ex99-1024.htm


    Exhibit
10.24

     

    SUPERVISORY
AGREEMENT

     

    This
Supervisory Agreement (“Agreement”) is made as of January 15, 2009 (the
Effective Date), by and between TierOne Bank, Lincoln, Nebraska (Bank) (OTS Docket No.
03309), a federally chartered savings bank, and the Office of Thrift Supervision
(OTS), a federal banking regulatory agency within the United States Department
of the Treasury, acting through its Midwest Regional Director or his designee
(Regional Director).

    


    WHEREAS, OTS is the primary
federal regulator of the Bank pursuant to the Home Owners’ Loan Act, 12 USC §§
1461 et seq., and is
the Bank’s appropriate Federal banking agency for purposes of the Federal
Deposit Insurance Act, 12 USC §§ 1811 et seq.; and

    


    WHEREAS, based on the findings
set out in the Report of Examination pertaining to OTS’s  examination
of the Bank commenced on June 2, 2008 (ROE), OTS is of the opinion that the Bank
violated regulations and engaged in acts and practices that are considered to be
unsafe and unsound; and

    


    WHEREAS, OTS is of the opinion
that grounds exist
for the initiation of administrative proceedings against the Bank pursuant to 12
USC §§ 1464(d) and 1818(b); and

    


    WHEREAS, OTS is of the view
that it is appropriate to take measures intended to ensure that the Bank will
comply with applicable laws and regulations and engage in safe and sound
practices; and

    


     

    WHEREAS, the Bank, acting
through its Board of Directors (Board), without admitting or denying that such
grounds exist except those as to jurisdiction, which are admitted, wishes to
cooperate with OTS and to evidence the intent to (i) comply with applicable laws
and regulations and (ii) engage in safe and sound practices.

     

    


    NOW THEREFORE, in
consideration of the above premises and the mutual undertakings set forth
herein, the parties hereto agree as follows:

    


    1.  Compliance with Laws and
Regulations.

    


    The Bank,
through its directors, officers, employees, and agents, shall comply with the
following regulations:

    


    
      	
              A.

            	
              12
      CFR § 560.160(a)(1) (classify assets in accordance with regulatory
      requirements);

            


    

    


    
      	
              B.

            	
              12
      CFR § 560.160(b) (establish adequate allowances for loan and lease losses
      (ALLL));

            


    

    


    
      	
                
      C. 

            	
              12
      CFR § 560.170(a) (establish and maintain adequate loan documentation to
      allow the Bank to appropriately assess lending risks and make informed
      lending decisions);

            


    

    


    
      	
              D. 

            	
              12
      CFR § 560.170(b) (establish and maintain loan documentation to allow the
      Bank to identify all sources of repayment and to assess the ability of the
      borrower(s) and any guarantor(s) to repay the indebtedness in a timely
      manner);

            


    


    
      
         


      

      
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              E.

            	
              12
      CFR § 560.170(d) (properly administer and monitor the Bank’s
      loans);

            


    

    


    
      	
              F.

            	
              12
      CFR § 560.170(e) (obtain adequate loan documentation in light of the size
      and complexity of some of the Bank’s
loans);

            


    

    


    
      	
              G.

            	
              12
      CFR § 562.1(b)(2) and § 562.2(b) (follow regulatory requirements regarding
      the reporting of classified assets, allowance for loan and lease losses
      (ALLL), and specific valuation allowances (SVAs) on its thrift financial
      reports (TFRs);

            


    

    


    
      	
              H.

            	
              12
      CFR § 564.4(a) and (c) (conform appraisals to generally accepted appraisal
      standards and analyze and report appropriate deductions and
      discounts);

            


    

    


    
      	
              I.

            	
              12
      CFR § 564.8 (management’s review of appraisals to ensure that appraisers
      follow the required procedures);

            


    

    


    
      	
              J.

            	
              12
      CFR § 229.10(c)(1)(i), § 229.13(b), and § 229.13(e)(1) (proper deposit
      hold requirements);

            


    

     

    
      	
              K.

            	
              12
      CFR § 226.18(n) and (o) ( disclosure form
  requirements);

            


    

     

    
      	
              L.

            	
              24
      CFR § 3500.8(b) ( HUD-1 disclosure form
  requirements);

            


    

    


    
      	
              M.

            	
              Appendix
      to 12 CFR § 560.101 (adequately monitor loans with high loan-to value
      ratios); and

            


    

    


    
      	
              N.

            	
              Interagency
      Guidelines Establishing Standards for Safety and Soundness, Appendix A to
      12 CFR Part 570 (conform to the safety and soundness guidelines with
      respect to (i) operational and managerial standards (Section II.A), (ii)
      loan documentation (Section II.C), (iii) credit underwriting (Section
      II.D), (iv) asset quality (Section II.G), and (v) compensation programs
      that could lead to material financial loss (Sections II.I and
      III).

            


    

    


    2.   Capital.

    


    
      	
              A.  

            	
              Effective
      immediately, the Bank shall continue to maintain a core capital ratio of
      8.50 percent and a risk-based capital ratio of 11.00
    percent.

            


    

    


    
      	
              B.  

            	
              Within
      45 calendar days of the end of each calendar quarter, beginning with the
      quarter ending December 31, 2008, the Board shall review a report (Capital
      Report), which shall reflect the Bank’s regulatory capital for the
      immediately preceding quarter end, from the Bank’s management
      that:

            


    

    


    
      	
              (i)  

            	
              sets
      forth the Bank’s capital ratios;

            


    

    


    
      	
               
      (ii)   

            	
              addresses
      the steps that the Bank will take to maintain the capital requirements set
      forth in Paragraph 2A hereof;
and

            


    


    
      
        
           

        

         


      

      
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      (iii)   

            	
              summarizes
      its other capital raising activities including, but not limited to,
      requests for capital infusions from its holding company, TierOne
      Corporation, Lincoln, Nebraska (Holding Company); contacts with investment
      bankers and parties undertaking due diligence; contacts with third parties
      regarding the purchase of debt and equity securities;  the
      receipt of offers to engage in a merger with, or acquisition of, the Bank;
      the execution of letters of intent, a merger agreement, or an investment
      agreement by the Bank or the Holding Company; or the termination of
      negotiations with parties considering a merger of the Bank, the
      acquisition of the Bank, the purchase of subordinated debt, or the
      acquisition of five (5) percent or more of common or preferred stock
      of  the Holding Company.

