UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005

OR

|_|    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number: 000-50015

TierOne Corporation

(Exact name of Registrant as specified in its charter)

Wisconsin
04-3638672
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)

1235 "N" Street
Lincoln, Nebraska
68508
(Address of Principal Executive Offices) (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    X    No        

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

As of May 5, 2005, there were 18,141,022 issued and outstanding shares of the Registrant’s common stock.


PART I - FINANCIAL INFORMATION

Page

Item 1 -
Financial Statements   3

Item 2 -
Management's Discussion and Analysis of Financial Condition
and Results of Operations 26

Item 3 -
Quantitative and Qualitative Disclosures About Market Risk 40

Item 4 -
Controls and Procedures 40

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings 41

Item 2 -
Unregistered Sales of Equity Securities and Use of Proceeds 41

Item 3 -
Defaults Upon Senior Securities 42

Item 4 -
Submission of Matters to a Vote of Security Holders 42

Item 5 -
Other Information 42

Item 6 -
Exhibits 42

Signatures
43

Exhibit Index
44




2


TierOne Corporation and Subsidiaries
Consolidated Statements of Financial Condition
March 31, 2005 (Unaudited) and December 31, 2004

(Dollars in thousands, except per share data)
March 31, 2005
December 31, 2004
ASSETS            
Cash and cash equivalents   $ 55,083   $ 70,030  
Investment securities:  
   Held to maturity, at cost which approximates fair value    122    126  
   Available for sale, at fair value    123,051    127,757  
Mortgage-backed securities, available for sale, at fair value    32,049    36,175  
Loans receivable:  
   Net loans (includes loans held for sale of $15,287 and $11,956 at  
      March 31, 2005 and December 31, 2004, respectively)    2,671,429    2,654,986  
   Allowance for loan losses    (27,252 )  (26,831 )

      Net loans after allowance for loan losses    2,644,177    2,628,155  

Federal Home Loan Bank stock    54,878    54,284  
Premises and equipment, net    37,448    38,220  
Accrued interest receivable    15,735    15,573  
Goodwill    42,283    42,283  
Other intangible assets, net    11,409    11,877  
Other assets    24,553    23,601  

         Total assets   $ 3,040,788   $ 3,048,081  

LIABILITIES AND STOCKHOLDERS' EQUITY  
Liabilities:  
   Deposits   $ 1,995,898   $ 1,864,761  
   Advances from Federal Home Loan Bank and other borrowings    707,965    841,666  
   Advance payments from borrowers for taxes, insurance and  
      other escrow funds    24,335    26,565  
   Accrued interest payable    6,557    6,308  
   Accrued expenses and other liabilities    25,372    31,758  

         Total liabilities    2,760,127    2,771,058  

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;  
      18,147,511 and 18,287,811 shares issued and outstanding at  
        March 31, 2005 and December 31, 2004, respectively    226    226  
   Additional paid-in capital    356,524    355,986  
   Retained earnings, substantially restricted    52,606    46,263  
   Treasury stock, at cost; 4,427,564 and 4,287,264 shares at  
      March 31, 2005 and December 31, 2004, respectively    (101,653 )  (98,254 )
   Unallocated common stock held by Employee Stock  
      Ownership Plan    (14,298 )  (14,674 )
   Unearned common stock held by Management  
      Recognition and Retention Plan    (11,510 )  (12,229 )
   Accumulated other comprehensive loss    (1,234 )  (295 )

         Total stockholders' equity    280,661    277,023  

Commitments and contingent liabilities  

         Total liabilities and stockholders' equity   $ 3,040,788   $ 3,048,081  

See accompanying notes to consolidated financial statements.

3


TierOne Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)

March 31,
(Dollars in thousands, except per share data)
2005
2004
Interest income:            
   Loans receivable   $ 37,466   $ 27,163  
   Investment securities    2,034    927  

         Total interest income    39,500    28,090  

Interest expense:  
   Deposits    8,898    5,655  
   Advances from Federal Home Loan Bank and other borrowings    6,266    4,687  

         Total interest expense    15,164    10,342  

            Net interest income    24,336    17,748  
Provision for loan losses    788    934  

            Net interest income after provision for loan losses    23,548    16,814  

Noninterest income:  
   Fees and service charges    4,888    3,113  
   Income (loss) from real estate operations, net    2    (77 )
   Net gain on sales of:  
      Investment securities    13    --  
      Loans held for sale    471    316  
      Real estate owned    36    --  
   Gain on pension plan curtailment    --    1,456  
   Other operating income    565    633  

            Total noninterest income    5,975    5,441  

Noninterest expense:  
   Salaries and employee benefits    10,220    7,864  
   Occupancy, net    2,188    1,466  
   Data processing    508    504  
   Advertising    914    693  
   Other operating expense    4,204    2,069  

            Total noninterest expense    18,034    12,596  

               Income before income taxes    11,489    9,659  
Income tax expense    4,311    3,599  

               Net income   $ 7,178   $ 6,060  

Net income per common share, basic   $ 0.44   $ 0.34  

Net income per common share, diluted   $ 0.43   $ 0.33  

Dividends declared per common share   $ 0.05   $ 0.05  

Average common shares outstanding, basic (000's)    16,180    17,939  

Average common shares outstanding, diluted (000's)    16,606    18,332  

See accompanying notes to consolidated financial statements.

4


TierOne Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity and Comprehensive Income
Three Months Ended March 31, 2005 and March 31, 2004
(Unaudited)

(Dollars in thousands)
Common
Stock

Additional
Paid-In
Capital

Retained
Earnings,
Substantially
Restricted

Treasury
Stock

Unallocated
Common Stock
Held by the
Employee Stock
Ownership Plan

Unearned
Common Stock
Held by the
Management
Recognition and
Retention Plan

Accumulated Other
Comprehensive
Income (Loss), Net

Total Stockholders' Equity
Balance at December 31, 2003     $ 226   $ 354,054   $ 25,833   $ (53,613 ) $ (16,179 ) $ (14,982 ) $ (250 ) $ 295,089  

Common stock earned by employees  
   in Employee Stock Ownership Plan    --    490    --    --    376    --    --    866  
Amortization of awards under the  
   Management Recognition and  
   Retention Plan    --    --    --    --    --    682    --    682  
Dividends paid ($0.05 per common share)    --    --    (935 )  --    --    --    --    (935 )
Comprehensive income:  
   Net income    --    --    6,060    --    --    --    --    6,060  
   Change in additional minimum pension  
      liability, net of tax    --    --    --    --    --    --    452    452  
   Change in unrealized gain on  
      available for sale securities, net of  
      tax and reclassification adjustment    --    --    --    --    --    --    222    222  

Total comprehensive income    --    --    6,060    --    --    --    674    6,734  

Balance at March 31, 2004   $ 226   $ 354,544   $ 30,958   $ (53,613 ) $ (15,803 ) $ (14,300 ) $ 424   $ 302,436  

Balance at December 31, 2004   $ 226   $ 355,986   $ 46,263   $ (98,254 ) $ (14,674 ) $ (12,229 ) $ (295 ) $ 277,023  

Common stock earned by employees  
   in Employee Stock Ownership Plan    --    541    --    --    376    --    --    917  
Amortization of awards under the  
   Management Recognition and  
   Retention Plan    --    --    --    --    --    719    --    719  
Treasury stock reissued under stock  
   option plan    --    (3 )  --    12    --    --    --    9  
Repurchase of common  
   stock (140,800 shares)    --    --    --    (3,411 )  --    --    --    (3,411 )
Dividends paid ($0.05 per common share)    --    --    (835 )  --    --    --    --    (835 )
Comprehensive income:  
   Net income    --    --    7,178    --    --    --    --    7,178  
   Change in unrealized loss on  
      available for sale securities, net of  
      tax and reclassification adjustment    --    --    --    --    --    --    (939 )  (939 )

Total comprehensive income    --    --    7,178    --    --    --    (939 )  6,239  

Balance at March 31, 2005   $ 226   $ 356,524   $ 52,606   $ (101,653 ) $ (14,298 ) $ (11,510 ) $ (1,234 ) $ 280,661  

See accompanying notes to consolidated financial statements.

