                   | 
|                                                   

22

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 7  Investment
and Mortgage-Backed Securities

Investment
Security Composition. The amortized cost, gross unrealized gains and losses and fair value
of investment and mortgage-backed securities by major security category at March 31, 2008
and December 31, 2007 are as follows:

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

|                                                  | December 31, 2007
|------------------------------------------------- | -----------------
|
|
|Held to maturity:                                 |                  
|Municipal obligations                             |                  
|                                                 
|Available for sale:                               |                  
|Mortgage-backed securities                        |                  
|U.S. Government securities and agency obligations |                  
|Corporate securities                              |                  
|Municipal obligations                             |                  
|Agency equity securities                          |                  
|Asset Management Fund - ARM Fund                  |                  
|                                                 
|Total investment and mortgage-backed              |                  
|securities, available for sale                    |                  
|                                                 

We
believe all unrealized losses as of March 31, 2008 to be market related, with no permanent
sector or issuer credit concerns or impairments. We had 17 securities with unrealized
losses totaling $185,000 for 12 consecutive months or longer as of March 31, 2008. The
unrealized losses are believed to be temporarily, not permanently, impaired in value.
Impairment is deemed temporary if the positive evidence indicating that an
investments carrying amount is recoverable within a reasonable time period outweighs
negative evidence to the contrary. At March 31, 2008, we have the ability and intent to
hold these securities until maturity.

23

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 8  Loans
Receivable

Loan
Portfolio Composition.  Loans receivable at March 31, 2008 and December 31, 2007
are summarized in the following table:

|                                                                                                    | March 31, 2008 | December 31, 2007
|--------------------------------------------------------------------------------------------------- | -------------- | -----------------
|
|Real estate loans:                                                                                  |                |                  
|One-to-four family residential (1)                                                                  |                |                  
|Second mortgage residential                                                                         |                |                  
|Multi-family residential                                                                            |                |                  
|Commercial real estate                                                                              |                |                  
|Land and land development (1)                                                                       |                |                  
|Residential construction (1)                                                                        |                |                  
|Commercial construction                                                                             |                |                  
|Agriculture                                                                                         |                |                  
|                                                                                                   
|Total real estate loans                                                                             |                |                  
|                                                                                                   
|Business                                                                                            |                |                  
|                                                                                                   
|Agriculture - operating                                                                             |                |                  
|                                                                                                   
|Warehouse mortgage lines of credit                                                                  |                |                  
|                                                                                                   
|Consumer loans:                                                                                     |                |                  
|Home equity                                                                                         |                |                  
|Home equity lines of credit                                                                         |                |                  
|Home improvement                                                                                    |                |                  
|Automobile                                                                                          |                |                  
|Other                                                                                               |                |                  
|                                                                                                   
|Total consumer loans                                                                                |                |                  
|                                                                                                   
|Total loans                                                                                         |                |                  
|                                                                                                   
|Unamortized premiums, discounts and                                                                 |                |                  
|deferred loan fees                                                                                  |                |                  
|Loans in process (2)                                                                                |                |                  
|                                                                                                   
|Net loans                                                                                           |                |                  
|Allowance for loan losses                                                                           |                |                  
|                                                                                                   
|Net loans after allowance for loan losses                                                           |                |                  
|                                                                                                   
|(1) Includes loans held for sale                                                                    |                |                  
|                                                                                                   
|(2) Loans in process represents the undisbursed portion of construction and land development loans.
|                                                                                                   

24

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Asset Quality

Reports
listing all delinquent loans (loans 30 or more days delinquent), classified assets and
real estate owned are reviewed by management and our Board of Directors no less frequently
than quarterly. The procedures we take with respect to delinquencies vary depending on the
nature of the loan, period and cause of delinquency and whether the borrower is habitually
delinquent. When a borrower fails to make a required payment on a loan, we take a number
of steps to have the borrower cure the delinquency and restore the loan to current status.
In the event payment is not then received or the loan not otherwise satisfied, collection letters are sent and
telephone calls are generally made. If the loan is still not brought current or satisfied
and it becomes necessary for us to take legal action, which typically occurs after a loan
is 90 days or more delinquent, we will commence recovery proceedings against the property
securing the loan. If a legal action is instituted and the loan is not brought current,
paid in full, or refinanced before the recovery sale, the property securing the loan
generally is sold and, if purchased by us, becomes real estate owned or a repossessed
asset.

During
2007, our levels of delinquent loans, nonperforming loans (loans 90 or more days
delinquent) and impaired loans increased significantly due to deterioration in the
nations economic conditions. Further deterioration occurred during the three months
ended March 31, 2008, which negatively impacted our asset quality. Our current levels of
delinquent, nonperforming and impaired loans are primarily attributable to the continued
deterioration in the real estate market and the economy in general. We have been further
impacted by the erosion of property values and an overall increase in housing inventory
(both developed lots and completed houses) in many of the areas of the country in which we
do business and where the collateral for our loans reside. Additionally, significantly
tightened credit standards have made it more difficult for potential borrowers to obtain
financing and for current borrowers to refinance existing loans. Furthermore, we have
tightened credit policies and limited our exposure in selected business lines and
geographic markets.

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

|(Dollars in thousands)                     | March 31, 2008 | December 31, 2007
|------------------------------------------ | -------------- | -----------------
|One-to-four family residential             |                |                  
|Second mortgage residential                |                |                  
|Multi-family residential                   |                |                  
|Commercial real estate                     |                |                  
|Land and land development                  |                |                  
|Residential construction                   |                |                  
|Agriculture - real estate                  |                |                  
|Business                                   |                |                  
|Agriculture - operating                    |                |                  
|Consumer                                   |                |                  
|                                          
|Total delinquent loans                     |                |                  
|                                          
|Delinquent loans as a percentage of        |                |                  
|net loans before allowance for loan losses |                |                  
|                                          

25

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

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

|(Dollars in thousands)                                                                                    | March 31, 2008 | December 31, 2007
|--------------------------------------------------------------------------------------------------------- | -------------- | -----------------
|Nonperforming loans:                                                                                      |                |                  
|One-to-four family residential                                                                            |                |                  
|Second mortgage residential                                                                               |                |                  
|Multi-family residential                                                                                  |                |                  
|Commercial real estate                                                                                    |                |                  
|Land and land development                                                                                 |                |                  
|Residential construction                                                                                  |                |                  
|Commercial construction                                                                                   |                |                  
|Agriculture - real estate                                                                                 |                |                  
|Business                                                                                                  |                |                  
|Agriculture - operating                                                                                   |                |                  
|Consumer                                                                                                  |                |                  
|                                                                                                         
|Total nonperforming loans (1)                                                                             |                |                  
|Real estate owned and repossessed assets, net (2)                                                         |                |                  
|                                                                                                         
|Total nonperforming assets                                                                                |                |                  
|Troubled debt restructurings                                                                              |                |                  
|                                                                                                         
|Total nonperforming assets and troubled debt restructurings                                               |                |                  
|                                                                                                         
|Total nonperforming loans as a percentage of net loans                                                    |                |                  
|                                                                                                         
|Total nonperforming assets as a percentage of total assets                                                |                |                  
|                                                                                                         
|Total nonperforming assets and troubled debt restructurings                                               |                |                  
|as a percentage of total assets                                                                           |                |                  
|                                                                                                         
|(1)  Includes loans held for sale which are 90 days or more delinquent.                                  
|(2)  Real estate owned and repossessed assets balances are shown net of related loss allowances. Includes
|both real property and other repossessed collateral.                                                     
|                                                                                                         

Nonperforming
Loans.At March 31, 2008, nonperforming loans totaled $127.1 million, a
decrease of $1.4 million, or 1.1%, compared to $128.5 million at December 31, 2007. The
change in the nonperforming loans is primarily attributable to the following:

| | Residential
Construction Loans.  Due to the continued erosion of housing values and increased
housing inventory in several markets throughout the country, especially Nevada and
Florida, we have, and may continue to experience, increased levels of nonperforming
residential construction loans. At March 31, 2008 we had classified $49.6 million of our
total residential construction loans as nonperforming, of which $17.3 million relate to
loans collateralized by property in Florida.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

| | During
the three months ended March 31, 2008 and December 31, 2007, we charged off $23.0 million
and $25.5 million of TransLand-related residential construction loans, respectively.
TransLand- related loan charge offs were due in large part to a decline in the estimated
fair value of undeveloped residential lots.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
March 31, 2008, we had four residential development construction loans totaling $10.3
million in the Las Vegas, Nevada area which were classified as nonperforming.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Land
and Land Development.Our nonperforming land development loans at March
31, 2008 totaled $44.1 million which consisted of 16 residential land development
properties. Of the 16 nonperforming residential land development properties, five
projects were located in the Las Vegas, Nevada area which totaled $38.5 million, six
projects were located in Nebraska totaling $2.8 million, one project in the Minneapolis,
Minnesota area totaling $1.5 million, one project in Illinois totaling $1.2 million and
three projects in Florida totaling $93,000.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Commercial
Construction.Nonperforming commercial construction loans totaled $19.2
million at March 31, 2008. This balance relates to one upscale, 113-unit condominium
project located within a suburban area of Las Vegas, Nevada. The multi-phase project,
with units in various stages of construction including the substantially completed
33-unit first phase, was funded by the Bank and three other financial institutions with
total committed loans by all institutions of $84.8 million. Many of the units were under
contract for purchase prior to the commencement of the construction project.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Impaired
Loans. Included in the preceding table, within nonperforming loans and
troubled debt restructurings, are impaired loans of $146.8 million and $125.9 million at
March 31, 2008 and December 31, 2007, respectively. At March 31, 2008, impaired loans
consisted primarily of $61.3 million of land and land development loans, $54.6 million of
residential construction loans and $22.8 million of commercial construction loans.

27

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

Real
Estate Owned and Repossessed Assets. When we acquire real estate owned
property or other assets through foreclosure, deed in lieu of foreclosure or repossession,
it is initially recorded at the lower of the recorded investment in the corresponding loan
or the fair value of the related assets at the date of foreclosure, less costs to sell. If
there is a further deterioration in value, we provide for a specific valuation allowance
and charge operations for the decline in value. We generally obtain an appraisal or
brokers price opinion on all real estate subject to foreclosure proceedings prior to
the time of foreclosure. It is our policy to require appraisals on a periodic basis on
foreclosed properties as well as conduct inspections of such properties.

28

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

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

|                                      | Three Months Ended March 31,
|------------------------------------- | ----------------------------
|
|Balance at beginning of period        |                             
|Loan foreclosures and other additions |                             
|Sales                                 |                             
|Provisions for losses                 |                             
|Net loss on disposal                  |                             
|                                     
|Balance at end of period              |                             
|                                     

At
March 31, 2008, real estate owned consisted primarily of 36 residential properties
totaling $9.9 million and three commercial properties totaling $2.8 million.