            


    

    


    
      	
               
      C.  

            	
              The
      Board’s review of the matters required by this Paragraph shall be fully
      detailed in the Board meeting minutes.  Within 15 calendar days
      after the Board meeting, the Bank shall submit a copy of management’s
      Capital Report to OTS.

            


    

    


      3.  Strategic
Plan.

     

    
      	
              A.  

            	
              By
      January 31, 2009, the Bank shall  submit to OTS the 2009-2011
      Corporate Strategic Plan (Strategic Plan) adopted by the Board for OTS’s
      review and a written notice of non-objection.  The Strategic
      Plan shall specifically address the Bank’s operations with or without the
      Bank’s participation in any federal government program for which the Bank
      is specifically eligible.

            


    

    


    
      	
              B.  

            	
              The
      Board shall review the Strategic Plan at least semi-annually and make
      appropriate amendments. At least 30 days prior to the implementation of an
      amendment to the Strategic Plan or the adoption of a revised Strategic
      Plan, the Board shall submit the revised or amended Strategic Plan,
      including the pro forma financial statements and supporting assumptions,
      to OTS for a notice of prior written non-objection, unless OTS waives such
      time period.

            


    

    


    
      	
              C.  

            	
              The
      Board shall direct management to implement the Strategic Plan, including
      any amendment thereto, after receiving a written notice of non-objection
      from OTS.

            


    

    


    
      	
              D.  

            	
              By
      January 31, 2009, the Board shall approve and submit to OTS pro forma
      financial statements for calendar years 2009 through 2011 that: (i)
      reflect the implementation of the Strategic Plan; (ii) set forth quarterly
      projections, utilizing TFR reporting categories and line items; (iii) set
      forth balance sheet composition, operating projections, and core and
      risk-based capital ratios; and (iv) are based on realistic and
      well-supported assumptions.  The submission to OTS shall also
      include a detailed description of all assumptions used to prepare the pro
      forma statements, including, but not limited to: (i) the assumed interest
      rate scenarios; (ii) assumptions used for non-interest income and
      non-interest expense; (iii) assumptions for forecasting loan losses or
      charge-offs and the disposition of problem assets; (iv) assumptions used
      for loan origination rates, taking into consideration current national and
      regional economic conditions; (v) assumptions used to determine the
      appropriate portfolio mix, including the consideration of credit,
      liquidity, interest rate, operational, reputation, and compliance risks;
      (vi) assumptions for the start-up costs, volumes,
  and

            


    


    
      
        
           

        

         


      

      
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              expected
      returns on any new branches or new products or services; and (vii)
      assumptions used to measure the Bank’s liquidity position, including, but
      not limited to, the solicitation of deposits in accordance with 12 CFR §
      337.6(a)(5)(iii), and  its borrowing capacities at, and
      collateral requirements of the Federal Home Loan Bank and the Federal
      Reserve Bank.

            


    

    


    
      	
              E.  

            	
              Within
      60 days of the end of each calendar quarter, beginning with the quarter
      ending March 31, 2009, management shall prepare and submit to the Board,
      with a copy to OTS, quarterly variance reports on the Bank’s compliance
      with the Strategic Plan and the Bank’s operating results in comparison
      with its pro forma financial statements.  Such variance reports
      shall: (i) compare actual operating results with projected results; (ii)
      compare actual balance sheet composition with projections; (iii) discuss
      any changes required in the Bank’s business strategy due to a change in
      market conditions or other factors; and (iv) include detailed explanations
      of any material deviations from the Strategic Plan or the pro forma
      financial statements and the corrective actions or measures implemented,
      proposed, or under consideration to correct any material deviation. The
      Board, on at least a quarterly basis, shall also review and address the
      external and internal risks that may affect the Bank’s ability to
      implement the Strategic Plan.  This review shall include, but
      not be limited to, adverse scenarios relating to asset or liability mixes,
      interest rates, staffing levels and expertise, operating expenses,
      marketing costs, and economic conditions in the markets where the Bank is
      operating.

            


    

    


    
      	
              F.  

            	
              A
      deviation shall be considered material under this Paragraph 3 when the
      Bank engages in (i) any material activity, business line, or operation
      that is inconsistent with the Strategic Plan or (ii) any new activity,
      business line, or operation that is inconsistent with the Strategic Plan
      and the corresponding pro forma financial statements.  A
      deviation also shall be considered material if the Bank (i) exceeds the
      level of any activity or growth contemplated in the pro forma financial
      statements by more than 10 percent, or (ii) falls below or fails to meet
      targets established in the pro forma financial statements by more than 10
      percent.

            


    

    


    
      	
              G.  

            	
              Notwithstanding
      the foregoing, none of the following deviations shall be deemed to be
      material: (i) a change of 10 percent or less in any balance sheet category
      or (ii) a change of 10 percent or less in any income statement
      category.  For purposes of this Paragraph, a balance sheet
      category is defined as cash, investments, 1-4 family permanent mortgage
      loans, consumer loans, nonhomogeneous loans, mortgage-backed securities,
      other investment securities,  fixed assets, retail deposits,
      wholesale deposits, advances from the Federal Home Loan Bank, other
      borrowed money, other liabilities, and equity capital.  For
      purposes of this Paragraph, an income statement category is defined as
      interest income, interest expense, noninterest income, noninterest
      expense, and extraordinary items.  In addition, a change of 20
      percent or less in net income or 20 percent or less in the amount of real
      estate owned shall not be deemed to be material for purposes of Paragraph
      3 hereof.

            


    

    


    
      	
              H.  

            	
              The
      Board’s review of the Strategic Plan, pro forma financial statements, and
      related variance reports shall be fully documented in the Board
      minutes.

            


    

    


    



    
      
        
           

        

         


      

      
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    4.  Brokered Deposits
Restriction.

    


    
      	
              A.  