5


TierOne Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2005 and March 31, 2004
(Unaudited)

March 31,
(Dollars in thousands)
2005
2004
Reconciliation of net income to net cash provided by operating activities:            
   Net income     $ 7,178   $ 6,060  
   Adjustments to reconcile net income to net cash provided by    
      operating activities:    
         Net premium amortization of investment and mortgage-backed securities       149     56  
         Depreciation and amortization       985     634  
         Amortization of intangible assets       468     --  
         Amortization of premium on Federal Home Loan Bank advances       (64 )   --  
         Employee Stock Ownership Plan expense       917     866  
         Management Recognition and Retention Plan expense       719     682  
         Amortization of premiums on net loans       1,363     2,076  
         Federal Home Loan Bank stock dividend       (594 )   (323 )
         Deferred income tax expense       253     100  
         Provision for loan losses       788     934  
         Proceeds from sales of loans held for sale       48,123     48,339  
         Originations and purchases of loans held for sale       (50,983 )   (54,496 )
         Net (gain) loss on sales of:    
            Investment securities       (13 )   --  
            Loans held for sale       (471 )   (316 )
            Real estate owned       (36 )   --  
            Premises and equipment       11     --  
         Changes in certain assets and liabilities:    
            Accrued interest receivable       (162 )   128  
            Other assets       74     413  
            Accrued interest payable       249     51  
            Accrued expenses and other liabilities       (6,386 )   (3,398 )

               Net cash provided by operating activities       2,568     1,806  

Cash flows from investing activities:    
   Purchase of investment and mortgage-backed securities, available for sale       (3,000 )   --  
   Proceeds from sale of investment and mortgage-backed securities, available for sale       3,143     --  
   Proceeds from maturities of investment securities, available for sale       3,125     3,900  
   Proceeds from principal repayments of investment and mortgage-backed    
      securities, available for sale and held to maturity       3,918     1,324  
   Increase in loans receivable       (15,202 )   (57,775 )
   Additions to premises and equipment       (904 )   (1,270 )
   Proceeds from sale of premises and equipment       27     --  
   Proceeds from sale of real estate owned       345     457  

               Net cash used in investing activities       (8,548 )   (53,364 )

See accompanying notes to consolidated financial statements.

6


TierOne Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Three Months Ended March 31, 2005 and March 31, 2004
(Unaudited)

March 31,
(Dollars in thousands)
2005
2004
Cash flows from financing activities:            
   Net increase in deposits   $ 131,137   $ 98,210  
   Net repayment on Federal Home Loan Bank line of credit  
      and short-term advances and other borrowings    (103,282 )  (53,363 )
   Repayments of Federal Home Loan Bank long-term advances and other borrowings    (30,355 )  --  
   Net decrease in advances from borrowers for taxes, insurance and  
      other escrow funds    (2,230 )  (1,106 )
   Repurchase of common stock    (3,411 )  --  
   Dividends paid on common stock    (835 )  (935 )
   Proceeds from the exercise of stock options    9    --  

            Net cash (used in) provided by financing activities    (8,967 )  42,806  

            Net decrease in cash and cash equivalents    (14,947 )  (8,752 )
Cash and cash equivalents at beginning of period    70,030    34,901  

Cash and cash equivalents at end of period   $ 55,083   $ 26,149  

Supplemental disclosures of cash flow information:  
   Cash paid during period for:  
      Interest   $ 14,915   $ 10,291  
      Income taxes, net of refunds   $ 4,525   $ 3,635  

Noncash investing activities:  
   Transfers from loans to real estate owned and other assets through foreclosure   $ 360   $ 685  





See accompanying notes to consolidated financial statements.

7


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 1 — Basis of Presentation

        TierOne Corporation (“Company”) is a Wisconsin corporation headquartered in Lincoln, Nebraska. TierOne Corporation is the holding company for TierOne Bank (“Bank”). At March 31, 2005, the Bank operated from 68 banking offices located in Nebraska, Iowa and Kansas and eight loan production offices located in Arizona, Colorado, Florida, Minnesota and North Carolina.

Note 2 — Basis of Consolidation

        The accompanying unaudited consolidated financial statements include the accounts of the Bank and its wholly owned subsidiaries TMS Corporation of the Americas (“TMS”) and United Farm & Ranch Management, Inc. (“UFARM”). TMS is the holding company of TierOne Investments and Insurance, Inc., a wholly owned subsidiary that administers the sale of securities and insurance products, and TierOne Reinsurance Company, a wholly owned subsidiary that reinsures credit life and disability insurance policies. UFARM provides agricultural customers professional farm and ranch management and real estate brokerage services.

        The accompanying interim consolidated financial statements as of March 31, 2005 and for the three months ended March 31, 2005 and March 31, 2004 have not been audited by independent auditors. All significant intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and operating results for interim periods. The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results which may be expected for the entire calendar year 2005.




8


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 3 – Significant Accounting Policies

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

  An analysis of delinquency trends;
  Nonperforming loan trends;
  Levels of charge-offs and recoveries;
  Prior loss experience;
  Total loans outstanding;
  Volume of loan originations;
  Type, size, terms and geographic concentration of loans held by us;
  Value of collateral securing loans;
  Number of loans requiring heightened management oversight; and
  General economic conditions.

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

9


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

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

  The fair value of the collateral if the loan is collateral dependent;
  The present value of expected future cash flows; or
  The observable market price of the loan.

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

        Goodwill and Other Intangible Assets. Goodwill represents the excess price paid by the Company over the fair value of the tangible and intangible assets and liabilities acquired from United Nebraska Financial Co. (“UNFC”) on August 27, 2004, the date of the acquisition. In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 142, Goodwill and Other Intangible Assets, goodwill and indefinite-lived intangible balances are not being amortized, but are tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires the intangible assets with estimated useful lives be amortized over their respective estimated useful lives to their residual values and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

        The impairment of identifiable intangibles and long-lived assets is assessed whenever events or changes in circumstances indicate their carrying value may not be recoverable through expected future undiscounted cash flows. If the total expected undiscounted cash flows are less than the carrying value of the assets, the asset is written down to its estimated fair value.

10


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

        The Company’s only identifiable intangible asset is the value of the core deposits acquired as part of the UNFC acquisition. 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. The core deposit intangible has been estimated to have a 10-year life with an accelerated rate of amortization. The Company is not aware of any events or circumstances that indicate carrying value or estimated life has changed during the three months ended March 31, 2005.

        The Company’s policy is to evaluate annually the carrying value of the reporting unit goodwill and identifiable assets not subject to amortization. Goodwill was established and supported by third-party valuations as of August 27, 2004 as part of the UNFC acquisition. If the carrying value of the goodwill exceeded the implied fair value of the goodwill, an impairment loss would be recorded in an amount equal to that excess. Performing such a discounted cash flow analysis would involve the significant use of estimates and assumptions.