29

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

Allowance
for Loan Losses.The activity in the allowance for loan losses during the three
months ended March 31, 2008 and 2007 is summarized in the following table:

|                                                 | At or for the Three Months Ended
March 31,
|------------------------------------------------ | ------------------------------------------
|
|Allowance for loan losses at beginning of period |                                           
|Charge-offs:                                     |                                           
|One-to-four family residential                   |                                           
|Second mortgage residential                      |                                           
|Land and land development                        |                                           
|Commercial real estate                           |                                           
|Residential construction                         |                                           
|Commercial construction                          |                                           
|Business                                         |                                           
|Consumer                                         |                                           
|                                                
|Total charge-offs                                |                                           
|Recoveries on loans previously charged-off       |                                           
|Change in reserve for unfunded loan commitments  |                                           
|Provision for loan losses                        |                                           
|                                                
|Allowance for loan losses at end of period       |                                           
|                                                
|Allowance for loan losses as a percentage        |                                           
|of net loans                                     |                                           
|Allowance for loan losses as a percentage of     |                                           
|nonperforming loans                              |                                           
|Ratio of net charge-offs during the period as a  |                                           
|percentage of average loans outstanding          |                                           
|during the period                                |                                           
|                                                

We
generally discontinue funding of loans which become nonperforming or are deemed impaired
unless additional funding is required to protect the asset. In addition, due to certain
laws and regulations in selected states, some additional funding may be required. Our
reserve for unfunded loan commitments was $2.2 million at March 31, 2008 compared to $2.7
million at December 31, 2007. Our reserve for unfunded loan commitments at March 31, 2008
represents potential future losses associated with unfunded loan commitments. We
charged-off $24.4 million of our allowance for loan losses related to loans which were
reclassified to loans held for sale at March 31, 2008.

30

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 9  Mortgage
Servicing Rights

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

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

The
balance of capitalized mortgage servicing rights, net of valuation allowances, at March
31, 2008 and December 31, 2007 was $15.5 million and $14.5 million, respectively. The
following are the key assumptions used in measuring the fair values of capitalized
mortgage servicing rights and the sensitivity of the fair values to changes in those
assumptions:

|(Dollars in thousands)             | March 31, 2008  | December 31, 2007
|---------------------------------- | --------------- | -----------------
|Serviced loan portfolio balance    | $1,530,145      | $1,459,498       
|Fair value                         | $7,023          | $8,310           
|Prepayment speed                   | 6.66% - 43.16%  | 6.62% - 26.07%   
|Weighted average prepayment speed  | 13.15%          | 10.37%           
|Fair value with 10% adverse change | $16,284         | $17,860          
|Fair value with 20% adverse change | $15,595         | $17,166          
|Discount rate                      | 10.00% - 13.00% | 9.50% - 13.00%   
|Weighted average discount rate     | 10.58%          | 10.63%           
|Fair value with 10% adverse change | $16,417         | $17,866          
|Fair value with 20% adverse change | $15,842         | $17,178          
|                                  

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

31

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

Mortgage
Servicing Right Activity. The following table summarizes mortgage servicing
right activity including amortization expense:

|                                      | Three Months Ended
March 31,
|------------------------------------- | ----------------------------
|
|Balance at beginning of period        |                             
|Mortgage servicing rights capitalized |                             
|Amortization expense                  |                             
|Valuation adjustment                  |                             
|                                     
|Balance at end of period              |                             
|                                     

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

|                                                | Three Months Ended
March 31,
|----------------------------------------------- | ----------------------------
|
|Balance at beginning of period                  |                             
|Changes in mortgage servicing valuation reserve |                             
|                                               
|Balance at end of period                        |                             
|                                               

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

32

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 10  Deposits

Deposit
Composition.  Deposits at March 31, 2008 and December 31, 2007 are summarized in
the following table:

|                                | March 31, 2008 | December 31, 2007
|------------------------------- | -------------- | -----------------
|
|Transaction accounts:           |                |                  
|Noninterest-bearing checking    |                |                  
|Savings                         |                |                  
|Interest-bearing checking       |                |                  
|Money market                    |                |                  
|                               
|Total transaction accounts      |                |                  
|                               
|Total transaction accounts as a |                |                  
|percentage of total deposits    |                |                  
|                               
|Time deposits:                  |                |                  
|0.00% to 0.99%                  |                |                  
|1.00% to 1.99%                  |                |                  
|2.00% to 2.99%                  |                |                  
|3.00% to 3.99%                  |                |                  
|4.00% to 4.99%                  |                |                  
|5.00% to 5.99%                  |                |                  
|                               
|Total time deposits             |                |                  
|                               
|Total time deposits as a        |                |                  
|percentage of total deposits    |                |                  
|                               
|Total deposits                  |                |                  
|                               

Time
Deposit Maturity.  The scheduled maturities of time deposits at March 31, 2008
are presented in the following table:

|(Dollars in thousands)                       | Amount | Percent
|-------------------------------------------- | ------ | -------
|Amount Maturing During the 12 Months Ending: |        |        
|March 31, 2009                               |        |        
|March 31, 2010                               |        |        
|March 31, 2011                               |        |        
|March 31, 2012                               |        |        
|March 31, 2013                               |        |        
|Thereafter                                   |        |        
|                                            
|Total time deposits                          |        |        
|                                            

33

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

Time
Deposits of $100,000 or More.The following table shows the maturities of
our time deposits of $100,000 or more at March 31, 2008 by the time remaining to maturity.
We did not have any brokered time deposits at March 31, 2008.

|(Dollars in thousands)                    | Amount | Weighted Average Rate
|----------------------------------------- | ------ | ---------------------
|Amount Maturing During the Quarter Ended: |        |                      
|June 30, 2008                             |        |                      
|September 30, 2008                        |        |                      
|December 31, 2008                         |        |                      
|March 31, 2009                            |        |                      
|Thereafter                                |        |                      
|                                         
|Total time deposits of $100,000 or more   |        |                      
|                                         

# Note 11  FHLBank
Topeka Advances and Other Borrowings

At
March 31, 2008 and December 31, 2007, we were indebted on notes as shown in the following
table:

|(Dollars in thousands)                  | March 31, 2008 | December 31, 2007
|--------------------------------------- | -------------- | -----------------
|Permanent fixed-rate notes payable to   |                |                  
|the FHLBank Topeka                      |                |                  
|Convertible fixed-rate notes payable to |                |                  
|the FHLBank Topeka                      |                |                  
|Retail repurchase agreements            |                |                  
|Junior subordinated debentures          |                |                  
|                                       
|Total FHLBank Topeka advances and       |                |                  
|other borrowings                        |                |                  
|                                       
|Weighted average interest rate          |                |                  
|                                       

The
convertible fixed-rate notes are convertible to adjustable-rate notes at the option of the
FHLBank Topeka (FHLBank). The line of credit with the FHLBank expires in
November 2008. We expect the line of credit agreement to be renewed in the ordinary course
of business due to our current blanket collateral agreement with the FHLBank.

Pursuant
to our blanket collateral agreement with the FHLBank, such advances are secured by our
qualifying residential, multi-family residential and commercial real estate mortgages,
residential construction, commercial construction and agricultural real estate loans.
Under our blanket collateral agreement with the FHLBank, our borrowing capacity at March
31, 2008 was $804.6 million. Other qualifying collateral can be pledged in the event
additional borrowing capacity is required.

34

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

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

35

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 12 
Unrecognized Tax Benefits

We
adopted FIN 48 on January 1, 2007 and, as a result, recognized no material adjustment in
our liability for unrecognized tax benefits. Unrecognized tax benefits, excluding interest
and penalties, were $724,000 at March 31, 2008. Unrecognized tax benefits of $150,000 and
interest and penalties of $87,000 would favorably affect our effective tax rate if
recognized in future periods. Unrecognized tax benefits of $543,000 are related to our
UNFC acquisition and would reduce other intangible assets if recognized in future periods.
The following table summarizes our unrecognized tax benefits for the three months ended
March 31, 2008:

|(Dollars in thousands)                                                                                        | Unrecognized Tax Benefits
|------------------------------------------------------------------------------------------------------------- | -------------------------
|Unrecognized tax benefits at December 31, 2007                                                                |                          
|Changes in unrecognized tax benefits for the three months ended:                                              |                          
|March 31, 2008                                                                                                |                          
|Changes in unrecognized tax benefits related to deferred loan fees due to a change in a tax accounting method |                          
|approved by the Internal Revenue Service                                                                      |                          
|                                                                                                             
|Unrecognized tax benefits at March 31, 2008                                                                   |                          
|                                                                                                             

Any
interest and penalties related to uncertain tax positions are recorded in income tax
expense in the Consolidated Statements of Operations. At March 31, 2008, we had
approximately $87,000 of accrued interest payable related to uncertain tax positions
recorded in our Consolidated Statements of Financial Condition.

We
anticipate that a reduction in unrecognized tax benefits of up to $566,000 is reasonably
possible during the next 12 months. This potential reduction is primarily attributable to
the expiration of the statute of limitations related to the 2004 tax period.

The
tax years of 2004 through 2007 remain open for examination by federal and state taxing
authorities.

36

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 13  Fair
Value Measurements

Effective
January 1, 2008, we adopted the provisions of SFAS No. 157, Fair Value
Measurements, for financial assets and financial liabilities. In accordance with FASB
Staff Position No. 157-2, Effective Date of FASB Statement No. 157, we will delay
application of SFAS No. 157 for non-financial assets and non-financial liabilities until
January 1, 2009. SFAS No. 157 defines fair value, establishes a framework for measuring
fair value in GAAP and expands disclosures about fair value measurements.

SFAS
No. 157 defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. A fair value
measurement assumes that the transaction to sell the asset or transfer the liability
occurs in the principal market for the asset or liability or, in the absence of a
principal market, the most advantageous market for the asset or liability. The price in
the principal (or most advantageous) market used to measure the fair value of the asset or
liability shall not be adjusted for transaction costs. An orderly transaction is a
transaction that assumes exposure to the market for a period prior to the measurement date
to allow for marketing activities that are usual and customary for transactions involving
such assets and liabilities; it is not a forced transaction. Market participants are
buyers and sellers in the principal market that are (a) independent, (b) knowledgeable,
(c) able to transact, and (d) willing to transact.

SFAS
No. 157 requires the use of valuation techniques that are consistent with the market
approach, the income approach and/or the cost approach. The market approach uses prices
and other relevant information generated by market transactions involving identical or
comparable assets and liabilities. The income approach uses valuation techniques to
convert future amounts, such as cash flows or earnings, to a single present amount on a
discounted basis. The cost approach is based on the amount that currently would be
required to replace the service capacity of an asset (replacement cost). Valuation
techniques should be consistently applied. Inputs to valuation techniques refer to the
assumptions that market participants would use in pricing the asset or liability. Inputs
may be observable, meaning those that reflect the assumptions market participants would
use in pricing the asset or liability developed based on market data obtained from
independent sources, or unobservable, meaning those that reflect the reporting
entitys own assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the best information available in the
circumstances. In that regard, SFAS No. 157 establishes a fair value hierarchy for
valuation inputs that gives the highest priority to quoted prices in active markets for
identical assets or liabilities and the lowest priority to unobservable inputs.