            	
              The
      Bank shall not accept brokered deposits, including deposits covered by 12
      CFR § 337.6(a)(5) except in compliance with 12 CFR § 337.6(b)(2), unless a
      waiver is granted by the Federal Deposit Insurance Corporation
      (FDIC).

            


    

    


    
      	
              B.  

            	
              The
      Bank shall provide to OTS:  (i) written notice if the Bank
      requests a waiver from the FDIC, and (ii) a copy of the FDIC’s
      correspondence indicating its disposition of any request for such a
      waiver.

            


    

    


    5.  Capital
Distributions.

    


    
      	
              A.  

            	
              The
      Bank shall not declare or pay a capital distribution, as defined in 12 CFR
      § 563.141, without the written prior approval of
  OTS.

            


    

    


    
      	
              B.  

            	
              The
      Bank shall not declare or submit an application to make a capital
      distribution unless at the time of such declaration or application (i) the
      Bank has or exceeds a core capital ratio of 8.50 percent and a risk-based
      capital ratio of 11.00 percent, and (ii) the Bank can demonstrate that it
      will have or exceed these core capital and risk-based capital ratios after
      the payment of the capital
distribution.

            


    

    


    6.  Commercial Real Estate and
Commercial Loan Risk Analysis.

     

    
      	
              A.  

            	
              By
      January 31, 2009, the Board shall adopt a plan (CRE Stress Test Plan) for
      the commencement of the stress testing of its commercial real estate
      portfolio in accordance with the guidelines in OTS CEO Letter No. 252,
      entitled “Guidance on Commercial Real Estate (CRE) Concentration Risks”,
      and dated December 14, 2006 (CEO Letter No. 252).  The Plan
      shall, at a minimum, address the
following:

            


    

     

    
      	
              (i)  

            	
              Completion
      of portfolio level stress tests or sensitivity analyses to quantify the
      impact of changing economic conditions, including, but not limited to
      those affecting certain relevant industries or sectors on asset quality,
      earnings, and capital; and

            


    

     

    
      	
              (ii)  

            	
              Revisions
      to the Bank’s commercial real estate loan policy and the internal asset
      review function, to the extent necessary, to reflect the results of the
      risk analysis and the guidelines set forth in CEO Letter No.
      252.

            


    

     

    
      	
              B.  

            	
              By
      January 31, 2009, the Board shall submit to OTS the CRE Stress Test
      Plan.

            


    

     

    


    7.  Diversification of Loan
Portfolio.

    


    By
January 31, 2009, the Board shall  adopt and submit to OTS for a
written notice of non-objection a policy (Loan Concentration Policy) that
establishes: (i) specific limits by loan type for each geographic market, with
a  discussion of the pertinent external and internal factors and
risks, and (ii) a review process for monitoring the conditions in the geographic
markets to ensure the limits remain appropriate and the Bank’s loan policies
continue to be appropriate for


    
      
        
           

        

         


      

      
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5

        
          

        

      

      
         


      

    


    the
current market conditions.  After receipt of OTS’s written notice of
non-objection, the Bank shall implement the Loan Concentration
Policy.

    


    8.
 High
Loan-to-Value Loans.

    


    
      	
              A.  

            	
              By
      December 31, 2008, the Board shall adopt and submit to OTS a certified
      resolution stating that: (i) management reviewed the loan portfolio and
      identified all high loan-to-value loans, as defined in Appendix to 12 CFR
      § 560.101, and presented the list of such loans to the Board for its
      review, and (ii) the Board will require management to submit an accurate
      list of high loan-to-value loans to the Board for review each
      quarter.

            


    

    


    
      	
              B.  

            	
              By
      December 31, 2008, the Board shall adopt and submit to OTS a written plan
      for the establishment of a system of internal controls, including the
      designation of responsible personnel and the provision of quarterly
      reports to the Board, to ensure that the Bank complies with the Appendix
      to 12 CFR  § 560.101.

            


    

    


    9.  Asset
Classification.

    


    
      	
              A.  

            	
              Effective
      immediately, the Bank shall establish reserves for losses on impaired
      loans either by establishing a specific valuation allowance or recording a
      charge-off in accordance with SFAS
114.

            


    

    


    
      	
              B.  

            	
              By
      November 30, 2008, the Board shall adopt a system of internal controls to
      verify that management is timely recognizing losses on impaired loans in
      accordance with SFAS 114 and submit documentation of the implementation of
      such system to OTS.

            


    

    


    
      	
              C.  

            	
              By
      October 31, 2008, the Board shall review the requirements and guidelines
      set forth in: (I) 12 CFR § 560.160, (ii) Section 260 (Classification of
      Assets) of the OTS Examination
      Handbook, (iii) Section II.G of Appendix A to 12 CFR Part 570, and
      (iv) OTS CEO Letter No. 250, dated December 13, 2006, and entitled
      “Interagency Policy Statement on the Allowance for Loan and Lease Losses
      and Questions and Answers on Accounting for Loan and Lease Losses” (CEO
      Letter No. 250).  By December 31, 2008, the Board, by a
      certified resolution, shall direct enhancements to the Bank’s asset
      classification process to ensure compliance with 12 CFR § 560.160, Section
      260 (Classification of Assets) of the OTS Examination
      Handbook, Section II.G of Appendix A to 12 CFR Part 570, OTS CEO
      Letter No. 250, and generally accepted accounting principles, including
      but not limited to the requirements of SFAS Nos. 5 and 114, with respect
      to troubled debt restructuring.  Within five (5) business days
      of the adoption of the resolution, the Board shall submit a copy of the
      certified board resolution to OTS.

            


    

    


    
      	
              D.  

            	
              By
      the forty-fifth (45th)
      calendar day after the end of each calendar quarter, beginning with the
      quarter ending March,  2009, the Board shall
      review  and submit to OTS a quarterly report (ALLL Report)
      analyzing the adequacy of the Bank’s ALLL  based on the factors
      noted in: (I) the Bank’s asset classification policy, (ii) 12 CFR §
      560.160, (iii) Section 261 (Adequacy of Valuation Allowances) of the OTS Examination
      Handbook, (iv) Section II.G of Appendix A to 12 CFR Part 570, (v)
      OTS CEO Letter No. 250, and
  (vi)  generally

            


    


    
      
        
           

        

         


      

      
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              accepted
      accounting principles. The ALLL Report shall set forth all assumptions
      used to determine the adequacy of the ALLL.  The Board’s review
      of the ALLL Report and approval of the adequacy of the Bank’s ALLL shall
      be fully documented in the Board meeting
  minutes.

