[Letterhead]

Private Capital Management, L.P.


November 9, 2007


Board of Directors
TierOne Corporation
1235 N Street
Lincoln, Nebraska  68508


Dear Members of the Board:

I am writing on behalf of Private Capital Management ("PCM"), TierOne
Corporation's largest shareholder.  PCM has been an investor in TierOne
since October of 2002 and through its clients currently holds in excess
of 9% of the Company's outstanding shares.  As you know, as a condition
of securing an acquisition offer from CapitalSource, Inc. in May of 2007,
TierOne agreed to pay a $24 million termination fee to CapitalSource should
its Board fail to recommend the proposed transaction to shareholders.  We
do not question the Board's judgment in agreeing to recommend the
transaction.  At the time it was announced, the proposed cash and stock
deal valued TierOne at a price in excess of $34.00 per share.
Unfortunately, the market's view of CapitalSource's prospects and financial
results has soured, resulting in what is now a totally inadequate deal price
for TierOne shareholders.

In light of the significant termination fee, TierOne's Board is clearly
constrained from reversing its recommendation to shareholders.  Accordingly,
we feel it is appropriate as a long-term investor in TierOne that we
publicly share with the Board our intention to vote against both the
proposed merger with CapitalSource and any possible adjournment of the
shareholders meeting to be held on November 29, 2007.

The financial sector in general and CapitalSource in particular have
suffered significant market reversals since the proposed transaction
was announced in May.  CapitalSource's share price has dropped from over
$25.00 per share to less than $16.00.  Of equal concern, we believe the
relative values of TierOne and CapitalSource have diverged significantly
since the deal was announced.  For instance, CapitalSource's specialty
lending franchise has proven much more vulnerable to recent market
reversals than conservatively run institutions with strong deposit
franchises and long track records such as TierOne.  However, with its
share price effectively pegged to CapitalSource's shares, TierOne has
fared significantly worse than a number of the deposit based franchises
with which it competes.

The registration statement filed by CapitalSource clearly, if
unintentionally, underscores the dramatic erosion in value of the
CapitalSource stock TierOne shareholders will receive should the deal
close.  Page three of the registration contains a chart intended to
show the differing  payouts TierOne shareholders will receive based on
various moving averages for CapitalSource shares in the 10 days preceding
the closing of the transaction.  The chart shows a range of share prices
from a low of $17.00 per share to a high of $27.00.  As of yesterday's
close, CapitalSource shares were trading at $15.66; less than the low end
of the trading range that CapitalSource and its counsel appear to have
viewed as reasonable for TierOne shareholders to consider in determining
how to vote their shares.  In fact, CapitalSource shares have traded below
the levels specified in the merger agreement to trigger a renegotiation of
the deal price for 48 of the last 60 trading days, including each of the
last 22 trading days.  In this respect we see the merger agreement itself
as clearly recognizing that at CapitalSource's trading levels the
consideration to be paid to TierOne shareholders is inadequate to justify
a transaction.  While the Board may be able to negotiate additional
consideration for TierOne shareholders prior to the closing, we cannot
in good faith support a deal at what amounts to a yet to be negotiated
price.

The unanticipated and persisting decline in CapitalSource's share price
also calls into question the reasonableness of the $9.6 million in closing
and "milestone" payments to be made to TierOne's CEO and President in
connection with the transaction.  While these amounts may well have fallen
within the customary range when the transaction valued TierOne at more
than $34.00 per share, we question whether TierOne would have negotiated
similarly large payments had the deal valued TierOne as it does currently.

Given the uncertainties we see regarding CapitalSource's current prospects
and the material reduction in its share price, we are of the strong view
that the proposed transaction is no longer in the best interest of
TierOne shareholders.  We expect to share our views with other TierOne
shareholders over the coming weeks.


Very truly yours,

/s/ Bruce S. Sherman
Bruce S. Sherman
Chief Executive Officer


cc:	Eugene B. Witkowicz
	Corporate Secretary