37

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

The
fair value hierarchy is as follows:

| |  | Level
1 Inputs  Unadjusted quoted prices in active markets for identical
assets or liabilities that the reporting entity has the ability to access at the
measurement date.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Level
2 Inputs  Inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly or indirectly. These might
include quoted prices for similar assets or liabilities in active markets, quoted prices
for identical or similar assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable for the asset or liability (such as interest
rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived
principally from or corroborated by market data by correlation or other means.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Level
3 Inputs  Unobservable inputs for determining the fair values of
assets or liabilities that reflect an entitys own assumptions about the assumptions
that market participants would use in pricing the assets or liabilities.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

A
description of the valuation methodologies used for instruments measured at fair value, as
well as the general classification of such instruments pursuant to the valuation
hierarchy, is set forth below. These valuation methodologies were applied to all of our
financial assets and financial liabilities carried at fair value effective January 1,
2008.

The
following disclosures exclude certain nonfinancial assets and liabilities which are
deferred under the provisions of FASB Staff Position 157-2. These include foreclosed real
estate, long-lived assets, goodwill and core deposit premiums, which are all written down
to fair value upon impairment. The FASBs deferral is intended to allow additional
time to consider the effect of various implementation issues relating to these
non-financial instruments and defers disclosures under SFAS No. 157 until
January 1, 2009.

38

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Valuation methods for
instruments measured at fair value on a recurring basis

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

Investment
Securities, Available for Sale  This portfolio comprises the majority
of the assets which we record at fair value. Securities classified as available for
sale, which include U.S.
Government securities and agency obligations, corporate securities
and Asset Management Fund, are priced utilizing observable data from an active
market. These measurements are classified as Level 1.

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

Derivatives.          Our
derivative instruments are loan commitments and forward loan sales related           to
personal mortgage loan origination activity. The fair values of mortgage loan
          commitments and forward sales contracts are based on quoted prices for similar
          loans in the secondary market. However, these prices are adjusted by a factor
          which considers the likelihood that the commitment will ultimately result in a
          closed loan. Based on the unobservable nature of this adjustment, these
          measurements are classified as Level 3. The fair value of derivatives was
          $544,000 and $136,000 at March 31, 2008 and December 31, 2007, respectively.
The           $408,000 change in the fair value amount is included in the gain on the
sale of           loans in the accompanying Consolidated Statements of Operations.

39

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

The
following table summarizes financial assets and financial liabilities measured at fair
value on a recurring basis as of March 31, 2008, segregated by the level of the valuation
inputs within the fair value hierarchy utilized to measure fair value:

|(Dollars in thousands)                          | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value
|----------------------------------------------- | -------------- | -------------- | -------------- | ----------------
|Securities, available for sale:                 |                |                |                |                 
|Mortgage-backed securities                      |                |                | $              | --              
|U.S. Government securities and                  |                |               
|agency obligations                              |                |                |                | 93,948          
|Corporate securities                            |                |                |                | 4,719           
|Municipal obligations                           |                |                |                | --              
|Agency equity securities                        |                |                |                | --              
|Asset Management Fund - ARM Fund                |                |                |                | 5,752           
|                                               
|Total investment securities, available for sale |                |                |                | 104,419         
|                                               
|SFAS No. 133 derivatives:                       |                |               
|Loan commitments                                |                |                |                | --              
|Forward loan sales                              |                |                |                | --              
|                                               
|Total SFAS No. 133 derivatives                  |                |                |                | --              
|                                               
|Total assets measured at fair value             |                |                | $              | 104,419         
|                                               

# Valuation methods for
instruments measured at fair value on a nonrecurring basis

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

Collateral
Dependent Impaired Loans. While the overall loan portfolio is not carried
at fair value, adjustments are recorded on certain loans to reflect partial write-downs
that are based on the value of the underlying collateral. In determining the value of real
estate collateral, we rely on external appraisals and assessment of property values by our
internal staff. In the case of non-real estate collateral, reliance is placed on a variety
of sources, including external estimates of value and judgments based on the experience
and expertise of internal specialists. Because many of these inputs are not observable,
the measurements are classified as Level 3. The carrying value of these impaired
loans was $146.8 million at March 31, 2008. Charge-offs on impaired loans during
the current quarter were $28.8 million, and the related allowance increased by
$7.4 million.

40

---

TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

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

In
determining the value of residential construction loans held for sale, we rely on external
appraisals and assessment of property values by our internal staff. Because many of these
inputs are not observable, the measurements are classified as Level 3. All of these
residential construction loans classified as held for sale were reclassified from held to
maturity as of March 31, 2008.

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

FHLBank
Topeka Stock  At March 31, 2008, we held $66.6 million of FHLBank
Topeka stock which represents our carrying value which is approximately equal to fair value.
Fair value measurements for these securities are classified as Level 3 based on their undeliverable nature related to credit risk.

Mortgage
Servicing Rights.We initially measure our mortgage servicing rights at
fair value, and amortize them over the period of estimated net servicing income. They are
periodically assessed for impairment based on fair value at the reporting date. Mortgage
servicing rights do not trade in an active market with readily observable prices.
Accordingly, the fair value is estimated based on a valuation model which calculates the
present value of estimated future net servicing income. The model incorporates assumptions
that market participants use in estimating future net servicing income, including
estimates of prepayment speeds, market discount rates, cost to service, float earnings
rates and other ancillary income, including late fees. The fair value measurements are
classified as Level 3. A valuation allowance of $206,000 was recorded as a reduction
of fees and services charges in the first quarter of 2008. The valuation allowance was
zero at December 31, 2007.

Effective
January 1, 2008, we adopted the provisions of SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities  Including an amendment of FASB Statement
No. 115. SFAS No. 159 allows us to choose to measure eligible items at fair value at
specified election dates. Unrealized gains and losses on items for which the fair value
measurement option has been elected are reported in earnings at each subsequent reporting
date. The fair value option (a) may be applied instrument by instrument, with certain
exceptions, thus we may record identical financial assets and liabilities at fair value or
by another measurement basis permitted under generally accepted accounting principals, (b)
is irrevocable (unless a new election date occurs) and (c) is applied only to entire
instruments and not to portions of instruments. Adoption of SFAS No. 159 on January 1,
2008 did not have a material impact on our consolidated financial statements.

41

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TierOne Corporation and
SubsidiariesNotes to Consolidated Financial Statements  (Unaudited)

# Note 14  Current
Accounting Pronouncements

For
a discussion regarding accounting pronouncements, interpretations, exposure drafts and
other formal accounting guidance and the impact of these on our financial condition and
results of operations, reference is made to our Annual Report on Form 10-K for the year
ended December 31, 2007. The following discussion identifies certain recently issued
accounting guidance.

# Statements of Financial
Accounting Standards

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

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

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

42

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

The
following is a discussion and analysis of the Companys financial condition and
results of operations including information on the Companys critical accounting
policies, asset/liability management, liquidity and capital resources and contractual
obligations. Information contained in this Managements Discussion and Analysis
should be read in conjunction with the disclosure regarding Forward-Looking Statements and the risk factors
described in Part 2, Item 1A of this Quarterly Report on Form 10-Q.

# General

TierOne
Bank (Bank), a subsidiary of TierOne Corporation (Company), is a
$3.4 billion federally chartered stock savings bank headquartered in Lincoln, Nebraska.
Established in 1907, the Bank offers customers a wide variety of full-service consumer,
commercial and agricultural banking products and services through a network of 69 banking
offices located in Nebraska, Iowa and Kansas and nine loan production offices located in
Arizona, Colorado, Florida, Minnesota, Nevada and North Carolina. Product offerings
include residential, commercial and agricultural real estate loans; consumer,
construction, business and agricultural operating loans; warehouse mortgage lines of
credit; consumer and business checking and savings plans; investment and insurance
services; and telephone and internet banking.

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

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

43

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# Recent Developments

Termination
of Acquisition Agreement. On May 17, 2007, the Company, CapitalSource Inc.
and CapitalSource TRS Inc. entered into and announced an Agreement and Plan of Merger
(Merger Agreement). On March 20, 2008, the Board of Directors of the Company
terminated the Merger Agreement. Pursuant to the terms of the Merger Agreement, either
party had the right to terminate the Merger Agreement if the proposed merger was not
completed by February 17, 2008. No termination fee was payable by either company as a
result of the termination of the Merger Agreement.

# Comparison of Financial
Condition at March 31, 2008 and December 31, 2007

# Assets

General.          Our
total assets were $3.4 billion at March 31, 2008, a decrease of $161.2           million,
or 4.6%, compared to $3.5 billion at December 31, 2007.

Cash
and Cash Equivalents. Our cash and cash equivalents totaled $223.4 million
at March 31, 2008, a decrease of $18.0 million, or 7.5%, compared to $241.5 million at
December 31, 2007. The decrease was primarily attributable to decreases in deposits and
FHLBank advances which were partially offset by a decrease in net loans.

Investment
Securities. Our available for sale investment securities totaled $118.4
million at March 31, 2008, a decrease of $12.1 million, or 9.2%, compared to $130.5
million at December 31, 2007. During the three months ended March 31, 2008 proceeds from
maturing investment securities totaled $110.1 million which were partially offset by
security purchases of $97.3 million. The securities purchased during 2008 were primarily
agency obligations that were purchased to collateralize deposits.

Mortgage-Backed
Securities. Our mortgage-backed securities, all of which are recorded as
available for sale, totaled $5.6 million at March 31, 2008, a decrease of $1.1 million, or
16.0%, compared to $6.7 million at December 31, 2007. The decrease in our mortgage-backed
securities was the result of $1.1 million of principal payments received during the three
months ended March 31, 2008.

44

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Loans
Receivable. Net loans totaled $2.9 billion at March 31, 2008, a decrease of
$89.6 million, or 3.0%, compared to $3.0 billion at December 31, 2007. During the three
months ended March 31, 2008, we originated $332.1 million of loans (exclusive of warehouse
mortgage lines of credit) and purchased $127.0 million of loans. These increases were
offset by $458.9 million of principal repayments and charge-offs and $135.8 million of
loan sales. The following table details the composition of our loan portfolio at the dates
indicated:

|(Dollars in thousands)                                                                              | March 31, 2008 | December 31, 2007 | Increase (Decrease) | % Change 
|--------------------------------------------------------------------------------------------------- | -------------- | ----------------- | ------------------- | ---------
|One-to-four family residential (1)                                                                  |                |                   | $                   | 316,680  
|Second mortgage residential                                                                         |                |                   |                     | 90,218   
|Multi-family residential                                                                            |                |                   |                     | 151,452  
|Commercial real estate                                                                              |                |                   |                     | 335,294  
|Land and land development (1)                                                                       |                |                   |                     | 458,551  
|Residential construction (1)                                                                        |                |                   |                     | 444,209  
|Commercial construction                                                                             |                |                   |                     | 501,886  
|Agriculture - real estate                                                                           |                |                   |                     | 91,334   
|Business                                                                                            |                |                   |                     | 253,217  
|Agriculture - operating                                                                             |                |                   |                     | 93,808   
|Warehouse mortgage lines of credit                                                                  |                |                   |                     | 86,404   
|Consumer                                                                                            |                |                   |                     | 384,468  
|                                                                                                   
|Total loans                                                                                         |                |                   |                     | 3,207,521
|                                                                                                   
|Unamortized premiums, discounts                                                                     |                |                  
|and deferred loan fees                                                                              |                |                   |                     | 9,584    
|Loans in process (2):                                                                               |                |                  
|Land and land development                                                                           |                |                   |                     | (76,619  
|Residential construction                                                                            |                |                   |                     | (114,652 
|Commercial construction                                                                             |                |                   |                     | (139,322 
|                                                                                                   
|Net loans                                                                                           |                |                   | $                   | 2,886,512
|                                                                                                   
|(1) Includes loans held for sale                                                                    |                |                   | $                   | 38,693   
|                                                                                                   
|(2) Loans in process represents the undisbursed portion of construction and land development loans.
|                                                                                                   

At
March 31, 2008, the outstanding balance (net of loans in process) of our residential
construction loans was $329.6 million, a decrease of $44.5 million, or 11.9%, compared to
$374.0 million at December 31, 2007. The outstanding balance of our land and land
development loans was $381.9 million at March 31, 2008, a decrease of $6.6 million, or
1.7%, compared to $388.6 million at December 31, 2007. The outstanding balance (net of
loans in process) of our commercial construction loans was $362.6 million at March 31,
2008, a decrease of $26.3 million, or 6.8%, compared to $388.9 million at December 31,
2007.