            


    

    


    10.
 Internal Asset
Review Program.

    


    
      	
              A.  

            	
              By
      December 31, 2008, the Board shall adopt and submit to OTS for written
      notice of non-objection a revised written Internal Asset Review (IAR)
      Program that is consistent with: (i) CEO Letters No. 140, dated May 31,
      2001 and entitled “Effective Internal Asset Review Systems”; (ii) CEO
      Letter No. 250; and (iii) CEO Letter No. 280, dated September 17, 2008,
      and entitled “Documentation and Underwriting Standards”.  The
      IAR Program shall: (i) assess the overall asset quality; (ii) determine
      problem assets; (iii) identify weaknesses in the Bank’s loan underwriting,
      documentation, and administration policies and procedures; (iv) violations
      of applicable regulations or the Bank’s policies; (v) assess the adherence
      to internal loan policies; (vi) provide information in determining the
      adequacy of the ALLL; (vii) identify relevant trends that affect the
      collectability of the portfolio; and (viii) review the lending personnel’s
      activities.

            


    

    


    
      	
              B.  

            	
              The
      IAR Program shall be conducted by either a qualified independent third
      party consultant and/or an adequately staffed department of qualified and
      independent personnel.

            


    

    


    
      	
              C.  

            	
              The
      IAR Program shall: (i) set forth the frequency, scope, and depth of the
      reviews; (ii) require a review by senior executive management and the
      Board of the IAR findings; and (iii) require the oversight of follow-up
      corrective actions by a committee composed of Outside Directors (as
      defined in Paragraph 19C hereof) or the Audit
      Committee.  Management shall not change or alter the findings of
      an IAR report.

            


    

    


    11.  Underwriting and
Documentation Plan.

     

    
      	
              A.  

            	
              By
      December 31, 2008, the Board shall adopt and submit to OTS for notice of
      written non-objection a plan (Underwriting and
      Documentation  Plan) to address the credit underwriting and
      administration deficiencies noted in the exception sheets and the loan
      review findings provided to management during the June 2, 2008
      examination, including, but not limited to, the
  following:

            


    

    


    
      	
               
      (i)   

            	
              Documentation
      of disbursements and a review to determine whether the conditions for the
      disbursements have been satisfied;

            


    

    


    
      	
              (ii)  

            	
              Preparation
      of  progress inspection reports that fully document the
      percentage of completion of development or construction activities, and
      compliance with plans and
specifications;

            


    

    


    
      	
              (iii)  

            	
              Establishment
      of procedures to appropriately monitor third-party inspectors or review
      third-party inspection reports for
accuracy;

            


    


    
      
        
           

        

         


      

      
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              (iv)  

            	
              Establishment
      of procedures for the appropriate oversight of the construction budgeting
      process, including the implementation of procedures to ensure the
      prevention of the use of budgeted hard cost funds to enhance or replenish
      the soft costs budget;

            


    

    


    
      	
              (v)  

            	
              Review
      of excessive front-end fees (soft costs) in construction loans paid to the
      borrower for job organization and setup, general and administrative
      expense, supervision, marketing, and undocumented contingencies to ensure
      that they were commensurate with the work
  performed;

            


    

    


    
      	
              (vi)  

            	
              Prohibition
      of the payment of interest due to the Bank from loan proceeds, when an
      appraised loss exists;

            


    

    


    
      	
              (vii)  

            	
              Establishment
      of procedures to appropriately analyze periodic financial and operating
      information;

            


    

    


    
      	
              (viii)  

            	
              Establishment
      of procedures to  maintain current financial data on borrowers
      and guarantors;

            


    

    


    
      	
              (ix)  

            	
              Establishment
      of procedures to require current collateral property lease
      agreements;

            


    

    


    
      	
              (x)  

            	
              Performance
      of global analyses and analyses of contingent liabilities for certain
      borrowers/guarantors;

            


    

    


    
      	
              (xi)  

            	
              Establishment
      of procedures that require the reliance  upon appraisals based
      on gross sales valuations instead of discounted cash flow valuations for
      credit underwriting and for valuation of certain projects where
      development or construction has
ceased;

            


    

    


    
      	
              (xii)  

            	
              Establishment
      of procedures that require current and well-supported appraisals on
      applicable loans;

            


    

    


    
      	
              (xiii)  

            	
              Establishment
      of procedures that require appraisals to document (a) conclusions
      regarding the reasonableness and (b) the existence
      of  independent documented reviews in other
    cases;

            


    

    


    
      	
              (xiv)  

            	
              Establishment
      of procedures requiring the performance of internal loan
      reviews;

            


    

    


    
      	
              (xv)  

            	
              Establishment
      of procedures that require agreed-upon performance standards be satisfied
      as a condition to pre-approved loan
extensions;

            


    

    


    
      	
              (xvi)  

            	
              Establishment
      of procedures for the formal extension or modification ofmatured
      loans;

            


    


    
      
        
           

        

         


      

      
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8

        
          

        

      

      
         


      

    


    
      
        	
                (xvii)

              	
                Establishment
      of procedures to ensure that loan terms on the loan information systems
      that are consistent with
      the  terms  set  forth in the loan
      documents; and

              


      

    

    


    
      	
              (xviii)  

            	
              Establishment
      of procedures that require that any volume driven compensation program for
      loan officers considers the asset quality of the loans in establishing the
      level of compensation thereunder.

            


    

    


    
      	
              B.  

            	
              The
      Board shall require monthly reports from a designated senior executive
      officer regarding the implementation of the Underwriting and Documentation
      Plan until each deficiency is resolved or the relevant activity is
      terminated or ceased.  The Board’s review of these reports shall
      be fully documented in the Board meeting
  minutes.

            


    

    


    12.  Loan
Review.

    


    
      	
              A.  