        There have been no changes in the carrying amount of goodwill during the three months ended March 31, 2005 due to impairment as the Company is not aware of any facts or circumstances that would indicate the Company’s carrying value exceeded fair value.

        Mortgage Servicing Rights. The Bank capitalizes the estimated value of mortgage servicing rights upon the sale of loans. The Bank’s 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. Management evaluates 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 the Bank 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. As interest rates rise, prepayments generally slow, which results in an increase in the fair value. 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.

        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.

11


TierOne Corporation and Subsidiaries
Notes 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 (“SAB”) No. 105, Application of Accounting Principles to Loan Commitments. 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 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.

        Investment Securities. The Company evaluates its available for sale and held to maturity investment securities for impairment on a quarterly basis. An impairment charge in the Consolidated Statements of Income is recognized when the decline in the fair value of investment securities below their cost basis is judged to be other-than-temporary. The Company considers various factors in determining whether it should recognize 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 market value.

12


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

        Income Taxes. We use the asset and liability method of accounting for income taxes. Under the asset and liability method, we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. If necessary, a valuation allowance would be established to adjust deferred tax assets to an amount for which realization is more likely than not.













13


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 4 — Earnings Per Share

        Basic and diluted earnings per share (“EPS”) data are based on the weighted average number of common shares outstanding during each reporting period. Employee Stock Ownership Plan (“ESOP”) and 2003 Management Recognition and Retention Plan (“MRRP”) shares not committed to be released are not considered to be outstanding for purposes of EPS calculations. The basic EPS calculation excludes the dilutive effect of all common stock equivalents. Diluted EPS is further adjusted for potential common shares that were dilutive and outstanding during the reporting periods. The Company’s potentially dilutive common shares at March 31, 2005 represent shares issuable under its 2003 Stock Option Plan and MRRP computed using the treasury stock method. All stock options awarded are assumed to be 100% vested for purposes of the EPS computations.

Three Months Ended
March 31, 2005

Three Months Ended
March 31, 2004

(Dollars in thousands, except per share data)
Basic
Diluted
Basic
Diluted
Net income     $ 7,178   $ 7,178   $ 6,060   $ 6,060  

Weighted average number of common shares
outstanding used in basic earnings per share
calculation (in 000's)
    16,180    16,180    17,939    17,939  

Common share equivalents - 2003 Stock Option Plan
and 2003 Management Recognition and Retention
Plan shares (in 000's)
        426        393  

Weighted average number of common shares
outstanding used in diluted earnings per share
calculation (in 000's)
        16,606        18,332  

Earnings per share   $ 0.44   $ 0.43   $ 0.34   $ 0.33  




14


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 5 – Goodwill and Other Intangible Assets

        Goodwill had a net carrying amount of $42.3 million at March 31, 2005. This amount represents the excess price paid by the Company over the fair value of the tangible and intangible assets and liabilities assumed in the acquisition of UNFC on August 27, 2004. The Company evaluates goodwill for impairment at least annually in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. There have been no changes in the carrying amount of goodwill during the three months ended March 31, 2005 due to impairment as the Company is not aware of any facts or circumstances that would indicate the Company’s carrying value exceeded fair value.

        The Company’s only identifiable other intangible asset is the value of core deposits acquired as part of the UNFC acquisition. The core deposit intangible has been estimated to have a 10-year life, with an accelerated rate of amortization. The Company is not aware of any events or circumstances that indicate carrying value or estimated life has changed during the three months ended March 31, 2005.

        The changes in the net carrying amounts of other intangible assets for the three months ended March 31, 2005 are as follows:

(Dollars in thousands)
Core Deposit
Intangible

Balance at beginning of period     $ 11,877  
   Additions    --  
   Amortization expense    (468 )

Balance at end of period   $ 11,409  

        Estimated amortization expense for core deposit intangibles for the year ended December 31, 2005 and five years thereafter is as follows:

(Dollars in thousands)
Core Deposit
Intangible

Estimated Amortization Expense  
For the Year Ending:  
   December 31, 2005   $ 1,835  
   December 31, 2006    1,729  
   December 31, 2007    1,616  
   December 31, 2008    1,494  
   December 31, 2009    1,362  
   December 31, 2010    1,215  

15


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 6 — Investment and Mortgage-Backed Securities

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

March 31, 2005
Gross Unrealized
(Dollars in thousands)
Amortized
Cost

Gains
Losses
Fair
Value

Held to maturity:                    
   Municipal obligations   $ 122   $ --   $ --   $ 122  

Available for sale:  
   Mortgage-backed securities    32,377    122    450    32,049  
   U.S. Government securities and agency obligations    84,326    4    1,249    83,081  
   Corporate securities    11,002    34    184    10,852  
   Municipal obligations    22,729    34    164    22,599  
   Agency equity securities    633    --    16    617  
   Asset Management Fund - ARM Fund    6,000    --    98    5,902  

      Total investment and mortgage-backed  
         securities, available for sale   $ 157,067   $ 194   $ 2,161   $ 155,100  


 
December 31, 2004
Gross Unrealized
(Dollars in thousands)
Amortized
Cost

Gains
Losses
Fair
Value

Held to maturity:  
   Municipal obligations   $ 126   $ --   $ --   $ 126  

Available for sale:  
   Mortgage-backed securities    36,286    234    345    36,175  
   U.S. Government securities and agency obligations    83,371    30    536    82,865  
   Corporate securities    11,532    216    34    11,714  
   Municipal obligations    23,434    36    42    23,428  
   Agency equity securities    3,763    61    1    3,823  
   Asset Management Fund - ARM Fund    6,000    --    73    5,927  

      Total investment and mortgage-backed  
         securities, available for sale   $ 164,386   $ 577   $ 1,031   $ 163,932  

16


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 7 — Loan Portfolio Composition

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

March 31, 2005
December 31, 2004
(Dollars in thousands)
Amount
%
Amount
%
Real estate loans:                    
   One-to-four family residential (1)   $ 400,435    12.82 % $ 418,270    13.54 %
   Second mortgage residential    227,774    7.29    255,222    8.26  
   Multi-family residential    129,449    4.15    142,454    4.61  
   Commercial real estate and land    627,893    20.10    597,114    19.33  
   Residential construction    634,242    20.31    601,075    19.46  
   Commercial construction    312,332    10.00    282,399    9.14  
   Agriculture    63,814    2.04    66,830    2.16  

      Total real estate loans    2,395,939    76.71    2,363,364    76.50  

Business loans    151,692    4.86    142,675    4.62  

Agriculture - operating    65,676    2.10    71,223    2.31  

Warehouse mortgage lines of credit    125,596    4.02    132,928    4.30  

Consumer loans:  
   Home equity    59,491    1.90    56,441    1.83  
   Home equity line of credit    143,177    4.58    142,725    4.62  
   Home improvement    72,429    2.32    73,386    2.37  
   Automobile    82,696    2.65    80,512    2.61  
   Other    26,788    0.86    25,956    0.84  

      Total consumer loans    384,581    12.31    379,020    12.27  

         Total loans    3,123,484    100.00 %  3,089,210    100.00 %

Unamortized premiums, discounts and  
   deferred loan fees    5,238      7,228
Undisbursed portion of construction and  
   land development loans in process    (457,293 )    (441,452 )

         Net loans    2,671,429      2,654,986
Allowance for loan losses    (27,252 )    (26,831 )

         Net loans after allowance for loan losses   $ 2,644,177     $2,628,155    

(1) Includes loans held for sale   $ 15,287     $11,956    

17


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 8 — Allowance for Loan Losses

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

At or for the Three Months Ended
March 31,

(Dollars in thousands)
2005
2004
Allowance for loan losses, beginning of period     $ 26,831   $ 19,586  
Provision for loan losses    788    934  
Charge-offs    (468 )  (507 )
Recoveries on loans previously charged-off    101    73  

   Allowance for loan losses, end of period   $ 27,252   $ 20,086  

Allowance for loan losses as a  
   percentage of net loans    1.02 %  0.96 %









18


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 9 —Nonperforming Assets

        The following table sets forth information with respect to nonperforming assets and troubled debt restructurings at the dates indicated. It is the Bank’s policy to cease accruing interest on loans 90 days or more past due and to charge off accrued interest. Total impaired loans amounted to approximately $6.1 million at March 31, 2005 and December 31, 2004. There was an allowance for loan loss specifically allocated to impaired loans of $464,000 at March 31, 2005 and December 31, 2004.