The
decrease in net loans at March 31, 2008 was primarily attributable to a decrease in loan
originations and purchases, loan payoffs and periodic payments on loans. We have also tightened
our credit policies and reduced our exposure in selected business lines and geographic
markets due to the continued deterioration in these real estate markets and
the economy in general.

45

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Loan
Portfolio  Concentration  by State.  The following  table details the
 concentration  of our total loan portfolio by state at the dates indicated:

|(Dollars in thousands)                        | At March 31, 2008 | % | At December 31, 2007 | %        
|--------------------------------------------- | ----------------- | - | -------------------- | ---------
|Within our Primary Lending Market Area:       |                   |   |                      |          
|Nebraska                                      |                   |   | $                    | 1,344,190
|Nevada                                        |                   |   |                      | 239,903  
|Colorado                                      |                   |   |                      | 229,171  
|Florida                                       |                   |   |                      | 135,874  
|Arizona                                       |                   |   |                      | 166,229  
|Minnesota                                     |                   |   |                      | 150,521  
|Iowa                                          |                   |   |                      | 126,663  
|North Carolina                                |                   |   |                      | 103,874  
|Kansas                                        |                   |   |                      | 68,337   
|                                             
|Total within our primary lending market area  |                   |   |                      | 2,564,762
|                                             
|Outside our Primary Lending Market Area:      |                   |  
|South Carolina                                |                   |   |                      | 101,515  
|California                                    |                   |   |                      | 79,024   
|Texas                                         |                   |   |                      | 56,390   
|Illinois                                      |                   |   |                      | 73,806   
|Oregon                                        |                   |   |                      | 33,340   
|Washington                                    |                   |   |                      | 30,666   
|Other States                                  |                   |   |                      | 268,018  
|                                             
|Total outside our primary lending market area |                   |   |                      | 642,759  
|                                             
|Total loans                                   |                   |   | $                    | 3,207,521
|                                             

46

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Delinquent
and Nonperforming Loans by State.The following table details our
delinquent and nonperforming loans by the state, on a net loan basis, as of March 31,
2008:

|(Dollars in thousands) | Net Loan Balance at March 31, 2008 | Loans 30 - 89 Days Delinquent | Nonperforming Loans | Total Delinquent and Nonperforming Loans
|---------------------- | ---------------------------------- | ----------------------------- | ------------------- | ----------------------------------------
|Nebraska               |                                    |                               | $                   | 1,284,039                               
|Nevada                 |                                    |                               |                     | 214,153                                 
|Colorado               |                                    |                               |                     | 189,795                                 
|Minnesota              |                                    |                               |                     | 141,368                                 
|Arizona                |                                    |                               |                     | 132,072                                 
|Florida                |                                    |                               |                     | 94,527                                  
|Iowa                   |                                    |                               |                     | 97,822                                  
|North Carolina         |                                    |                               |                     | 83,894                                  
|South Carolina         |                                    |                               |                     | 81,175                                  
|California             |                                    |                               |                     | 79,024                                  
|Kansas                 |                                    |                               |                     | 65,664                                  
|Other States           |                                    |                               |                     | 422,979                                 
|                      
|Total net loans        |                                    |                               | $                   | 2,886,512                               
|                      

Allowance
for Loan Losses. Our allowance for loan losses increased $12.0 million, or 18.0%, to $78.5
million at March 31, 2008 compared to $66.5 million at December 31, 2007. During the three
months ended March 31, 2008, we recorded provisions for loan losses totaling $39.9 million
and net charge-offs of $28.5 million. Our allowance for loan losses as a percentage of
nonperforming loans was 61.75% at March 31, 2008 compared to 51.79% at December 31, 2007.
Our ratio of the allowance for loan losses to net loans was 2.72% and 2.24% at March 31,
2008 and December 31, 2007, respectively. The following table details our nonperforming
and impaired loans for the periods presented:

|                               | Nonperforming Loans | Impaired Loans
|------------------------------ | ------------------- | --------------
|
|One-to-four family residential |                     |               
|Second mortgage residential    |                     |               
|Multi-family residential       |                     |               
|Commercial real estate         |                     |               
|Land and land development      |                     |               
|Residential construction       |                     |               
|Commercial construction        |                     |               
|Agriculture - real estate      |                     |               
|Business                       |                     |               
|Agriculture - operating        |                     |               
|Consumer                       |                     |               
|                              
|Total                          |                     |               
|                              

47

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During 2007, our levels of
delinquent loans, nonperforming loans (loans 90 or more days delinquent) and impaired
loans increased significantly. We have been further impacted by the erosion of property
values and an overall increase in housing inventory (both developed lots and completed
houses) in many of the areas of the country in which we do business and where the
collateral for our loans reside. Additionally, significantly tightened credit standards in
the marketplace generally have made it more difficult for potential borrowers to obtain
financing and for current borrowers to refinance existing loans.

Our
allowance for loan losses related to impaired loans totaled $32.1 million at March 31,
2008 compared to $24.6 million at December 31, 2007. Actual losses are dependent upon
future events and, as such, further changes to the level of allowance for loan losses may
become necessary based on changes in economic conditions and other factors.

FHLBank
Topeka Stock. FHLBank Topeka (FHLBank) stock totaled $66.6
million at March 31, 2008, an increase of $762,000, or 1.2%, compared to $65.8 million at
December 31, 2007. The increase was attributable to FHLBank dividends paid in stock
received during the three months ended March 31, 2008.

Premises
and Equipment.Premises and equipment decreased $606,000, or 1.6%, to $37.4
million at March 31, 2008 compared to $38.0 million at December 31, 2007. The decrease was
attributable to $1.0 million of depreciation and amortization expense which was partially
offset by $415,000 in asset additions.

Goodwill
and Other Intangible Assets. At December 31, 2007 we had $42.1 million of
goodwill that was recorded as a result of our 2004 acquisition of United Nebraska Financial
Co. (UNFC). In accordance with Statement of Financial Accounting Standard
(SFAS) No. 142, Goodwill and Other Intangible Assets, we test this
goodwill for impairment annually during the third quarter of each year, or between annual
assessment dates whenever events or significant changes in circumstances indicate that the
carrying value may be impaired. We performed a goodwill impairment test as of March 31,
2008 due to adverse changes in the business climate. As a result of a decline in the
market value of our common stock to levels below our book value, we determined that the
entire amount of our goodwill was impaired, and we recorded a $42.1 million goodwill
impairment charge to write-off our goodwill at March 31, 2008.

Other
Intangible Assets. Other intangible assets totaled $6.4 million at March
31, 2008, a decrease of $391,000, or 5.8%, compared to $6.7 million at December 31, 2007
and relates to the core deposit intangible assets recorded as a result of the UNFC
acquisition and the Marine Bank transaction. The decrease was attributable to $391,000 in
amortization during the three months ended March 31, 2008.

Other
Assets.Other assets increased $15.8 million, or 26.0%, to $76.8 million at
March 31, 2008 compared to $61.0 million at December 31, 2007. Other assets consists
primarily of prepaid expenses, miscellaneous receivables and other assets. The increase in
other assets at March 31, 2008 was primarily attributable to federal and state tax
receivables.

48

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# Liabilities and
Stockholders Equity

General.           Our
total liabilities were $3.1 billion at March 31, 2008, a decrease of $100.8
          million, or 3.2%, compared to $3.2 billion at December 31, 2007. The decline in
          total liabilities was attributable to decreases in deposits and FHLBank
          advances.

Deposits.          Deposits
declined $74.8 million, or 3.1%, to $2.4 billion at March 31, 2008           compared to
December 31, 2007.

|(Dollars in thousands)       | March 31, 2008 | December 31, 2007 | Increase (Decrease) | % Change 
|---------------------------- | -------------- | ----------------- | ------------------- | ---------
|Noninterest-bearing checking |                |                   | $                   | 153,225  
|Savings                      |                |                   |                     | 206,325  
|Interest-bearing checking    |                |                   |                     | 343,378  
|Money market                 |                |                   |                     | 359,975  
|Time deposits                |                |                   |                     | 1,292,836
|                            
|Total retail deposits        |                |                   |                     | 2,355,739
|Brokered time deposits       |                |                   |                     | --       
|                            
|Total deposits               |                |                   | $                   | 2,355,739
|                            

Our
transaction accounts (checking, savings and money market) totaled $1.1 billion at March
31, 2008, an increase of $31.5 million, or 3.1%, compared to $1.0 billion at December 31,
2007. The increase in our savings accounts was attributable to a new savings account which
was introduced in September 2007. The number of transaction accounts increased by 2,034
accounts, or 1.5%, to 135,434 accounts compared to 133,400 accounts at December 31, 2007.
The weighted average interest rate of our transaction accounts was 1.24% at March 31, 2008
compared to 1.96% at December 31, 2007. The decrease in time deposits was primarily the
result of time deposits which matured during the three months ending March 31, 2008 but
were not renewed with us. The weighted average interest rate of our time deposits was
4.65% at March 31, 2008 compared to 4.96% at December 31, 2007.

FHLBank
Advances and Other Borrowings. Our FHLBank advances and other borrowings
totaled $668.0 million at March 31, 2008, a decrease of $21.3 million, or 3.1%, compared
to $689.3 million at December 31, 2007. The decrease in FHLBank advances and other
borrowings at March 31, 2008 was primarily attributable to the repayment of a $25.0
million FHLBank convertible advance as it was called by the FHLBank. We did not have an
outstanding balance on our FHLBank line of credit at both March 31, 2008 and December 31,
2007. The weighted average interest rate on our FHLBank advances and other borrowings was
4.41% at March 31, 2008, a decrease of nine basis points compared to 4.50% at December 31,
2007.

Accrued
Expenses and Other Liabilities. Our accrued expenses and other liabilities
totaled $29.5 million at March 31, 2008, a decrease of $6.4 million, or 17.8%, compared to
$35.9 million at December 31, 2007. The primary items comprising accrued expenses and
other liabilities are deferred compensation agreements, loan servicing payments and other
miscellaneous accrued expenses.