            	
               Management
      t shall complete a comprehensive review of each nonhomogeneous loan or
      loan relationship exceeding $1,000,000.  The review of
      approximately 50% of such loans and loan relationships will be completed
      by January 31, 2009, with the review of the remainder being completed by
      March 31, 2009.  This evaluation, at a minimum, shall: (i)
      identify significant loan underwriting, documentation, or administration
      deficiencies, if any; (ii) set forth the most recent collateral or
      appraisal valuations; (iii) determine the appropriate asset classification
      category; (iv) effectively identify the  risks with respect to
      the asset;  (v) identify whether the loan is impaired and, if
      impaired, provide an estimate of the loan impairment; (vi) recommend any
      required SVAs, charge-offs, or ALLL allocation; and (vii) provide a
      resolution plan, if appropriate.

            


    

    


    
      	
              B.  

            	
              By
      February 28, 2009, the Board shall review results of management’s loan
      portfolio review completed by January 31, 2009 pursuant to Paragraph 12A
      hereof, approve the resolution plans, and submit to OTS: (i) a certified
      board resolution stating the loan review has been completed in accordance
      with the requirements of this Paragraph, and (ii) a copy of a report
      containing a summary of the findings of the comprehensive review and the
      actions taken to address potential or actual losses, if any, on the loans.
      By April 30, 2009, the Board shall review results of management’s loan
      portfolio review completed by March 31, 2009 pursuant to Paragraph 12A
      hereof, approve the resolution plans, and submit to OTS: (i) a certified
      board resolution stating the loan review has been completed in accordance
      with the requirements of this Paragraph, and (ii) a copy of a report
      containing a summary of the findings of the comprehensive review and the
      actions taken to address potential or actual losses, if any, on the
      loans.

            


    

    


    
      	
              C.  

            	
              By
      the sixtieth (60th) calendar
      day after the close of each calendar quarter, commencing with the December
      31, 2008 quarter, the Board shall review and submit to OTS a status report
      from the Bank’s management on all nonhomogeneous special mention,
      classified assets, and nonperforming assets that are $500,000 or greater
      in amount.  The status reports, at a minimum, shall set forth:
      (i) the date(s) of next payment due and the last payment made; (ii) the
      amount of interest reserve remaining; (iii) the contractually required
      debt service; (iv) most recent appraised value of the collateral
      and  the date of this valuation; (v) the
      borrower’s  and/or guarantor’s current financial condition at
      least annually; (vi) the asset

            


    


    
      
        
           

        

         


      

      
        Page
9

        
          

        

      

      
         


      

    


    
      	
               

            	
              classification
      and any allocated allowances; (vii) the rationale for the classification;
      and (viii) information regarding the  current status of the
      asset..

            


    

    


    
      	
              D.  

            	
              The
      Board’s review of the quarterly problem asset report shall be fully
      documented in the Board meeting
minutes.

            


    

    


    
      	
              E.  

            	
              By
      the sixtieth (60th)
      calendar day after the close of each calendar quarter, commencing with the
      December 31, 2008 quarter, the Board shall review and submit to OTS a
      report from management on all delinquent loans categorized by the type of
      loan and the geographic market or state.  The report also shall
      delineate trends in delinquencies and set forth
      any  recommendations whether a  modification of the
      Bank’s Loan Concentration Policy adopted pursuant to Paragraph 7 hereof or
      the Bank’s loan policies is
appropriate.

            


    

    


    13.  Board Oversight of
Management.

    


    
      	
              A.  

            	
              By
      February 28, 2009, the Outside Directors (as defined in Paragraph 19C)
      shall prepare and submit to the Board a written report (Corporate
      Governance Report)
that  evaluates:

            


    

     

    
      	
              (i)  

            	
              The
      performance of the Bank’s senior executive officers that includes an
      assessment of the responsibility and involvement of each senior executive
      officer for, in the opinion of OTS, the violations and unsafe and unsound
      practices set forth in the ROE;

            


    

     

    
      	
              (ii)  

            	
              The
      ability of the management team to effectively address the concerns
      disclosed in the ROE and to operate the Bank in a safe and sound manner in
      compliance with all applicable laws and regulations;
  and

            


    

     

    
      	
              (iii)  

            	
              The
      performance of the Board in overseeing the activities of senior executive
      officers and the Bank’s compliance with applicable laws and regulations
      and engagement in practices about which regulatory concerns were set forth
      in the ROE.

            


    

     

    
      	
              B.  

            	
              Based
      on the findings of the review, the Corporate Governance Report shall set
      forth recommendations, if any, for improving the Board’s oversight and the
      Bank’s compliance with applicable laws and regulations, safe and sound
      practices, and its policies.

            


    

     

    
      	
              C.  

            	
              After
      reviewing the findings of the Corporate Governance Report and by March 31,
      2009, the Board shall submit to OTS, for review and written notice
      of  non-objection, an acceptable written plan designed: (i) to
      ensure management’s observance of sound lending and credit administration
      practices and adherence to regulatory requirements for lending, asset
      classification, maintenance of ALLL, and incentive compensation
      (Compliance Oversight Plan); and (ii) to strengthen and improve the
      Board’s oversight of the Bank’s operations, including, but not limited to,
      its oversight of the Bank’s lending activities and senior executive
      officers’ performance of their duties and
  responsibilities.

            


    


    
      
        
           

        

         


      

      
        Page
10

        
          

        

      

      
         


      

    


    
    

    
      	
              D.  

            	
              In
      adopting the Compliance Oversight Plan, the Board shall consider: (i)
      whether the Board should receive training on corporate governance,
      oversight of lending and asset classification practices, and business
      planning; (ii) whether any changes in management personnel and
      management’s duties and responsibilities  are appropriate,
      subject to the requirements of Paragraph 15 hereof; (iii) whether the
      composition and the term of the charter of any Board Committee should be
      revised and whether additional Board Committees should be formed to
      enhance the Board’s oversight of the Bank’s operations; (iv) whether the
      Bank’s compensation policy, including incentive compensation, should be
      revised; and (v) whether the Bank’s  information systems should
      be enhanced to ensure that comprehensive and accurate information is
      available for the Board in its deliberations.  To be acceptable
      to OTS, the Compliance Oversight Plan must (i) set forth specific actions
      with corresponding due dates and (ii) assign an Outside Director (as
      defined in Paragraph 19C) to monitor compliance with each corrective
      action.