(Dollars in thousands)
March 31, 2005
December 31, 2004
Non-accruing loans:            
   One-to-four family residential   $ 1,732   $ 1,914  
   Second mortgage residential    667    739  
   Multi-family residential    2,374    2,374  
   Commercial real estate and land    1,287    707  
   Residential construction    2,017    2,256  
   Agriculture real estate    --    349  
   Business    900    771  
   Agriculture - operating    323    1  
   Consumer    682    1,121  

      Total non-accruing loans    9,982    10,232  
Real estate owned, net (1)    433    382  

      Total nonperforming assets    10,415    10,614  
Troubled debt restructurings    3,993    3,469  

      Total nonperforming assets and troubled debt restructurings   $ 14,408   $ 14,083  

Total nonperforming loans as a percent of net loans    0.37 %  0.39 %

Total nonperforming assets as a percent of total assets    0.34 %  0.35 %

Total nonperforming assets and troubled debt restructurings  
   as a percent of total assets    0.47 %  0.46 %

Allowance for loan losses as a percent of net loans    1.02 %  1.01 %

Allowance for loan losses as a percent of nonperforming loans    273.01 %  262.23 %

(1) Real estate owned balances are shown net of related loss allowances. Includes both real
      property and other repossessed collateral consisting primarily of automobiles.

19


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 10 — Mortgage Servicing Rights

        Mortgage servicing rights are included in the Consolidated Statements of Financial Condition under the caption “Other Assets.” The activity of mortgage servicing rights during the periods presented is summarized in the following table:

Three Months Ended
March 31,

Year Ended
December 31,

(Dollars in thousands)
2005
2004
2004
2003
Balance at beginning of period     $ 10,505   $ 8,705   $ 8,705   $ 6,290  
Mortgage servicing rights capitalized    602    611    3,406    7,346  
Mortgage servicing rights acquired    --    --    402    --  
Amortization expense    (648 )  (625 )  (2,876 )  (5,583 )
Valuation adjustment    120    --    868    652  

   Balance at end of period   $ 10,579   $ 8,691   $ 10,505   $ 8,705  

        The activity of the valuation allowance on mortgage servicing rights is summarized in the following table for the periods presented:

Three Months Ended
March 31,

Year Ended
December 31,

(Dollars in thousands)
2005
2004
2004
2003
Balance at beginning of period     $ 800   $ 1,668   $ 1,668   $ 2,320  
Changes in mortgage servicing valuation reserve    (120 )  --    (868 )  (652 )

   Balance at end of period   $ 680   $ 1,668   $ 800   $ 1,668  

        The following table compares the key assumptions used in measuring the fair values of mortgage servicing rights at March 31, 2005 and December 31, 2004:

(Dollars in thousands)
March 31, 2005
December 31, 2004
Serviced loan portfolio balance $1,122,364 $1,111,104
Fair value $11,830 $11,503
Prepayment speed 8.61% - 32.57% 7.86% - 35.52%
Weighted average prepayment speed 15.68% 17.17%
     Fair value with 10% adverse change $11,344 $11,021
     Fair value with 20% adverse change $10,855 $10,528
Discount rate 10.00% - 15.50% 10.00% - 15.50%
Weighted average discount rate 12.10% 11.74%
     Fair value with 10% adverse change $11,477 $11,207
     Fair value with 20% adverse change $11,110 $10,867

20


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 11 – Stock-Based Benefit Plans

        Management Recognition and Retention Plan. The Company has in effect the MRRP, which is a stock-based incentive plan. The following table summarizes shares of the Company’s common stock which were subject to award and have been granted pursuant to the MRRP:


March 31, 2005
Common shares authorized to be awarded by the Management Recognition        
   and Retention Plan    903,003  
Common shares awarded by Management Recognition and Retention Plan    (797,350 )
Common shares forfeited    --  

   Shares available for award at March 31, 2005    105,653  

        The shares awarded by the MRRP vest to participants at the rate of 20% per year. As a result, expense for this plan is being recorded over a 60-month period and is based on the market value of the Company’s stock as of the date the awards were made. The remaining unamortized cost of the MRRP shares acquired to date is reflected as a reduction in stockholders’ equity. Expense under the MRRP for the three months ended March 31, 2005 and March 31, 2004 was $719,000 and $682,000, respectively.

        Stock Option Plan. The Company established the 2003 Stock Option Plan (“SOP”) under which 2,257,508 shares of Company common stock are reserved for the grant of common stock options to directors, officers and employees. Stock options awarded under the SOP vest to participants at the rate of 20% per year. The exercise price of the options is equal to the fair market value of the common stock on the grant date.

March 31, 2005

Options
Outstanding

Remaining
Contractual
Life

Options
Exercisable

Stock options issued and outstanding at an exercise price of $17.83 1,840,750 8.1 years 366,550
Stock options issued and outstanding at an exercise price of $22.40      45,000 9.6 years          --

   Stock options outstanding, end of period 1,885,750           --          --

Stock options remaining for future grants    359,758

21


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

        The Company accounts for its stock options in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”). Under the provisions of APB No. 25, since the exercise price of the Company’s employees’ stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. See Note 14 for additional information regarding stock options.

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

Three Months Ended
March 31,

(Dollars in thousands, except per share data)
2005
2004
Net income (as reported)     $ 7,178   $ 6,060  
Add: stock-based employee compensation expense included in reported  
   net income, net of related tax effects    467    443  
Deduct: total stock-based employee compensation expense determined under  
   the fair value based method for all awards, net of related tax effects   $ (749 ) $ (715 )

Pro forma net income   $ 6,896   $ 5,788  

Basic earnings per share (as reported)   $ 0.44   $ 0.34  
Pro forma basic earnings per share    0.43    0.32  
Diluted earnings per share (as reported)    0.43    0.33  
Pro forma diluted earnings per share    0.42    0.32  

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

        The fair value of each option grant is estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants during the years ended December 31, 2004 and December 31, 2003, respectively: dividend yield of 1.0% and 1.0%; expected volatility of 22.6% and 13.2%; risk-free interest rates of 4.0% and 3.5%; and an expected life of 8.0 years and 10.0 years.