49

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Stockholders
Equity. At March 31, 2008, stockholders equity totaled $285.2
million, a decrease of $60.4 million, or 17.5%, compared to $345.6 million at December 31,
2007. The decrease in stockholders equity was primarily the result of a net loss of
$60.9 million and cash dividends of $1.3 million paid to our stockholders during the three
months ended March 31, 2008. The decrease was partially offset by $726,000 related to
amortization of awards under the 2003 Management Recognition and Retention Plan
(MRRP), $624,000 related to common stock earned by participants in the
Employee Stock Ownership Plan (ESOP) and $513,000 related to amortization of
stock options under the 2003 Stock Option Plan (SOP). We paid cash dividends
of $0.08 per share on March 31, 2008 to stockholders of record on March 14, 2008.

On
March 20, 2008, we announced that our Board of Directors had authorized the repurchase of
up to 1,797,592 shares of our outstanding common stock. There is no stated expiration date
for this authorization. We did not repurchase any shares of our outstanding common stock
during the three months ended March 31, 2008.

Comparison of Operating Results
for the Three Months Ended March 31, 2008 and 2007

Net
Income (Loss). Net loss for the three months ended March 31, 2008 was $60.9
million, or $3.60 per diluted and basic share, compared to net income of $9.4 million, or
$0.55 per diluted share ($0.56 per basic share), for the three months ended March 31,
2007. The net loss for the three months ended March 31, 2008 included a non-cash,
after-tax charge of $42.1 million, or $2.49 per share, for the write-off of our goodwill.
Our results for the three months ended March 31, 2008 were also negatively impacted by
provisions for loan losses totaling $39.9 million. Financial performance for the three
months ended March 31, 2008 compared to the same period in 2007 was also negatively
impacted by a decline in net interest income due to the tightening of interest rate
margins and the nonaccrual of interest on nonperforming loans.

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

Net
interest income, average interest rate spread and net interest margin for the three months
ended March 31, 2008 compared to the three months ended March 31, 2007 were negatively
affected by the increased balance of our nonperforming loans as we do not recognize
interest income on nonperforming loans (loans 90 days or more past due). We had
nonperforming loans totaling $127.1 million and $40.3 million at March 31, 2008 and 2007,
respectively.

Net
interest income before provision for loan losses totaled $23.1 million for the three
months ended March 31, 2008, a decrease of $8.1 million, or 26.0%, compared to $31.2
million for the three months ended March 31, 2007. The decrease in net interest income for
the three months ended March 31, 2008 compared to the three months ended March 31, 2007
was primarily attributable to an 86 basis point decrease in the average yield earned on
loans receivable and a $122.3 million decline in the average balance of loans receivable.

50

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Our
average interest rate spread for the three months ended March 31, 2008 and 2007 was 2.47%
and 3.50%, respectively. The decrease in our average interest rate spread was attributable
to the decrease in the average yield earned on loans receivable, an increased balance of
nonperforming loans and the decrease in the average balance of loans receivable.

The
average yield on interest-earning assets was 6.32% for the three months ended March 31,
2008, a 106 basis point decrease compared to 7.38% for the three months ended March 31,
2007. The decrease in the average yield earned on interest-earning assets for the three
months ended March 31, 2008 was primarily related to a decrease in the average yield
earned on loans receivable. Our average yield earned on loans receivable for the three
months ended March 31, 2008 and 2007 was 6.66% and 7.52%, respectively. Our average rate
paid on interest bearing liabilities was 3.85% for the three months ended March 31, 2008,
a decrease of three basis points compared to 3.88% for the three months ended March 31,
2007.

Our
net interest margin (net interest income (annualized) divided by average interest-earning
assets) declined to 2.85% for the three months ended March 31, 2008 compared to 3.93% for
the three months ended March 31, 2007. The decrease in our net interest margin was
attributable to the factors described above.

We
anticipate that our average interest rate spread and net interest margin may stabilize
and/or improve during 2008 due to the repricing or run-off of our time deposits as they
mature. However, continued deterioration of the real estate market and the economy in
general could lead to further increases in our level of nonperforming loans and decreased
lending volume which would have a negative impact on our average interest rate spread and
net interest margin.

51

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

|                                                                                                                                      | Three Months Ended March 31,
|------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------
|
|
|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                                                                                                       |                             
|                                                                                                                                     
|FHLBank Topeka advances and                                                                                                           |                             
|other borrowings                                                                                                                      |                             
|                                                                                                                                     
|Total interest-bearing liabilities                                                                                                    |                             
|Noninterest-bearing accounts                                                                                                          |                             
|Other liabilities                                                                                                                     |                             
|                                                                                                                                     
|Total liabilities                                                                                                                     |                             
|Stockholders equity                                                                                                                  |                             
|                                                                                                                                     
|Total liabilities and stockholders equity                                                                                            |                             
|                                                                                                                                     
|Net interest-earning assets                                                                                                           |                             
|Net interest income; average                                                                                                          |                             
|interest rate spread                                                                                                                  |                             
|Net interest margin (3)                                                                                                               |                             
|Average interest-earning assets to average                                                                                            |                             
|interest-bearing liabilities                                                                                                          |                             
|                                                                                                                                     
|(1)  Includes securities available for sale and held to maturity. Investment securities also include FHLBank Topeka stock.           
|(2)  Includes nonperforming loans during the respective periods. Calculated net of unamortized premiums, discounts and deferred fees,
|loans in process and allowance for loan losses.                                                                                      
|(3)  Equals net interest income (annualized) divided by average interest-earning assets.                                             
|                                                                                                                                     

52

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

|                                                                                | Three Months Ended March 31, 2008
Compared to
Three Months Ended March 31, 2007
|------------------------------------------------------------------------------- | -------------------------------------------------------------------------------
|
|
|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 interest expense                                                          |                                                                                
|on deposits                                                                     |                                                                                
|FHLBank Topeka advances and                                                     |                                                                                
|other borrowings                                                                |                                                                                
|                                                                               
|Total interest expense                                                          |                                                                                
|                                                                               
|Net change in net interest income                                               |                                                                                
|                                                                               
|(1)  Calculated net of unamortized premiums, discounts and deferred fees, loans
|in process and allowance for loan losses.                                      
|                                                                               

53

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Interest
Income.Our total interest income for the three months ended March 31, 2008 was
$51.2 million, a decrease of $7.4 million, or 12.7%, compared to $58.7 million for the
three months ended March 31, 2007. Interest income on loans receivable totaled $47.6
million for the three months ended March 31, 2008, a decrease of $8.5 million, or 15.2%,
compared to $56.1 million for the three months ended March 31, 2007. The average balance
of loans receivable decreased $122.3 million, or 4.1%, to $2.9 billion for the three
months ended March 31, 2008 compared to $3.0 billion for the three months ended March 31,
2007. The average yield earned on loans receivable declined to 6.66% for the three months
ended March 31, 2008 compared to 7.52% for the three months ended March 31, 2007.

The
decrease in interest income for the three months ended March 31, 2008 compared to the same
period one year ago was primarily attributable to the 86 basis point decline in the
average yield earned on loans receivable. Additionally, interest income on loans
receivable was negatively affected by an increased balance of nonperforming loans as we do
not recognize interest income on loans 90 days or more past due. At March 31, 2008 our
nonperforming loans totaled $127.1 million, an increase of $86.8 million, or 215.6%,
compared to $40.3 million at March 31, 2007.

Interest
Expense.Our total interest expense for the three months ended March 31, 2008 was
$28.2 million, an increase of $682,000, or 2.5%, compared to $27.5 million for the three
months ended March 31, 2007. Interest expense on deposits totaled $20.7 million for the
three months ended March 31, 2008, an increase of $2.8 million, or 15.8%, compared to
$17.9 million for the three months ended March 31, 2007. The average balance of our
interest-bearing deposits increased $321.8 million, or 16.6%, to $2.3 billion for the
three months ended March 31, 2008 compared to $1.9 billion for the three months ended
March 31, 2007. The average rate paid on interest-bearing deposits was 3.66% and 3.69% for
the three months ended March 31, 2008 and 2007, respectively. Interest expense on FHLBank
advances and other borrowings declined $2.1 million, or 22.4%, to $7.4 million for the
three months ended March 31, 2008 compared to $9.6 million for the three months ended
March 31, 2007. The average balance of our FHLBank advances and other borrowings totaled
$662.2 million for the three months ended March 31, 2008, a decrease of $229.9 million, or
25.8%, compared to $892.1 million for the three months ended March 31, 2007. The average
rate paid on FHLBank advances and other borrowings was 4.49% and 4.29% for the three
months ended March 31, 2008 and 2007, respectively. Additionally, the average balance of
our interest-bearing liabilities totaled $2.9 billion for the three months ended March 31,
2008, an increase of $91.9 million, or 3.3%, compared to $2.8 billion for the three months
ended March 31, 2007.

The
increase in interest expense was primarily attributable to an increase in the average
balance of interest bearing deposits partially offset by a decrease in the average balance
of FHLBank advances and other borrowings. Additionally, the increase was also attributable
to customers migrating to other higher-yielding deposit products.

Provision
for Loan Losses. We establish provisions for loan losses in order to
maintain the allowance for loan losses at a level we believe, to the best of our
knowledge, covers all known and inherent losses in the portfolio that are both probable
and reasonable to estimate at each reporting date. Management performs reviews no less
frequently than quarterly in order to identify these inherent losses and to assess the
overall collection probability for the loan portfolio. Our reviews consist of a
quantitative analysis by loan category, using historical loss experience, and
consideration of a series of qualitative loss factors (See Note 3 to the Consolidated
Financial Statements, Critical Accounting Policies  Allowance for Loan
Losses).

54

---

We
recorded a provision for loan losses of $39.9 million for the three months ended March 31,
2008 compared to $1.5 million for the three months ended March 31, 2007, an increase of
$38.5 million. The increase in our provision for loan losses for the three months ended
March 31, 2008 compared to the three months ended March 31, 2007 was primarily
attributable to the increase in our nonperforming residential construction, land and land
development and commercial construction loans. The increase in our provision for loan
losses was also attributable to an increase in the level of loans which were deemed
impaired at March 31, 2008. Our provision for loan losses during the three months ended
March 31, 2008 was primarily related to Las Vegas, Nevada and TransLand-related loans. The
following table details nonperforming and impaired loans for selected loan types for the
periods presented:

|                          | Nonperforming Loans | Impaired Loans
|------------------------- | ------------------- | --------------
|
|
|Residential construction  |                     |               
|Land and land development |                     |               
|Commercial construction   |                     |               
|All other loans           |                     |               
|                         
|Total                     |                     |               
|                         

Our
loan delinquency rate (30 or more days delinquent) at March 31, 2008 as a percentage of
net loans (before allowance for loan losses) was 6.11% compared to 6.08% at December 31,
2007 and 2.59% at March 31, 2007. Our level of nonperforming loans and loan delinquencies
may continue to increase for the foreseeable future.