            


    

    


    
      	
              E.  

            	
              The
      Board’s review of the Corporate Governance Report shall be fully
      documented in the Board meeting minutes.  The Bank shall submit
      to OTS a copy of the Corporate Governance
  Report.

            


    

    


    
      	
              F.  

            	
              To
      assist in the preparation of the Corporate Governance Report, the Outside
      Directors may consider the utilization of the services of a qualified
      third party consultant that is independent of management  (as
      defined in Paragraph 19B) and acceptable to OTS pursuant to Paragraph 18
      hereof.

            


    

    


     

    
      	
              G.  

            	
              Immediately
      following receipt of written notice of non-objection from OTS to the
      Compliance Oversight Plan (with such revisions as may be required by OTS),
      the Bank and its Board shall implement and adhere to the Compliance
      Oversight Plan.

            


    

     

    


    
      	
              H.  

            	
              Effective
      immediately, the Board shall require Board minutes and Board Committee
      minutes are complete and accurate descriptions of all matters presented
      to, and discussed by the Board at all Board and Committee meetings, in
      accordance with 12 CFR § 563.170(c).  Each Board and Committee
      member shall ensure that the minutes clearly and accurately reflect his or
      her actions, discussions, dissensions, abstentions, absences, presence,
      and votes before approving the minutes.  The Board and Board
      Committee members shall review and approve or modify the minutes of each
      meeting at the next regular Board or Board Committee meeting and submit a
      copy of such minutes to OTS within ten (10) business days after such
      meeting.

            


    

    


    
      	
              14.

            	
               Employment Contracts
      and Compensation
Arrangements.

            


    

    


    
      	
              A.  

            	
              Effective
      immediately, the Bank shall not enter into, renew, extend, or revise any
      contractual arrangement relating to compensation or benefits for any
      senior executive officer or director of the institution, unless it first
      provides OTS with not less than thirty (30) days prior written notice of
      the proposed transaction.

            


    


    
      
        
           

        

         


      

      
        Page
11

        
          

        

      

      
         


      

    

     

    
      	
              B.
      .

            	
              Notwithstanding
      the foregoing, the Bank may amend: (i) any compensation or benefit
      arrangement which is subject to the provisions of Section 409A of the
      Internal Revenue Code of 1986, as amended, by December 31, 2008, provided
      such amendment is solely to achieve compliance with Section 409A or this
      Agreement and will not result in an increase in the benefits due the
      individual(s) subject to such compensation arrangement or (ii) any
      tax-qualified benefit plan in order to comply with changes in applicable
      law or regulations, in each case without the prior non-objection
      of  OTS.  A copy of any such amendment adopted by the
      Bank will be provided to the OTS with fifteen (15) days of the adoption of
      such amendment.

            


    

    


    
      	
              C.  

            	
              Effective
      immediately, the Bank’s notice to OTS shall include a copy of the proposed
      employment contract or compensation arrangement, or a detailed, written
      description of the compensation arrangement to be offered to such officer
      or director, including all benefits and perquisites.  The Board
      shall ensure that any contract, agreement, or arrangement submitted to OTS
      fully complies with the requirements, to the extent applicable, of: (i) 12
      CFR Part 359, (ii) 12 CFR § 563.39, (iii) 12 CFR § 563.161(b), (iv) the
      guidelines set forth in Sections II.I and III of Appendix A to 12 CFR Part
      570, and (v) Section 310 of the OTS Examination
      Handbook.

            


    

    


    
      	
              D.  

            	
              By
      February 28, 2009, the Board shall review the bonuses that they authorized
      for executive officers in 2007 and provide to OTS a detailed written
      analysis regarding the appropriateness of the bonuses in light of the
      Bank’s significant asset quality problems and poor financial
      performance.  The written report shall address: (i) the specific
      factors considered by the Board, and (ii) whether the Board considered the
      financial condition of the Bank; the combined value of all cash and
      noncash benefits provided to the officer, and the involvement, if any, of
      the officer with respect to any of the matters about which concerns were
      raised in the ROE.

            


    

    


    
      	
              E.  

            	
              Effective
      immediately, the Board shall not increase the directors’ compensation for
      attendance at Board and Committee meetings during the term of this
      Agreement.  The Board shall review and determine the
      appropriateness of management’s receipt of fees to attend Board and
      Committee meetings, and at no time shall such fees exceed what was set
      forth in the ROE.  By January 31, 2009, the Board shall submit
      to OTS the results of its review.

            


    

    


    
      	
              F.  
      

            	
              Effective
      immediately, the Board shall limit the directors’ remuneration
      to  (i) no more than   $56,250 annually
      (excluding therefrom the value (a) of the payment of life, health and
      dental premiums (or the equivalent cash value thereof) as provided in
      subclause (ii) hereof and (b) resulting from the vesting or exercise of
      stock option and restricted stock awards granted prior to October 1, 2008)
      and  (ii) the continued payment (with respect to non-employee
      directors) of life, health and dental premiums (or the equivalent cash
      value thereof with respect to those non-employee directors covered by
      other employer plans) in accordance with existing policy and practice;
      provided, however,
      no individual director’s remuneration will exceed the amount of
      remuneration received thereby for the year ended December 31, 2007, except
      for the most recently appointed director whose remuneration will not
      exceed $56,250.

            


    

    



    
      
        
           

        

         


      

      
        Page
12

        
          

        

      

      
         


      

    


    15.  Changes in Management and
Directorate.

     

    
      	
              A.  

            	
              Effective
      immediately, the Bank shall comply with the prior notification
      requirements for changes in its directors and senior executive officers,
      including changes in responsibilities of senior executive officers, as set
      forth in 12 CFR Part 563, Subpart
H.

            


    

    


    
      	
              B.  

            	
              By
      February 28, 2009, the Board shall review the current board composition in
      light of the findings of the ROE and the Bank’s current financial
      condition and shall adopt and submit to OTS either (i) a written plan to
      expand the current board membership to add directors with community
      banking, financial management, or accounting experience and who are
      independent of management (as defined in Paragraph 19B hereof), or (ii) a
      justification as to why the Board should not be expanded.  The
      appointment of new directors shall be subject to the requirements of
      Paragraph 15A hereof. The Outside Directors (as defined in Paragraph 19C
      hereof) shall be responsible for identifying and nominating candidates who
      have community banking, financial management, or accounting
      experience.