22


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 12 – Deposits

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

March 31, 2005
December 31, 2004
(Dollars in thousands)
Weighted
Average
Rates

Amount
Weighted
Average
Rates

Amount
Transaction accounts:                    
     Noninterest-bearing checking    --  % $112,827    --  % $112,216  
     Savings    0.61    75,977    0.65    79,546  
     Interest-bearing checking    0.67    398,951    0.67    414,093  
     Money market    1.43    317,391    1.09    291,111  

        Total transaction accounts    0.85    905,146    0.72    896,966  

Time deposits:  
     0.00% to 2.99%        509,452        589,373  
     3.00% to 4.99%        567,930        364,400  
     5.00% to 6.99%        13,370        14,022  

        Total time deposits    3.00    1,090,752    2.77    967,795  

           Total deposits    2.02 % $1,995,898    1.79 % $1,864,761  





23


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 13 – Federal Home Loan Bank Advances and Other Borrowings

        At March 31, 2005 and December 31, 2004, the Company was indebted on notes as shown in the following table:

(Dollars in thousands)
March 31, 2005
December 31, 2004
Permanent fixed-rate notes payable to            
   the Federal Home Loan Bank   $ 83,455   $ 83,819  

Convertible fixed-rate notes payable to
  
   the Federal Home Loan Bank    395,990    426,045  

Line of credit with the
  
   Federal Home Loan Bank    153,600    261,200  

Adjustable-rate note payable to the
  
   Federal Home Loan Bank    10,000    10,000  

Retail repurchase agreements
    26,992    22,674  

Junior subordinated debentures
    37,928    37,928  

      Total Federal Home Loan Bank  
         advances and other borrowings   $ 707,965   $ 841,666  

Weighted average interest rate    3.55 %  3.25 %

        The convertible fixed-rate notes are convertible to adjustable-rate notes at the option of the Federal Home Loan Bank (“FHLB”). The line of credit with the FHLB expires in November 2005. The Company expects the line of credit agreement with the FHLB to be renewed in the ordinary course of business.





24


TierOne Corporation and Subsidiaries
Notes to Consolidated Financial Statements

(Unaudited)

Note 14 — Current Accounting Pronouncements

        For discussion regarding accounting pronouncements, interpretations, exposure drafts and other formal accounting guidance and the impact on the Company, reference is made to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. The following discussion identifies accounting guidance issued during 2005.

        In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 123 (revised 2004), Share-Based Payment, (“SFAS No. 123(R)”), which requires that the cost resulting from stock options be measured at fair value and recognized in earnings. SFAS No. 123(R) replaces Statement No. 123, Accounting for Stock-Based Compensation, (“SFAS No. 123”) and supersedes APB No. 25 which permitted the recognition of compensation expense using the intrinsic value method. SFAS No. 123(R) will be effective July 1, 2005. However, on April 15, 2005, the SEC issued a press release announcing the amendment of the compliance date for SFAS No. 123(R) to be no later than the beginning of the first fiscal year beginning after June 15, 2005. The Company presently plans to adopt SFAS No. 123(R) on January 1, 2006. The method for adoption of this statement is yet to be determined. See Note 11 for SFAS No. 123 pro forma disclosures.





25


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

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

General

        TierOne Bank (“Bank”), a subsidiary of TierOne Corporation (“Company”), is a $3.0 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 68 banking offices located in Nebraska, Iowa and Kansas and eight loan production offices located in Arizona, Colorado, Florida, Minnesota 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.

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

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





26


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Forward-Looking Statements

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

  Changes in interest rates which could affect net interest margins and net interest income;

  Competitive factors which could affect net interest income and noninterest income;

  Changes in demand for loans, deposits and other financial services in the Company's market area;

  Changes in asset quality and general economic conditions;

  Unanticipated issues associated with the execution of the Company's strategic plan;

  Unanticipated difficulties in realizing the growth opportunities and cost savings from recent acquisitions;

  Unanticipated issues related to the resultant integration of recent acquisitions; and

  Other factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time.

        These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. The Company undertakes no obligation, and disclaims 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.

27


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Comparison of Financial Condition at March 31, 2005 and December 31, 2004

Assets

        General. Our total assets were $3.0 billion at March 31, 2005, a $7.3 million decrease from December 31, 2004. We continue to realign our balance sheet to focus our efforts on loans with relatively higher yields, adjustable interest rates and/or shorter terms to maturity while seeking to maintain a loan portfolio with a high level of asset quality.

        Investment Securities. Our available for sale investment securities amounted to $123.1 million at March 31, 2005, a $4.7 million, or 3.7%, decrease compared to $127.8 million at December 31, 2004. The decrease in our available for sale investment securities was primarily due to $6.3 million in proceeds from maturing and sold investment securities partially offset by a security purchase of $3.0 million. Our mortgage-backed securities portfolio, all of which are recorded as available for sale, amounted to $32.0 million at March 31, 2005, a $4.1 million, or 11.4%, decrease compared to $36.2 million at December 31, 2004. The decrease in our mortgage-backed securities portfolio was primarily the result of $3.9 million of principal payments received during the three months ended March 31, 2005.

        Loans Receivable. Net loans (after allowance for loan losses) totaled $2.6 billion at March 31, 2005, a $16.0 million, or 0.6%, increase compared to December 31, 2004. This increase is primarily attributable to increased originations in our residential construction, commercial real estate and land and commercial construction loan portfolios partially offset by declines in our second mortgage and multi-family residential loan portfolios. Commercial real estate and land loans amounted to $627.9 million, a $30.8 million, or 5.2%, increase compared to $597.1 million at December 31, 2004. Our residential construction loans totaled $634.2 million, a $33.2 million, or 5.5%, increase compared to $601.1 million at December 31, 2004. During the three months ended March 31, 2005, we originated $126.7 million and purchased $87.6 million of residential construction loans which were partially offset by payoffs on completed construction projects. Commercial construction loans increased $29.9 million, or 10.6%, to $312.3 million compared to $282.4 million at December 31, 2004. The increase is primarily attributable to increased origination of commercial construction loans in our primary lending market area (Nebraska, Iowa, Kansas, Arizona, Colorado, Florida, Minnesota and North Carolina). Second mortgage residential loans totaled $227.8 million at March 31, 2005, a $27.4 million, or 10.8%, decrease compared to $255.2 million at December 31, 2004. The decrease in our second mortgage residential loans during the three months ended March 31, 2005 was primarily attributable to principal payments and prepayments. Multi-family residential loans totaled $129.4 million at March 31, 2005, a $13.0 million, or 9.1%, decrease compared to $142.5 million at December 31, 2004.

        The Bank’s focus on loans with relatively higher yields, adjustable interest rates and/or shorter terms to maturity, as well as our expanded loan origination capabilities, contributed to $420.8 million of gross loan originations, exclusive of warehouse mortgage lines of credit and loan purchases, for the three months ended March 31, 2005. Gross originations do not directly correlate to net loans due to timing of construction loan advances, repayments and undisbursed lines of credit but reflect in part future loan commitments.

28


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

        Allowance for Loan Losses. Our allowance for loan losses increased $421,000, or 1.6%, to $27.3 million at March 31, 2005 compared to $26.8 million at December 31, 2004. Net charge-offs were $367,000 during the three months ended March 31, 2005, a decrease of $67,000, or 15.4%, compared to $434,000 for the three months ended March 31, 2004. Our ratio of the allowance for loan losses to net loans increased to 1.02% at March 31, 2005 compared to 1.01% at December 31, 2004.

        Goodwill and Other Intangible Assets. Our goodwill at March 31, 2005 was $42.3 million and relates to our acquisition of United Nebraska Financial Co. (“UNFC”) in 2004. Goodwill is subject to periodic impairment analysis which will be completed during the third quarter of 2005. Other intangible assets totaled $11.4 million at March 31, 2005, a decrease of $468,000, or 3.9%, compared to $11.9 million at December 31, 2004 and relates to core deposit intangible assets recorded as a result of the UNFC acquisition. The decrease is attributable to amortization during the three months ended March 31, 2005.