During
the three months ended March 31, 2008 and 2007, we charged-off, net of recoveries, $28.5
million and $691,000, respectively. Charge-offs, net of recoveries, during the three
months ended March 31, 2008 consisted primarily of $20.5 million of residential
construction loans, $4.7 million of one-to-four family residential loans, $2.0 million of
land and land development loans, $526,000 of consumer loans and $476,000 of business
loans. Our charge-offs, net of recoveries, as a percentage of average loans outstanding
were 3.98% and 0.09% for the three months ended March 31, 2008 and 2007, respectively. Our
strategy of focusing on loans with relatively higher yields, adjustable interest rates
and/or shorter terms to maturity subjects us to an increased level of credit risk which
has resulted in an increased amount of nonperforming loans, loan delinquencies and
charge-offs. Loan charge-offs and provisions for loan losses may continue to negatively
affect our financial performance in future periods.

55

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Noninterest
Income.Noninterest income for the three months ended March 31, 2008 was $8.2 million, an
increase of $1.2 million, or 17.6%, compared to $7.0 million for the three months ended
March 31, 2007.

|                                                 | Three Months Ended
March 31, | Increase
|------------------------------------------------ | ---------------------------- | --------
|
|Deposit account fees and service charges         |                              |         
|Debit card fees                                  |                              |         
|Lending fees and service charges                 |                              |         
|Mortgage servicing rights valuation adjustements |                              |         
|Commissions and management fee income            |                              |         
|Loss from real estate operations, net            |                              |         
|Net gain (loss) on sales of:                     |                              |         
|Loans held for sale                              |                              |         
|Real estate owned                                |                              |         
|Other operating income                           |                              |         
|                                                
|Total noninterest income                         |                              |         
|                                                

Growth
in noninterest income during the three months ended March 31, 2008 compared to the three
months ended March 31, 2007 was primarily attributable to increases in the gain on sale of
loans held for sale, other operating income and commissions and management fee income. The
increase in other operating income was primarily attributable to a $681,000 gain
associated with VISA Inc.s initial public offering. The increase in commissions and
management fee income was primarily attributable to fees collected by UFARM (a subsidiary
that provides agricultural customers with professional farm and ranch management and real
estate brokerage services) and TierOne Financial (a subsidiary that administers the sale
of securities and insurance products). The increase in deposit account and debit card fees
was largely due to an increase in the number of transaction accounts and in the volume of
activity.

56

---

Noninterest
Expense.Our noninterest expense increased by $43.1 million, or 200.5%, to $64.6
million for the three months ended March 31, 2008 compared to $21.5 million for the three
months ended March 31, 2007.

|                                           | Three Months Ended
March 31, | Increase
|------------------------------------------ | ---------------------------- | --------
|
|Employee compensation                      |                              |         
|Employee benefits                          |                              |         
|Payroll taxes                              |                              |         
|Management Recognition and Retention Plan  |                              |         
|Employee Stock Ownership Plan              |                              |         
|2003 Stock Option Plan                     |                              |         
|Goodwill impairment                        |                              |         
|Occupancy, net                             |                              |         
|Data processing                            |                              |         
|Advertising                                |                              |         
|Core deposit intangible asset amortization |                              |         
|Professional services                      |                              |         
|Other                                      |                              |         
|                                          
|Total noninterest expense                  |                              |         
|                                          

The
increase in noninterest expense during the three months ended March 31, 2008 compared to
the three months ended March 31, 2007 was primarily attributable to goodwill impairment.
The increase in employee compensation, employee benefits and payroll taxes resulted from
annual salary increases. At March 31, 2008 and 2007, we had 854 and 856 full-time
equivalent employees, respectively. We had 862 full-time equivalent employees at December
31, 2007. The increase in other noninterest expense is primarily related to loan
collection activities.

Income
Tax Expense.Our income tax expense decreased by $18.1 million, or 309.8%, for an
income tax benefit of $12.3 million for the three months ended March 31, 2008 compared to
income tax expense of $5.9 million for the three months ended March 31, 2007. The decrease
in income tax expense for the three months ended March 31, 2008 compared to the same
period in 2007 was primarily due to a decrease in net income resulting from an increase in
our provision for loan losses. The effective income tax benefit rate for the three months
ended March 31, 2008 was 16.8% compared to an effective income tax rate of 38.4% for the
three months ended March 31, 2007. The decrease in the effective tax rate for the three
months ended March 31, 2008 was primarily attributable to the  nonrecurring goodwill impairment charge
which is a nondeductible permanent tax item. Additionally,
expenses initially considered nondeductible totaling $2.0 million related to the Merger Agreement became deductible for tax
purposes as a result of the termination of the Merger Agreement.

57

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# Liquidity and Capital
Resources

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

We
actively manage our liquidity in an effort to maintain an adequate liquidity margin over
the level necessary to support expected and potential loan fundings and deposit
withdrawals. Our liquidity level may vary throughout the year, depending on economic
conditions, deposit fluctuations and loan funding needs.

During
the three months ended March 31, 2008, net cash used in operating activities was $5.8
million. Net cash provided by investing activities during the three months ended March 31,
2008 was $82.7 million and primarily related to cash inflows from matured investment
securities and loan payoffs and periodic payments partially offset by the purchase of
available for sale investment securities. Net cash used in financing activities was $94.9
million for the three months ended March 31, 2008 and consisted primarily of cash outflows
from a decline in deposits, repayment of a FHLBank advance and cash dividends paid on our
common stock.

Deposits,
particularly core deposits, provide a more preferable source of funding than FHLBank
advances and other borrowings. However, to the extent that competitive or market factors
do not allow us to meet our funding needs with deposits alone, FHLBank advances and other
borrowings provide a readily available alternative source of liquidity. Due to a decreased
volume of lending activity we had $223.4 million of cash and cash equivalents at March 31,
2008. The following table details time deposits maturing during the next 12 months:

|(Dollars in thousands)                                 | Amount | Weighted Average Rate
|------------------------------------------------------ | ------ | ---------------------
|Amount Maturing During the Quarter Ended:              |        |                      
|June 30, 2008                                          |        |                      
|September 30, 2008                                     |        |                      
|December 31, 2008                                      |        |                      
|March 31, 2009                                         |        |                      
|                                                      
|Total time deposits maturing during the next 12 months |        |                      
|                                                      

Based
upon historical experience, we anticipate that a significant portion of the maturing time
deposits will be renewed with us.

58

---

In
addition to cash flows generated by loan and securities payments and prepayments, we have
additional borrowing capacity to fund our asset growth. The average balance of our FHLBank
advances and other borrowings was $662.2 million for the three months ended March 31, 2008
compared to $892.1 million for the three months ended March 31, 2007. To date,
substantially all of our borrowings have consisted of FHLBank advances. Pursuant to
blanket collateral agreements with the FHLBank, we have pledged qualifying residential,
multi-family residential and commercial real estate mortgages, residential construction,
commercial construction and agricultural real estate loans as collateral for our FHLBank
advances.

59

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# Aggregate Contractual
Obligations and Off-Balance Sheet Arrangements

We
believe we have sufficient liquidity to fund existing and future loan commitments, to fund
maturing time deposits and demand deposit withdrawals, to invest in other interest-earning
assets and to meet operating expenses. At March 31, 2008, we had the following contractual
obligations (excluding bank deposits and interest) and lending commitments:

|                                                                                                       |  | Due In
|------------------------------------------------------------------------------------------------------ |  | ------
|
|Contractual obligations:                                                                               |  |       
|FHLBank Topeka advances                                                                                |  |       
|and other borrowings                                                                                   |  |       
|Recourse obligations on assets                                                                         |  |       
|Annual rental commitments under non-                                                                   |  |       
|cancellable operating leases                                                                           |  |       
|                                                                                                      
|Total contractual obligations (1)                                                                      |  |       
|                                                                                                      
|Lending commitments:                                                                                   |  |       
|Commitments to originate loans                                                                         |  |       
|Commitments to sell loans                                                                              |  |       
|Commitments to purchase loans                                                                          |  |       
|Loans in process (2)                                                                                   |  |       
|Standby letters of credit                                                                              |  |       
|Unused lines of credit:                                                                                |  |       
|Warehouse mortgage lines of credit                                                                     |  |       
|Business loans                                                                                         |  |       
|Consumer loans                                                                                         |  |       
|                                                                                                      
|Total lending commitments and                                                                          |  |       
|unused lines of credit                                                                                 |  |       
|                                                                                                      
|Total contractual obligations, lending                                                                 |  |       
|commitments and unused lines of credit                                                                 |  |       
|                                                                                                      
|(1)  Unrealized tax benefits of $724,000, associated with FIN 48, are not included in the above table 
|as the timing and resolution of these unrealized benefits cannot be reasonably estimated at this time.
|(2)  Loans in process represents the undisbursed portion of construction and land development loans.  
|                                                                                                      

We
have not used, and have no intention to use, any significant off-balance sheet financing
arrangements for liquidity purposes or otherwise. Our primary financial instruments with
off-balance sheet risk are limited to loan servicing for others, our obligations to fund
loans to customers pursuant to existing commitments and commitments to purchase and sell
mortgage loans. In addition, we have certain risks due to limited recourse arrangements on
loans serviced for others and recourse obligations related to loan sales. At March 31,
2008, the maximum total dollar amount of such recourse was approximately $19.5 million.
Based on historical experience, at March 31, 2008, we had established a liability of
$742,000 with respect to this recourse obligation. In addition, we have not had, and have
no intention to have, any significant transactions, arrangements or other relationships
with any unconsolidated, special purpose entities.

60

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# Regulatory Capital

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

Quantitative
measures that have been established by regulation to ensure capital adequacy require that
we maintain minimum capital amounts and ratios (as set forth in the following table). Our
primary regulatory agency, the Office of Thrift Supervision (OTS), requires
that we maintain minimum ratios of tangible capital (as defined in the regulations) of
1.5%, core capital (as defined) of 4.0% and total risk-based capital (as defined) of 8.0%.
As of March 31, 2008, we exceed all capital requirements to which we are subject.