            


    

     

    16.  Transactions with
Affiliates.

    


    Effective
immediately, the Bank shall not engage in any transactions or enter into any
contracts or agreements with affiliates or insiders, except in compliance with
12 CFR §§ 563.41, 563.43, 563.200, and 563.201.  The Board shall
ensure the Bank complies with this restriction and the Bank’s senior executive
officers shall provide such documentation and information as the Board
requests.

    


    17.  Severance and
Indemnification Payments.

    


    Effective
immediately, the Bank shall not make any golden parachute payment or prohibited
indemnification payment unless, with respect to each such payment, the Bank has
complied with the requirements of 12 CFR Part 359 and, as to indemnification
payments, also with 12 CFR § 545.121.

    


    18.  Third Party
Contracts.

    


    Effective
immediately, the Bank shall not enter into any third party contract outside the
normal course of business, as defined in OTS Thrift Bulletin 82a, unless, with
respect to each such contract, the Bank has (i) provided OTS with a minimum of
thirty (30) days prior written notice of such contract, and (ii) received
written notice of non-objection from OTS.

    


    MISCELLANEOUS

    


    19.   Definitions.

     

    For
purposes of this Agreement, the terms referenced below have the meanings as set
out below:


    
      
        
           

        

         


      

      
        Page
13

        
          

        

      

      
         


      

    


    
      	
              A.  
      

            	
              The
      term “acceptable” means the Regional Director, the Regional Deputy
      Director, or assigned Assistant Director, has stated in writing that it is
      acceptable or has provided a written notice of non-objection to
      it.

            


    

     

    
      	
              B.  
      

            	
              The
      term “independent of management” means that the person: (i) is not, and
      within the preceding three (3) years has not served as, a consultant,
      advisor, or legal counsel to the Bank, its affiliates or subsidiaries,
      excepted as approved by OTS; (ii) is not, either by blood or marriage,
      related to any existing or former Bank officer or their attorneys or
      consultants; (iii) does not have a business or professional relationship
      with any existing or former Bank officers or their attorneys or
      consultants, except as approved by OTS; and (iv) to the extent not
      inconsistent with the foregoing, meets the criteria set forth at 12 CFR
      Part 363 and Appendix A thereof.

            


    

     

    
      	
              C.  
      

            	
              The
      term “Outside Director” means that the director (i) is not, and within the
      preceding     three years has not been, an
      officer or employee of the Bank or any subsidiary or affiliate or the
      Bank; or (ii) is not related by blood or marriage to any officer or
      employee of the Bank or any subsidiary
thereof.

            


    

     

    
      	
              D.  
      

            	
              The
      term “Regional Director” means the OTS “Regional Director for the Midwest
      Region, and includes any OTS official designated by him to act on his
      behalf with respect to matters relating to this
  Agreement.

            


    

     

    
      	
              E.  
      

            	
              The
      term “senior executive officer” shall have the meaning set forth in 12 CFR
      § 563.555.

            


    

    


      20.  Compliance with
Agreement.

    


    
      	
              A.  
      

            	
              All
      policies, procedures, corrective actions, plans, programs, systems of
      internal controls, and reviews required by this Agreement (collectively
      referred to as Plans and Policies) shall conform to all applicable
      statutes, regulations, and written OTS policy and guidance that has been
      published by OTS or distributed by OTS to OTS-related
      institutions.  The Board shall revise such Plans and Policies as
      required by OTS.  The Bank shall comply with all Plans and
      Policies required by this Agreement, including any revisions or amendments
      required by OTS or which OTS provided written notice of
      non-objection.  The Bank’s failure to comply with a Plan or
      Policy required by this Agreement is considered a violation of this
      Agreement.

            


    

    


    
      	
              B.  
      

            	
              The
      Board and management of the Bank shall take immediate action to cause the
      Bank to comply with the provisions of this
  Agreement.

            


    

    


    
      	
              C.  

            	
              This
      Agreement requires the Bank to receive approval, a notice of
      non-objection, or a notice of acceptability from OTS for certain Board
      actions.  The Board affirms that such regulatory oversight does
      not derogate or supplant each individual member’s continuing fiduciary
      duty.  The Board shall have the ultimate responsibility for
      overseeing the safe and sound operation of the
  Bank.

            


    

    



    
      
        
           

        

         


      

      
        Page
14

        
          

        

      

      
         


      

    


    
      	
               
      D.   

            	
              By
      the sixtieth (60th)
      calendar day after the end of each calendar quarter, beginning
      with the quarter ending December 31, 2008, the Board shall adopt and
      submit to OTS a certified copy of a board resolution formally resolving
      that, following a careful review of relevant information (including a
      report from Bank’s management regarding the Bank’s compliance with each
      provision of this Agreement), to the best of its knowledge and belief,
      during the immediately preceding calendar quarter, the Bank complied with
      each provision of this Agreement currently in effect, except as otherwise
      stated.  The Compliance Resolution shall: (i) specify in detail
      how, if at all, full compliance was found not to exist; and (ii) identify
      all notices of exemption or non-objection issued by OTS that were
      outstanding as of the date of its adoption.  In the event that
      one or more directors do not agree with the representations set forth in a
      Compliance Resolution, such disagreement shall be noted in the Board
      meeting minutes.

            


    

    


    
      	
              E.  

            	
              With
      respect to any plan, policy, or procedure that is timely filed and
      prepared by the Bank, but nevertheless requires modification to address
      OTS’s comments occurring after the due date, no violation will be found to
      exist for so long as the Bank (i) incorporates such modifications and (ii)
      implements the modified plan, policy, or
  procedures.

            


    

    


    21.     Submissions and
Notices.

     

    
      	
              A.  

            	
              All
      submissions, including progress reports, to OTS that are required by or
      contemplated by this Agreement shall be submitted within the specified
      timeframes;

            


    

    


    
      	
              B.  