        Other Assets. Our other assets increased $952,000, or 4.0%, to $24.6 million at March 31, 2005 compared to $23.6 million at December 31, 2004. At March 31, 2005, the largest item recorded in other assets was mortgage servicing assets of $10.6 million. The remainder consists of prepaid expenses, miscellaneous receivables and other miscellaneous assets.

Liabilities and Stockholders’ Equity

        General. Our total liabilities were $2.8 billion at March 31, 2005, a $10.9 million, or 0.4%, decrease compared to December 31, 2004. We utilized our increased deposits to fund loan originations and purchase activities and reduce our FHLB advances and other borrowings.

        Deposits. Our total deposits increased by $131.1 million, or 7.0%, to $2.0 billion at March 31, 2005 compared to $1.9 billion at December 31, 2004. Time deposits increased $123.0 million, or 12.7%, to $1.1 billion at March 31, 2005 compared to $967.8 million at December 31, 2004. The increase in our time deposits was primarily the result of a promotion held during the three months ended March 31, 2005 to attract new deposit accounts and establish new customer relationships. Additionally, we have experienced increases in time deposits due to customers utilization of this product as interest rates have began to increase. Our interest-bearing checking accounts totaled $399.0 million, a $15.1 million, or 3.7%, decrease compared to $414.1 million at December 31, 2004. Our money market accounts, which also experienced an increase due to the rising interest rate environment, totaled $317.4 million, a $26.3 million, or 9.0%, increase compared to $291.1 million at December 31, 2004. Noninterest-bearing checking accounts totaled $112.8 million at March 31, 2005 compared to $112.2 million at December 31, 2004. Brokered time deposits (included in our time deposits) amounted to $125.9 million at March 31, 2005 compared to $124.6 million at December 31, 2004. We utilize brokered time deposits to fund loan origination and purchase activity.

29


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

        FHLB Advances and Other Borrowings. Our FHLB advances and other borrowings amounted to $708.0 million at March 31, 2005, an $133.7 million, or 15.9%, decrease compared to $841.7 million at December 31, 2004. The decrease in FHLB advances and other borrowings at March 31, 2005 is primarily attributable to our utilization of increased deposits to reduce our outstanding line of credit with the FHLB. Our outstanding line of credit with the FHLB was $153.6 million at March 31, 2005, a decrease of $107.6 million compared to $261.2 million at December 31, 2004. The weighted average rate of our FHLB advances and other borrowings was 3.55% at March 31, 2005, an increase of 30 basis points compared to 3.25% at December 31, 2004. The increase in the weighted average rate of our FHLB advances and other borrowings is primarily attributable to rising interest rates on our short-term advances and a change in the composition of our FHLB advances and other borrowings during the three months ended March 31, 2005.

        Stockholders’ Equity. At March 31, 2005, stockholders’ equity totaled $280.7 million, an increase of $3.6 million, or 1.3%, from December 31, 2004. The increase in stockholders’ equity primarily reflects net income of $7.2 million during the three months ended March 31, 2005, $917,000 related to common stock earned by participants in the Employee Stock Ownership Plan (“ESOP”) and $719,000 related to amortization of awards under the 2003 Management Recognition and Retention Plan (“MRRP”) partially offset by the purchase of 140,800 shares of common stock at a cost of $3.4 million, a $939,000 change in net unrealized losses in our available for sale investment securities portfolio and $835,000 in cash dividends paid to the Company’s stockholders. The Company paid cash dividends of $0.05 per common share payable on March 31, 2005 to shareholders of record on March 15, 2005. For further discussion regarding the Company’s common stock repurchases, see Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds”.





30


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Comparison of Operating Results for the Three Months Ended March 31, 2005 and March 31, 2004

        Net Income. Net income for the three months ended March 31, 2005 was $7.2 million, or $0.43 per diluted share ($0.44 per basic share), compared to net income of $6.1 million, or $0.33 per diluted share ($0.34 per basic share) for the three months ended March 31, 2004.

        Net Interest Income. Net interest income is the principal source of earnings for the Company, and consists primarily of interest income on loans receivable and investment and mortgage-backed securities, offset by interest expense on deposits and borrowed funds. Net interest income is determined by interest rate spread (i.e., the difference between the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities) and also by the amount of interest-earning assets relative to interest-bearing liabilities. Generally, we are able to increase our net interest income at a faster pace when the spread between short-term and long-term U.S. Treasury rates is positive, due to funding costs being more directly tied to shorter-term rates, while loan rates are tied to intermediate to longer-term rates. Net interest income before provision for loan losses was $24.3 million for the three months ended March 31, 2005, an increase of $6.6 million, or 37.1%, compared to $17.7 million for the three months ended March 31, 2004. Our average interest rate spread for the three months ended March 31, 2005 and March 31, 2004 was 3.24% and 3.01%, respectively. The increase in our average interest rate spread is primarily attributable to a 32 basis point increase in the average yield earned on interest-earning assets to 5.62% for the three months ended March 31, 2005 compared to 5.30% for the three months ended March 31, 2004. Our net interest margin (net interest income divided by average interest-earning assets) for the same periods was 3.46% and 3.35%, respectively. The increase in net interest margin is primarily due to an increase in the average balance of interest-earning assets coupled with the increase in the average yield earned on interest-earning assets. The ratio of average interest-earning assets to average interest-bearing liabilities declined to 110.24% for the three months ended March 31, 2005 compared to 117.23% for the three months ended March 31, 2004. This decrease was the result of a $50.4 million decline in the average balance of net interest earning assets at March 31, 2005, resulting primarily from recognition of goodwill associated with the UNFC acquisition and the funding of the Company’s stock repurchase program both of which are noninterest earning activities.

        Interest Income. Our total interest income for the three months ended March 31, 2005 was $39.5 million, an $11.4 million, or 40.6%, increase compared to $28.1 million for the three months ended March 31, 2004. Interest income on loans receivable increased $10.3 million, or 37.9%, to $37.5 million for the three months ended March 31, 2005 compared to $27.2 million for the three months ended March 31, 2004. Interest income on investment securities totaled $2.0 million for the three months ended March 31, 2005, an increase of $1.1 million, or 119.4%, compared to $927,000 for the three months ended March 31, 2004. The increase in interest income for the three months ended March 31, 2005 compared to the three months ended March 31, 2004 is primarily attributable to increases in the average balance of loans receivable and yields earned on loans receivable. The average balance of loans receivable during the three months ended March 31, 2005 was $2.6 billion, an increase of $574.7 million, or 28.4%, compared to $2.0 billion for the three months ended March 31, 2004. The weighted average yield earned on the loan portfolio was 5.76% and 5.36% for the three months ended March 31, 2005 and March 31, 2004, respectively. The increase in the average balance of loans receivable is the result of loans acquired from the UNFC acquisition and our loan origination and purchase activities. The increase in the average yield earned on loans receivable is the result of our strategy to realign our loan portfolio to increase our holdings of loans with relatively higher yields, adjustable interest rates and/or shorter terms to maturity.