At
March 31, 2008 and December 31, 2007, the most recent notifications from the OTS
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. There are no conditions or events since the notification that we
believe have changed the Banks category. The actual capital amounts and ratios at
March 31, 2008 and December 31, 2007 are presented in the following table:

|                            | Actual | For Capital
Adequacy Purposes | To be Well Capitalized
Under Prompt Corrective
Action Provisions
|--------------------------- | ------ | ----------------------------- | ----------------------------------------------------------------
|
|At March 31, 2008:          |        |                               |                                                                 
|Total risk-based capital    |        |                              
|(to risk-weighted assets)   |        |                               | $                                                               
|Tier 1 capital (to adjusted |        |                              
|tangible assets)            |        |                               |                                                                 
|Tangible capital (to        |        |                              
|tangible assets)            |        |                               |                                                                 
|Tier 1 capital (to risk-    |        |                              
|weighted assets)            |        |                               |                                                                 
|At December 31, 2007:       |        |                              
|Total risk-based capital    |        |                              
|(to risk-weighted assets)   |        |                               | $                                                               
|Tier 1 capital (to adjusted |        |                              
|tangible assets)            |        |                               |                                                                 
|Tangible capital (to        |        |                              
|tangible assets)            |        |                               |                                                                 
|Tier 1 capital (to risk-    |        |                              
|weighted assets)            |        |                               |                                                                 
|                           

61

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# Selected Financial Data

|(Dollars in thousands, except per share data)   | At
March 31,
2008 | At
December 31,
2007 | At
September 30,
2007 | At
March 31,
2007
|----------------------------------------------- | ----------------- | -------------------- | --------------------- | -----------------
|SELECTED STATEMENT OF FINANCIAL CONDITION DATA: |                   |                      |                       |                  
|Cash and cash equivalents                       |                   |                      | $                     | 223,437          
|Investment securities                           |                   |                      |                       | 118,495          
|Net loans after allowance for loan losses       |                   |                      |                       | 2,808,005        
|Goodwill                                        |                   |                      |                       | --               
|Total assets                                    |                   |                      |                       | 3,376,583        
|Deposits                                        |                   |                      |                       | 2,355,739        
|FHLBank Topeka advances and other borrowings    |                   |                      |                       | 667,993          
|Stockholders equity                            |                   |                      |                       | 285,168          
|                                               

|                                                                                                                                  | For the Three Months Ended
|--------------------------------------------------------------------------------------------------------------------------------- | --------------------------
|
|SELECTED STATEMENT OF OPERATIONS DATA:                                                                                            |                           
|Total interest income                                                                                                             |                           
|Total interest expense                                                                                                            |                           
|                                                                                                                                 
|Net interest income                                                                                                               |                           
|Provision for loan losses                                                                                                         |                           
|                                                                                                                                 
|Net interest income (loss) after provision                                                                                        |                           
|for loan losses                                                                                                                   |                           
|                                                                                                                                 
|Total noninterest income                                                                                                          |                           
|Total noninterest expense                                                                                                         |                           
|                                                                                                                                 
|Income (loss) before income taxes                                                                                                 |                           
|Income tax expense (benefit)                                                                                                      |                           
|                                                                                                                                 
|Net income (loss)                                                                                                                 |                           
|                                                                                                                                 
|Net income (loss) per common share, basic                                                                                         |                           
|Net income (loss) per common share, diluted                                                                                       |                           
|Dividends declared per common share                                                                                               |                           
|                                                                                                                                 
|SELECTED OPERATING RATIOS:                                                                                                        |                           
|Average yield on interest-earning assets                                                                                          |                           
|Average rate on interest-bearing liabilities                                                                                      |                           
|Average interest rate spread                                                                                                      |                           
|Net interest margin                                                                                                               |                           
|Average interest-earning assets to                                                                                                |                           
|average interest-bearing liabilities                                                                                              |                           
|Net interest income (loss) after provision for                                                                                    |                           
|loan losses to noninterest expense                                                                                                |                           
|Total noninterest expense to average assets                                                                                       |                           
|Efficiency ratio (1)                                                                                                              |                           
|Return on average assets                                                                                                          |                           
|Return on average equity                                                                                                          |                           
|Average equity to average assets                                                                                                  |                           
|Return on tangible equity (2)                                                                                                     |                           
|                                                                                                                                 
|SELECTED ASSET QUALITY RATIOS:                                                                                                    |                           
|Nonperforming loans as a percentage of net loans                                                                                  |                           
|Nonperforming assets as a percentage of total assets                                                                              |                           
|Allowance for loan losses as a percentage of net loans                                                                            |                           
|                                                                                                                                 
|(1)  Efficiency ratio is calculated as total noninterest expense, less amortization expense of intangible assets, as a percentage
|of the sum of net interest income and noninterest income.                                                                        
|(2)  Return on tangible equity is calculated as annualized net income as a percentage of average stockholders equity adjusted   
|for goodwill and other intangible assets.                                                                                        
|                                                                                                                                 

62

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

For
a discussion of our asset and liability management policies as well as the methods used to
manage our exposure to the risk of loss from adverse changes in market prices and interest
rates, see Managements Discussion and Analysis of Financial Condition and
Results of Operations  Asset and Liability Management and Quantitative
and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for
the year ended December 31, 2007. There has been no material change in our market risk
position since our prior disclosures.

# Item 4  Controls
and Procedures.

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

63

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# PART II  OTHER
INFORMATION

# Item 1  Legal
Proceedings.

Except
litigation relating to certain goodwill claims against the United States as described
below, we are not involved in any pending legal proceedings other than routine legal
proceedings occurring in the ordinary course of business. Such routine legal proceedings,
in the aggregate, are believed by management to be immaterial to our consolidated
financial statements.

On
October 31, 2006, the U.S. Court of Federal Claims (Federal Claims Court)
issued an opinion finding the U.S. liable to the Bank for lost franchise value related to
our damages claim against the U.S. for breach of contract following changes to the rules
for computing our regulatory capital that were required by the adoption of the Financial
Institution Reform Recovery and Enforcement Act of 1989. The Federal Claims Courts
opinion awarding the Bank $4.5 million in damages was appealed to the United States Court
of Appeals for the Federal Circuit (Court of Appeals) by the U.S. on December
29, 2006. The Bank subsequently filed a cross-appeal seeking review of earlier liability
rulings which absolved the U.S. of liability in connection with two other related merger
transactions and reduced the amount of the Banks potential recovery.

On
March 5, 2008, the Court of Appeals panel rendered a split decision. The majority found in
favor of the U.S. thereby reversing the Federal Claims Courts damage award and
denying the cross-appeal. A separate dissenting opinion would have sustained the Federal
Claim Courts damage award for the Bank. The Bank filed a petition for panel
rehearing on April 17, 2008 seeking a review of the Court of Appeals decision to reverse
the Federal Claims Courts damage award. The Court of Appeals has subsequently
requested a response from the U.S. regarding the Banks rehearing petition. There can
be no assurance as to the type or amount of damages, if any, that we may recover or the
timing, if we are successful, for receipt by us of any damages from the U.S.

# Item 1A  Risk
Factors.

In
addition to other information contained in this Quarterly Report on Form 10-Q, the
following risk factors should be considered in evaluating our business. Additional risks
and uncertainties not currently known to us or that we currently deem to be immaterial
also may adversely affect our business, financial condition and/or results of operations.

# As a bank holding
company, our earnings are dependent upon the performance of the Bank and the Banks
subsidiaries.

Since
we are a holding company with no significant assets other than the Bank, we currently
depend upon dividends from the Bank for a substantial portion of our revenues. These
dividends are the primary funding source for the dividends we pay on our common stock. Our
ability to pay dividends will continue to depend in large part upon our receipt of
dividends or other capital distributions from the Bank. Various state and federal laws and
regulations limit the amount of dividends that a bank may pay to a parent holding company.
In addition, our right to participate in a distribution of assets upon the liquidation or
reorganization of a subsidiary may be subject to prior claims of the subsidiarys
creditors. In the event the Bank is unable to pay dividends to the Company, we may not be
able to service our debt, pay our obligations or pay dividends on our common stock. The
inability to receive dividends from the Bank could therefore have a material adverse
effect on our business, our financial condition and our results of operations.

64

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# If economic conditions
decline further, our financial condition and results of operations could continue to be
adversely affected.

Our
operating results are affected by national and local economic and competitive conditions,
including changes in market interest rates, the strength of the local economy,
governmental policies of the communities in which we do business and actions of regulatory
authorities. A further decline in the local or national economy could continue to
adversely affect our financial condition and results of operations. Deterioration in
economic conditions could result in the following consequences, any of which could have a
material adverse effect on our business, financial condition, results of operations and
cash flows:

| |  | A
decline in the demand for the products and services we offer;
| | - | ---------------------------------------------------------------

| |  | An
increase in nonperforming loans and loan charge-offs;
| | - | --------------------------------------------------------

| |  | An
increase in provisions for loan losses;
| | - | ------------------------------------------

| |  | An
increase in losses on real estate owned (acquired through foreclosure); and
| | - | ------------------------------------------------------------------------------

| |  | A
migration from low-yielding or noninterest bearing deposits to higher-yielding deposit
products such as time deposits.
| | - | ------------------------------------------------------------------------------------------------------------------------

# Our loan origination and
purchase activity is highly concentrated in certain types of loans.

At
March 31, 2008, $1.7 billion, or 53.0%, of our total loans consisted of multi-family
residential, commercial real estate, land and land development, commercial construction
and business loans. These types of loans generally expose a lender to a greater risk of
non-payment and loss than one-to-four family residential mortgage loans because repayment
of such loans is dependent upon the successful operation of the property and the income
stream of the borrowers. Additionally, these types of loans typically involve larger loan
balances to single borrowers or groups of related borrowers compared to one-to-four family
residential mortgage loans. Also, many of the Banks commercial borrowers have more
than one loan outstanding. Consequently, an adverse development with respect to one loan
or one credit relationship may expose us to a significantly greater risk of loss compared
to an adverse development with respect to a one-to-four family residential mortgage loan.

At
March 31, 2008, $444.2 million, or 13.9%, of our total loans consisted of residential
construction loans. Our portfolio of residential construction loans increased dramatically
in 2004, 2005 and 2006 as a result of our emphasis on loans with relatively higher yields,
adjustable interest rates and/or shorter terms to maturity. Risk of loss on a residential
construction loan is dependent largely upon the accuracy of the initial estimate of the
propertys value when completed compared to the projected cost (including interest)
of construction and other assumptions, including the approximate time to sell the
property. Our ability to continue to originate and/or purchase residential construction
loans may be impaired by adverse changes in local and regional economic conditions in the
real estate markets, or by acts of nature. Due to the concentration of real estate
collateral, these events could have a material adverse impact on the value of collateral,
resulting in delinquencies and/or losses. Customer demand for loans secured by real estate
could be reduced by a weaker economy, an increase in unemployment, a decrease in real
estate values or an increase in interest rates.

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# Our concentration of
loans in certain areas of Florida and the Las Vegas, Nevada area may expose us to
increased credit risk that may cause us to record additional provisions for loan losses
and/or may result in future loan charge-offs.

At
March 31, 2008, $135.9 million, or 4.2%, of our total loans were collateralized by
properties in the state of Florida. Among our Florida loans, $17.3 million were considered
nonperforming residential construction loans at March 31, 2008. Approximately $11.4
million of our total nonperforming residential construction loans in Florida were
purchased from TransLand. During the three months ended March 31, 2008 we charged off
$23.0 million of TransLand residential construction loans, due in large part to a
permanent decline in the estimated fair value of residential real estate.

At
March 31, 2008, $239.9 million, or 7.5%, of our total loans were collateralized by
properties in the state of Nevada, primarily in the Las Vegas, Nevada area. Our loans in
the Las Vegas, Nevada area are primarily composed of land development, commercial
construction and residential construction loans. At March 31, 2008, our nonperforming land
development, commercial construction and residential construction loans in the Las Vegas,
Nevada area totaled $38.5 million, $19.2 million and $10.3 million, respectively.

# Our results of
operations are significantly affected by the fiscal and monetary policies of the federal
government and the governments of the states in which we operate.