            	
              Except
      as otherwise provided herein, all submissions, requests, communications,
      consents or other documents relating to this Agreement shall be in writing
      and sent by first class U.S mail (or by reputable overnight carrier,
      electronic facsimile transmission or hand delivery by messenger) addressed
      as follows:

            


    

    


    (i)    To
OTS:

    Regional
Director

                                   
Attn:  Tony Jardieu, Assistant Director

    Office of Thrift
Supervision

    225 E. John Carpenter Freeway, Suite
500

    Irving, TX 75062

    Phone:  (972) 277-
9547

    Fax:      (972)
277- 9596

    


    (ii)   To
Bank:

    Gilbert
G. Lundstrom

    Chairman
of the Board

    TierOne Bank

    P.O. Box 83009

    Lincoln, NE 83009

    Fax: (402) 435-0427


    
      
        
           

        

         


      

      
        Page
15

        
          

        

      

      
         


      

    


    22. 
 Successor
Statutes, Regulations, Guidance, Amendments.

    


    Reference
in this Agreement to provisions of federal and state statutes, regulations, and
published OTS guidance shall be deemed to include references to all amendments
to such provisions that have been made as of the Effective Date and references
to successor provisions as they become applicable.

    


    23.  
Time
Calculations.

    


    
      	
              A. 
      

            	
              Calculation
      of time limitations for compliance with the terms of this Agreement run
      from the Effective Date and shall be calendar based, unless otherwise
      noted; and

            


    

    


    
      	
              B.  
      

            	
              The
      Regional Director, Regional Deputy Director, or assigned Assistant
      Director may extend any of the deadlines set forth in the provisions of
      this Agreement upon written request by the Bank that includes reasons in
      support for any such extension.  Any OTS extension shall be made
      in writing.

            


    

    


    24. 
 OTS Review of
Actions Required.

    


    The
Regional Director, Regional Deputy Director, or assigned Assistant Director may
request additional information and provide a written notice of non-objection or
objection to any submission required by this Agreement.

    


    25.  Rules of
Interpretation.

    


    
      	
              A.  

            	
              Nothing
      in this Agreement shall be construed as allowing the Bank to violate any
      law, rule, regulation, or policy statement to which it is
      subject.

            


    

    


    
      	
              B.  

            	
              The
      paragraph headings herein are for convenience only and shall not affect
      the construction hereof.

            


    

    


    
      	
              C.  

            	
              In
      case any provision in this Agreement is ruled to be invalid, illegal, or
      unenforceable by the decision of any court of competent jurisdiction, the
      validity, legality, and enforceability of the remaining provisions hereof
      shall not in any way be affected or impaired thereby, unless OTS
      determines otherwise in the exercise of its
  discretion.

            


    

    


    26. 
 Integration
Clause.

    


    This
Agreement represents, as of the Effective Date, the final written agreement of
the parties  with respect to the subject matter hereof and constitutes
the sole agreement of the parties, as of the Effective
Date.



    
      
        
           

        

         


      

      
        Page
16

        
          

        

      

      
         


      

    


    27. 
 Successors in
Interest/Benefit.

    


    The terms
and provisions of this Agreement shall be binding upon, and inure to the benefit
of, the parties hereto and their successors in interest.  Nothing in
this Agreement, expressed or implied, shall give to any person or entity, other
than the parties hereto, the Federal Deposit Insurance Corporation, and their
successors hereunder, any benefit or any legal or equitable right, remedy, or
claim under this Agreement.

    


    28. 
 Enforceability
of Agreement; Director Attestation.

    


    The Bank
represents and warrants that this Agreement has been duly authorized, executed,
and delivered, and constitutes, in accordance with its terms, a valid and
binding agreement of the Bank.  Each director signing this Agreement
attests, by such act, that she or he, as the case may be, voted in favor of the
Board resolution (a copy of which shall be submitted to OTS) authorizing the
execution of this Agreement by the Bank.

    


    29.
  Effective
Date; Duration; Termination or Suspension of Agreement.

    


    This
Agreement shall be effective and enforceable as of the Effective Date, which
appears on the first page of this Agreement.  This Agreement shall
remain in effect until terminated, modified, or suspended in writing by OTS,
acting by and through its Regional Director or other authorized
representatives.  OTS may suspend any or all provisions of this
Agreement by providing written notice of such action to the Bank.

    


    30. 
 No Bar or
Estoppel.

    


    The
provisions of this Agreement shall not bar, estop, or otherwise prevent OTS from
taking any other action (including, without limitation, any type of supervisory,
enforcement, or resolution action) affecting the Bank or any of its current or
former institution-affiliated parties that is appropriate in fulfilling the
responsibilities placed upon it by law.

    


    31. 
 Statutory Basis
for Agreement.

    


    This
Agreement is a “written agreement” for purposes of Section 8 of the Federal
Deposit Insurance Act, 12 USC § 1818.

    


    32. 
 Counterparts.

    


    This
Agreement may be executed in separate counterparts, each of which shall be an
original and all of which, taken together, shall constitute one and the same
instrument.



    
      
        
           

        

         


      

      
        Page
17

        
          

        

      

      
         


      

    


     

    IN
WITNESS WHEREOF, OTS, acting by and through the Regional Director, and the Bank
hereby executes this Agreement as of the Effective Date of this
Agreement.

    


    


    OFFICE OF THRIFT
SUPERVISION

    


    


    By:
_/s/ C. K.
Lee                                                                                     

      
     C. K. Lee

    Regional Director, Midwest
Region

    


    Date:                 The Effective Date shown on
page 1

    


    


    TIERONE BANK, LINCOLN,
NEBRASKA

    


    


    /s/ Gilbert G.
Lundstrom                                                                                 /s/ James A.
Laphen_________________

    Gilbert
G.
Lundstrom                                                                            
         James A. Laphen, President
& Director

    Chairman
& CEO

    


    


    /s/ Campbell R.
McConnell_______                                                           /s/ Joyce Person
Pocras                                                           

    Campbell
R. McConnell,
Director                                                                Joyce
Person Pocras, Director

    


    


    /s/ Samuel P.
Baird                                                                                         /s/ Charles W.
Hoskins

    Samuel P.
Baird,
Director                                                      
                       Charles
W. Hoskins, Director

     

     

    Page 18