31


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

        Interest Expense. Our total interest expense for the three months ended March 31, 2005 was $15.2 million, a $4.8 million, or 46.6%, increase compared to $10.3 million for the three months ended March 31, 2004. Interest expense on deposits totaled $8.9 million for the three months ended March 31, 2005, an increase of $3.2 million, or 57.4%, compared to $5.7 million for the three months ended March 31, 2004. Interest expense on FHLB advances and other borrowings increased $1.6 million, or 33.7%, to $6.3 million for the three months ended March 31, 2005 compared to $4.7 million for the three months ended March 31, 2004. The primary reasons for the increase in interest expense was a $595.3 million increase in the average balance of interest-bearing deposits and an 11 basis point increase in the average rate paid on interest-bearing deposits. The average rate paid on interest-bearing deposits was 1.97% for the three months ended March 31, 2005 compared to 1.86% for the three months ended March 31, 2004. The increase in the average balance of interest-bearing deposits is primarily the result of the UNFC acquisition and continued emphasis on growing our deposit balances. The average balance of our FHLB advances and other borrowings was $743.5 million for the three months ended March 31, 2005, a $147.4 million, or 24.7%, increase compared to $596.1 million for the three months ended March 31, 2004. Additionally, the average rate paid on FHLB advances and other borrowings was 3.37% for the three months ended March 31, 2005 compared to 3.14% for the three months ended March 31, 2004. We utilized FHLB advances and other borrowings during 2004 as our primary funding source for loan portfolio growth and the UNFC acquisition.





32


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

        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, interest rate spread and net interest margin. All average balances are based on daily balances.

Three Months Ended March 31,
2005
2004
(Dollars in thousands)
Average
Balance

Interest
Average
Yield/Rate

Average
Balance

Interest
Average
Yield/Rate

Interest-earning assets:                            
   Investment securities (1)   $178,718   $1,715    3.84 % $80,420   $796    3.96 %
   Mortgage-backed securities (1)    34,381    319    3.71    15,100    131    3.47  
   Loans receivable (2)    2,600,676    37,466    5.76    2,025,969    27,163    5.36  

      Total interest-earning assets    2,813,775    39,500    5.62 %  2,121,489    28,090    5.30 %
   Noninterest-earning assets    196,235          88,988

      Total assets   $ 3,010,010           $ 2,210,477          

Interest-bearing liabilities:  
   Interest-bearing checking accounts   $ 402,091   $ 666    0.66 % $ 296,153   $ 574    0.78 %
   Savings accounts    77,849    121    0.62    20,414    16    0.31  
   Money market accounts    297,776    910    1.22    268,854    652    0.97  
   Time deposits    1,031,047    7,201    2.79    628,083    4,413    2.81  

      Total interest-bearing deposits    1,808,763    8,898    1.97    1,213,504    5,655    1.86  
   Federal Home Loan Bank  
      advances and other borrowings    743,546    6,266    3.37    596,135    4,687    3.14  

      Total interest-bearing liabilities    2,552,309    15,164    2.38 %  1,809,639    10,342    2.29 %
Noninterest-bearing accounts    112,506            47,486          
Other liabilities    64,445            56,241          

         Total liabilities    2,729,260            1,913,366          
Stockholders' equity    280,750            297,111          

Total liabilities and stockholders' equity   $ 3,010,010           $ 2,210,477          

Net interest-earning assets   $ 261,466           $ 311,850          
Net interest income; average  
   interest rate spread       $ 24,336    3.24 %     $ 17,748    3.01 %
Net interest margin (3)            3.46 %          3.35 %
Average interest-earning assets to average  
   interest-bearing liabilities            110.24 %          117.23 %

(1) Includes securities available for sale and held to maturity. Investment securities also include Federal Home Loan Bank stock.
(2) Includes nonaccrual loans during the respective periods. Calculated net of unamortized premiums, discounts and deferred fees,
     undisbursed portion of construction and land development loans in process and allowance for loan losses.
(3) Equals net interest income (annualized) divided by average interest-earning assets.

33


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

        Rate/Volume Analysis. The following table shows the extent to which changes in interest rates and changes in the volume of interest-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 (i) changes in rate (change in rate multiplied by prior year volume) and (ii) changes in volume (change in volume multiplied by prior year rate). The combined effect of changes in both rate and volume has been allocated proportionately to the change due to rate and the change due to volume.

Three Months Ended March 31, 2005
Compared to
Three Months Ended March 31, 2004

Increase (Decrease) Due to
Total
Increase
(Dollars in thousands)
Rate
Volume
(Decrease)
Interest income:                
   Investment securities   $(25 ) $944   $919  
   Mortgage-backed securities    10    178    188  
   Loans receivable (1)    2,146    8,157    10,303  

      Total interest income    2,131    9,279    11,410  

Interest expense:  
   Interest-bearing checking accounts    (97 )  189    92  
   Savings accounts    28    77    105  
   Money market accounts    182    76    258  
   Time deposits    (31 )  2,819    2,788  

      Total deposits    82    3,161    3,243  
   Federal Home Loan Bank advances and other borrowings    361    1,218    1,579  

      Total interest expense    443    4,379    4,822  

Net change in net interest income   $ 1,688   $ 4,900   $ 6,588  

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





34


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

        Provision for Loan Losses. We made a provision for loan losses of $788,000 for the three months ended March 31, 2005 compared to $934,000 for the three months ended March 31, 2004, a decrease of $146,000, or 15.6%. We have made provisions in order to maintain the allowance for loan losses at a level we believe, to the best of our knowledge, covers all known and inherent losses in the portfolio that are both probable and reasonable to estimate at the relevant date. At March 31, 2005, our total nonperforming loans amounted to $10.0 million, or 0.37% of net loans, compared to $10.2 million, or 0.39% of net loans, at December 31, 2004. Our total nonperforming assets totaled $10.4 million, or 0.34%, of total assets at March 31, 2005, compared to $10.6 million, or 0.35%, of total assets at December 31, 2004. During the three months ended March 31, 2005 and March 31, 2004, we charged-off, net of recoveries, $367,000 and $434,000, respectively, primarily related to automobile and other consumer-related loans. At March 31, 2005, December 31, 2004 and March 31, 2004, our allowance for loan losses amounted to 1.02%, 1.01% and 0.96%, respectively, of net loans.

        Noninterest Income. Our noninterest income increased by $534,000, or 9.8%, to $6.0 million for the three months ended March 31, 2005 compared to $5.4 million for the three months ended March 31, 2004. The favorable increase in noninterest income was primarily attributable to an increase in fees and charges associated with additional products and services provided to new and existing customers. The increase in noninterest income was primarily the result of a $960,000 increase in non-deposit and lending related fees, a $717,000 increase in deposit account related fees and a $155,000 net gain on loans held for sale. The increase in noninterest income was partially offset by a one-time gain recorded during the three months ended March 31, 2004 related to the merger of the Bank’s defined benefit pension plan with an unrelated third party plan. This transaction resulted in a $1.5 million pre-tax gain for the three months ended March 31, 2004 from the curtailment of the liability associated with the plan.

        Noninterest Expense. Our noninterest expense increased by $5.4 million, or 43.2%, to $18.0 million for the three months ended March 31, 2005 compared to $12.6 million for the three months ended March 31, 2004. The increases in noninterest expense primarily related to the UNFC acquisition completed in August 2004. The increase during the three month period ended March 31, 2005 compared to the three month period ended March 31, 2004 resulted primarily from a $2.4 million increase in compensation expense and employee benefits, a $2.1 million increase in other operating expenses and a $722,000 increase in net occupancy expenses.

        Income Tax Expense. Our income tax expense increased by $712,000 to $4.3 million for the three months ended March 31, 2005 compared to $3.6 million for the same period in 2004 due to an increase in net income and an increase in our effective income tax rate. The effective income tax rate for the three months ended March 31, 2005 was 37.5% compared to 37.3% for the three months ended March 31, 2004.