The
Board of Governors of the Federal Reserve System, also known as the Federal Reserve Board,
regulates the supply of money and credit in the United States. Its policies determine in
large part our cost of funds for lending and investing and the return we earn on those
loans and investments, both of which impact our net interest margin, and can significantly
affect the value of financial instruments such as debt securities and mortgage servicing
rights. Its policies can also affect our borrowers, potentially increasing the risk that
they may fail to repay their loans. Changes in Federal Reserve Board policies are beyond
our control and difficult to predict or anticipate.

The
amount of income taxes we are required to pay on our earnings is based on federal and
state legislation and regulations. We have provided for current and deferred income taxes
in our financial statements, based on our results of operations, business activity, and
interpretations of tax statutes. We may take filing positions or follow tax strategies
that may be subject to challenge by federal and state taxing authorities. Our net income
and earnings per share may be reduced if a federal, state or local authority assessed
charges for taxes that have not been provided for in our consolidated financial
statements.

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# If the interest payments
on our interest-bearing liabilities increase relative to the interest we earn on our
interest-earning assets, our net interest income may decline.

When
interest-bearing liabilities mature or reprice more quickly than interest-earning assets,
a significant increase in market interest rates could adversely affect net interest
income. Conversely, a significant decrease in market interest rates could result in
increased net interest income. We seek to manage our exposure to interest rate
fluctuations, however, changes in market interest rates are neither predictable nor
controllable and may have an adverse impact on our financial condition and results of
operations.

Prevailing
interest rates may significantly affect the overall demand for loans and could also impact
the extent to which borrowers repay and refinance loans. Loan prepayments and
refinancings, as well as prepayments of mortgage-backed securities, may increase in a
declining interest rate environment. Call provisions associated with our investment in
U.S. government securities and agency obligations and corporate securities may also
negatively impact net interest income in a declining interest rate environment. Such
prepayment, refinancing and security call activity may negatively impact the yield of our
loan portfolio and investment and mortgage-backed security portfolios, as we would
reinvest the prepaid funds in a lower interest rate environment. Additionally,
adjustable-rate mortgage loans and mortgage-backed securities generally contain interim
and lifetime caps that limit the amount interest rates can increase or decrease at
repricing dates.

In
a decreasing interest rate environment, our level of core deposits may decline if our
depositors seek higher-yielding instruments or other investment products we are unwilling
to offer. This may increase our cost of funds and decrease our net interest margin to the
extent that alternative funding sources are utilized to fund our business activities. In
an increasing interest rate environment, depositors tend to prefer higher-yielding time
deposits which could adversely affect our net interest income if rates were to
subsequently decline.

# Potential future loan
losses may increase.

We
maintain an allowance for loan losses that represents managements best estimate of
probable losses within our existing loan portfolio. The level of the allowance for loan
losses reflects managements continuing evaluation of industry concentrations,
specific credit risks, loan loss experience, current loan portfolio quality, present
economic, political and regulatory conditions and unidentified losses inherent in the
current loan portfolio. Over the past several years, historical loan losses had been low
and our loan loss ratios had performed better than industry averages. During 2007, our
levels of delinquent loans, nonperforming loans (loans 90 or more days delinquent),
impaired loans and charge-offs increased significantly. These increases were primarily
attributable to the continued deterioration in the real estate market and the economy in
general. We have been further impacted by the erosion of property values and an overall
increase in housing inventory (both developed lots and completed houses) in many of the
areas of the country in which we do business and where the collateral for our loans
reside. Additionally, significantly tightened credit standards have made it more difficult
for potential borrowers to obtain financing and for current borrowers to refinance
existing loans. Loan losses related to residential construction loans increased during the
year ended December 31, 2007 and also during the three months ended March 31, 2008. If the
recent trend is prolonged and losses continue to increase, our results of operations will
continue to be negatively impacted.

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# Our allowance for loan
losses may be inadequate.

An
inadequate allowance for loan losses could adversely affect our results of operations. We
are exposed to the risk that our customers may be unable to repay their loans according to
their terms and that any collateral securing the payment of their loans may not be
sufficient to assure full repayment. We evaluate the collectibility of our loan portfolio
and provide for an allowance for loan losses which is based on our historical loan loss
experience for each group of loans as further adjusted for specific factors.

If
our evaluation is incorrect, our allowance for loan losses may not be sufficient to cover
losses inherent in the loan portfolio, resulting in additions to our allowance for loan
losses. Increases in the allowance for loan losses result in an expense for the period.
If, as a result of general economic conditions or a decrease in asset quality, management
determines that additional increases in the allowance for loan losses are warranted, we
may incur additional expenses. We can make no assurances that our allowance for loan
losses will be adequate to cover loan losses inherent in our portfolio.

Our
loans are primarily secured by real estate, including regional concentrations of loans in
areas of the United States that are susceptible to tornados, earthquakes, hurricanes or
other natural disasters. If a natural disaster were to occur in one of our major market
areas, loan losses could occur that are not incorporated in the existing allowance for
loan losses.

# We could be held
responsible for environmental liabilities of properties acquired through foreclosure.

If
we are forced to foreclose on a defaulted mortgage loan to recover our investment, we may
be subject to environmental liabilities related to the underlying real property. Hazardous
substances or wastes, contaminants, pollutants or sources thereof may be discovered on
properties under our ownership or after a sale to a third party. The amount of
environmental liability could exceed the value of the real property. There can be no
assurance that we would not be fully liable for the entire cost of any removal,
remediation or other clean-up on the acquired property, that the cost of removal and
clean-up would not exceed the value of the property or that costs could be recovered from
any third party. Additionally, it may be difficult or impossible to sell the property
prior to or following any environmental remediation.

# Our cost of funds may
increase as a result of general economic conditions, interest rates or competitive
pressures.

Our
cost of funds may increase because of general economic conditions, unfavorable conditions
in capital markets, interest rates and competitive pressures. We have traditionally
obtained funds primarily through deposits and borrowings. Generally, deposits are a
preferable source of funds than borrowings because interest rates paid for deposits are
typically less than interest rates charged for borrowings. If deposit growth is inadequate
to fund our operations we may have to rely on borrowings as a source of funds. Relying on
borrowings as a primary funding source may have an adverse impact on our net interest
margin.

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# Competition could result
in our loan portfolios and deposit base declining.

The
banking and financial services businesses in our market areas are highly competitive. Our
market area has a high density of financial institutions, some of which have greater
financial resources, name recognition and market presence than us, and all of which are
our competitors. Competition within the banking, mortgage and finance industries may limit
our ability to attract and retain customers. Our competition for loans comes primarily
from commercial banks, savings banks, savings and loan associations, mortgage banking
companies, insurance companies, finance companies and credit unions. Our most direct
competition for deposits historically has come from commercial banks, savings banks,
savings and loan associations and credit unions. In addition, we face competition for
deposits from products offered by brokerage firms, insurance companies and other financial
intermediaries, such as money market and other mutual funds and annuities. If we are
unable to attract and retain customers, our loan and deposit growth may be inhibited which
could have an adverse impact on our financial condition and results of operations.

# Legislative and
regulatory issues could adversely affect our financial condition and results of
operations.

We
are subject to extensive regulation, supervision and examination by the OTS as our primary
federal regulator, and by the FDIC, which insures our deposits. As a member of the
FHLBank, we must also comply with applicable regulations of the Federal Housing Finance
Board and the FHLBank. Regulation by these agencies is intended primarily for the
protection of our depositors and the Deposit Insurance Fund and not for the benefit of our
stockholders. Our activities are also regulated under consumer protections laws applicable
to our lending, deposit and other activities. A sufficient claim against us under these
laws could have a material adverse affect on our financial condition and results of
operations.

# We may not be able to
retain or replace key members of management or attract and retain qualified customer
relationship managers.

We
depend on the services of existing management personnel to carry out our business and
investment strategies. It is critical that we are able to attract and retain management
and other qualified personnel. Competition for qualified personnel is significant in our
geographical market areas. The loss of services of any management personnel, or the
inability to recruit and retain qualified personnel in the future, could have an adverse
effect on our financial condition and results of operations.

We rely on communications,
information, operating and financial control systems technology from third-party service
providers. An interruption in these third-party systems could have an adverse effect on
our business.

We
rely heavily on third-party service providers for much of our communications, information,
operating and financial control systems technology. Any failure, interruption or breach in
security of these systems could result in failures or interruptions in our customer
relationship management, general ledger, deposit, loan servicing and loan origination
systems. We can make no assurances that such failures or interruptions will not occur or,
if they do occur, that they will be adequately addressed by us or the third parties on
which we rely. Any failure or interruption could have a material adverse effect on our
business, financial condition and results of operations. If any of our third-party service
providers experience financial, operational or technological difficulties, or if there is
any other disruption in our relationships with them, we may be required to locate
alternative sources of such services. We can make no assurances that we could negotiate
terms that are favorable to us, or could obtain comparable services without the need to
expend substantial resources.

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# Our stock price can be
volatile.

Our
stock price can fluctuate in response to a variety of factors, including; actual or
anticipated variations in quarterly operating results; changes in our stockholder dividend
policy; recommendations of securities analysts; and news media reports relating to trends,
concerns and other issues in the financial services industry. Other factors that may
influence our stock price include products or services offered by our competitors;
operating and stock price performance of other companies that investors or analysts deem
comparable to us; and changes in governmental regulations.

General
market fluctuations, industry factors and general economic conditions and political
conditions and events, such as future terrorist activities, economic slowdowns or
recessions, interest rate changes or credit loss trends, also could cause our stock price
to decline regardless of our operating results.

# If we fail to maintain
effective systems of internal and disclosure control, we may not be able to accurately
report our financial results or prevent fraud.

Effective
internal and disclosure controls are necessary for us to provide reliable financial
reports, to effectively prevent fraud and to operate successfully as a public company. If
we were unable to provide accurate and reliable financial reports or prevent fraud, our
reputation and results of operations would be adversely effected. As part of our ongoing
monitoring of internal controls, we may discover material weaknesses or significant
deficiencies in our internal controls as defined under standards adopted by the Public
Company Accounting Oversight Board (PCAOB) that require remediation. Under
PCAOB standards, a material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis. A significant
deficiency is a deficiency, or combination of deficiencies, in internal control over
financial reporting that is less severe than a material weakness, yet important enough to
merit attention by those responsible for oversight of the companys financial
reporting..

Any
failure to maintain effective internal and disclosure controls, or to make necessary
improvements in such controls in a timely manner, could harm operating results or cause us
to fail in meeting our financial reporting obligations. Such a failure could have an
impact on our ability to remain listed on the NASDAQ Global Select Market. Ineffective
internal and disclosure controls could also cause investors to lose confidence in our
reported financial information, which would likely have a negative effect on our stock
price.

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

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

# Item 3  Defaults
Upon Senior Securities.

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

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

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.

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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:  May 12, 2008 | By:/s/ Gilbert G. Lundstrom                      
|                    | Gilbert G. Lundstrom                             
|                    | Chairman of the Board and Chief Executive Officer
|Date:  May 12, 2008 | By:/s/ Eugene B. Witkowicz                       
|                    | Eugene B. Witkowicz                              
|                    | Executive Vice President and                     
|                    | Chief Financial Officer                          

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# EXHIBIT INDEX

|No.  | Exhibits                                                                                          
|---- | --------------------------------------------------------------------------------------------------
|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
|    

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