35


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Liquidity

        Our primary sources of funds are deposits, amortization of loans, loan prepayments and maturity of loans, mortgage-backed securities and other investments and other funds provided 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 and mortgage-backed securities prepayments can be greatly influenced by general interest rates, economic conditions and competition. Additionally, we utilize FHLB advances, brokered time deposits and available for sale loans as additional funding sources.

        We use our liquidity to fund existing and future loan commitments, maturing time deposits and demand deposit withdrawals, to invest in other interest-earning assets and to meet operating expenses. At March 31, 2005, we had time deposits maturing within the next 12 months totaling $596.9 million. Based upon historical experience, we anticipate that a significant portion of the maturing time deposits will be redeposited with us.

        In addition to cash flow from loan and securities payments and prepayments, we have additional borrowing capacity available to fund our asset growth. We continue to utilize borrowings as a cost efficient addition to deposits as a source of funds. The average balance of our FHLB advances and other borrowings was $743.5 million and $596.1 million for the three months ended March 31, 2005 and March 31, 2004, respectively. To date, substantially all of our borrowings have consisted of advances from the FHLB, of which we are a member. Pursuant to blanket collateral agreements with the FHLB, the Bank pledged qualifying residential, multi-family residential and commercial real estate mortgages, residential construction, commercial construction and agricultural real estate loans as collateral for such advances. Other qualifying collateral can be pledged in the event additional borrowing capacity is required.





36


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

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

        We use our liquidity to fund existing and future loan commitments, to fund maturing time deposits and demand deposit withdrawals, to invest in other interest-earning assets and to meet operating expenses. At March 31, 2005, we had the following contractual obligations (excluding bank deposits and interest) and lending commitments:

Due In
(Dollars in thousands)
Total at
March 31, 2005

1 Year
1-3 Years
3-5 Years
After 5 Years
Contractual obligations:                        
   Federal Home Loan Bank advances  
      and other borrowings   $ 707,965   $ 232,600   $ 92,017   $ 80,348   $ 303,000  
   Recourse obligations on assets    14,631    14,631    --    --    --  
   Purchase investment securities    1,571    1,571    --    --    --  
   Annual rental commitments under non-  
      cancellable operating leases    4,259    825    1,231    825    1,378  

      Total contractual obligations   $ 728,426   $ 249,627   $ 93,248   $ 81,173   $ 304,378  

Lending commitments:  
   Commitments to originate loans   $ 150,125   $ 150,125   $ --   $ --   $ --  
   Commitments to sell loans    (46,984 )  (46,984 )  --    --    --  
   Commitments to purchase loans    28,123    28,123    --    --    --  
   Undisbursed portion of construction and  
      land development loans in process    457,293    457,293    --    --    --  
   Standby letters of credit    2,049    2,049    --    --    --  
Unused lines of credit:  
   Warehouse mortgage lines of credit    390,405    390,405    --    --    --  
   Business loans    138,242    138,242    --    --    --  
   Consumer loans    124,415    124,415    --    --    --  

      Total lending commitments and  
         unused lines of credit   $ 1,243,668   $ 1,243,668   $ --   $ --   $ --  



37


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

        We have not used any significant off-balance sheet financing arrangements for liquidity purposes or otherwise. Our primary financial instruments with off-balance sheet risk are limited to loan servicing for others, our obligations to fund loans to customers pursuant to existing commitments and commitments to purchase and sell mortgage loans. In addition, we have certain risks due to limited recourse arrangements on loans serviced for others and recourse obligations related to loan sales. At March 31, 2005, the maximum total dollar amount of such recourse was approximately $14.0 million. Based on historical experience, at March 31, 2005, we had established a liability of $737,000 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, limited purpose entities.

Regulatory Capital

        At March 31, 2005, the Bank’s regulatory capital exceeded regulatory limits set by the Office of Thrift Supervision. The current regulatory requirements and the Bank’s actual levels at March 31, 2005 are set forth in the following table:

Required Capital
Actual Capital
Excess Capital
(Dollars in thousands)
Amount
Percent
Amount
Percent
Amount
Percent
Tangible capital     $ 44,766    1.50 % $ 239,313    8.02 % $ 194,547    6.52 %

Tier 1 (core) capital
    119,376    4.00 %  239,313    8.02 %  119,937    4.02 %

Total risk-based capital
    207,726    8.00 %  266,565    10.27 %  58,839    2.27 %

        The Bank remains classified as a “well capitalized” financial institution under Federal regulatory guidelines.





38


TierOne Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Selected Operating Ratios

        Selected operating and other ratios (annualized where appropriate) at or for the three months ended March 31, 2005 and March 31, 2004 are presented in the following table:

At or for the
Three Months Ended
March 31,


2005
2004
Selected Operating Ratios:            
   Average yield on interest-earning assets    5.62 %  5.30 %
   Average rate on interest-bearing liabilities    2.38    2.29  
   Average interest rate spread    3.24    3.01  
   Net interest margin    3.46    3.35  
   Average interest-earning assets to average  
      interest-bearing liabilities    110.24    117.23  
   Net interest income after provision for loan  
      losses to noninterest expense    130.58    133.49  
   Total noninterest expense to average assets    2.40    2.28  
   Efficiency ratio (1)    59.50    54.32  
   Return on average assets    0.95    1.10  
   Return on average equity    10.23    8.16  
   Average equity to average assets    9.33    13.44  

Other Ratios:
  
   Nonperforming loans as a percent of net loans    0.37    0.15  
   Nonperfoming assets as a percent of total assets    0.34    0.18  
   Allowance for loan losses as a percent of  
      nonperforming loans    273.01    622.05  
   Allowance for loan losses as a percent of net loans    1.02    0.96  

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



39


Item 3 — Quantitative and Qualitative Disclosures About Market Risk.

        For a discussion of our asset and liability management policies as well as the methods used to manage our exposure to the risk of loss from adverse changes in market prices and rates market, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – How We Manage Our Risks” and “Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. There has been no material change in our market risk position since our prior disclosures.

Item 4 — Controls and Procedures.

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





40


PART II — OTHER INFORMATION

Item 1 — Legal Proceedings.

        There have been no substantive changes with respect to legal proceedings during the three months ended March 31, 2005. Disclosures regarding legal proceedings are incorporated by reference to Part I, Item 3. Legal Proceedings in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds.

        The following table details the Company’s purchases of common stock during the three months ended March 31, 2005:


Total
Number of
Shares
Purchased

Average
Price
Paid Per
Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs*

Maximum Number of
Shares that May Yet
Be Purchased Under
Plans or Programs

January 2005        
   Beginning Date - January 1, 2005
   Ending Date - January 31, 2005 -- -- -- 1,828,581
February 2005
   Beginning Date - February 1, 2005
   Ending Date - February 28, 2005 -- -- -- 1,828,581
March 2005
   Beginning Date - March 1, 2005
   Ending Date - March 31, 2005 140,800 $24.22 140,800 1,687,781

   Total shares purchased during the
   three months ended March 31, 2005
140,800 $24.22

        * Information related to the Company’s publicly announced plan authorizing purchases of its common stock during the three months ended March 31, 2005, is as follows:

Date Purchase
Plan Announced

Number of Shares
Approved for
Purchase

Expiration Date of Purchase Plan
July 27, 2004 1,828,581 No stated expiration date

41


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.









42


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 5, 2005
By:/s/ Gilbert G. Lundstrom
      Gilbert G. Lundstrom
      Chairman of the Board and Chief Executive Officer


Date:  May 5, 2005
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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