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 June 30, 2002
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
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(Exact Name of Registrant as Specified in Its Charter)
Wisconsin 04-3638672
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State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1235 "N" Street
Lincoln, Nebraska 68508
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(Address of Principal Executive Offices) (Zip Code)
(402) 475-0521
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(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 No X
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of September 26, 2002, no
shares of the Registrant's common stock were issued and outstanding. *
____________________
* The issuer became subject to the filing requirements of Section 13 or 15(d)
when its Form S-1 was declared effective by the SEC on August 12, 2002.
PART I - FINANCIAL INFORMATION
Interim financial information required by Rule 10-01 of
Regulation S-X and Item 303 of Regulation S-K is included in this
Form 10-Q as referenced below.
Page
----
Item 1 - Financial Statements.......................................... 3
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 15
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.... 24
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings............................................. 24
Item 2 - Changes in Securities and Use of Proceeds..................... 24
Item 3 - Defaults Upon Senior Securities............................... 24
Item 4 - Submission of Matters to a Vote of Security Holders........... 24
Item 5 - Other Information............................................. 24
Item 6 - Exhibits and Reports on Form 8-K.............................. 25
Signatures.............................................................. 26
2
TierOne Bank and Subsidiaries
Consolidated Statements of Financial Condition
June 30, 2002 (Unaudited) and December 31, 2001
(dollars in thousands)
June 30, December 31,
2002 2001
----------- -----------
Assets
Cash and due from banks $ 25,330 $ 24,141
Federal funds sold -- 10,300
----------- -----------
Total cash and cash equivalents 25,330 34,441
Investment securities:
Held-to-maturity 238 221
Available-for-sale 86,315 90,811
Loans receivable, net 1,394,040 1,379,066
Loans held for sale 10,939 14,373
Accrued interest receivable 8,009 7,834
Federal Home Loan Bank stock 16,135 14,836
Premises and equipment 23,227 18,201
Other assets 13,012 10,230
----------- -----------
Total assets $ 1,577,245 $ 1,570,013
=========== ===========
Liabilities and Retained Earnings
Liabilities:
Deposits $ 1,116,470 $ 1,096,242
Advances from Federal Home Loan Bank
and other Borrowings 293,399 303,315
Advances from borrowers for taxes and
insurance 11,808 15,535
Accrued interest payable 6,709 8,734
Accrued expenses and other liabilities 18,450 24,432
----------- -----------
Total liabilities 1,446,836 1,448,258
----------- -----------
Retained earnings:
Retained earnings, subject to certain
restrictions 130,216 121,678
Cumulative other comprehensive income, net 193 77
----------- -----------
Total retained earnings 130,409 121,755
Commitments and contingent liabilities
Total liabilities and retained ----------- -----------
earnings $ 1,577,245 $ 1,570,013
=========== ===========
See accompanying notes to consolidated financial statements.
3
TierOne Bank and Subsidiaries
Consolidated Statements of Income
(dollars in thousands)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------- ------------------
2002 2001 2002 2001
------- ------- ------- -------
Interest income: (unaudited)
Loans receivable $24,008 $23,584 $47,151 $47,013
Investment securities 1,439 2,416 2,683 5,059
Other interest-earning assets 9 559 207 729
------- ------- ------- -------
Total interest income 25,456 26,559 50,041 52,801
------- ------- ------- -------
Interest expense:
Deposits 7,862 13,130 16,022 26,823
Advances from Federal Home
Loan Bank and other borrowings 3,105 2,265 6,024 4,421
------- ------- ------- -------
Total interest expense 10,967 15,395 22,046 31,244
------- ------- ------- -------
Net interest income 14,489 11,164 27,995 21,557
Provision for loan losses 643 454 1,207 940
------- ------- ------- -------
Net interest income after
provision for loan losses 13,846 10,710 26,788 20,617
------- ------- ------- -------
Other income:
Fees and service charges 1,663 1,634 3,479 3,102
Income from real estate
operations, net 210 133 359 264
Other operating income 562 310 1,132 1,165
Net gain (loss) on sales of:
Investments - (5) - (5)
Loans held for sale 609 571 1,314 736
Real estate owned (1) 9 (1) 9
------- ------- ------- -------
Total other income 3,043 2,652 6,283 5,271
------- ------- ------- -------
Other expense:
Salaries and employee benefits 5,342 4,899 10,487 9,425
Occupancy, net 1,467 1,251 2,904 2,594
Data processing 348 328 712 687
Advertising 942 417 1,889 858
Legal services 101 184 152 395
Other operating expense 1,799 1,419 3,566 2,874
------- ------- ------- -------
Total other expense 9,999 8,498 19,710 16,833
------- ------- ------- -------
Income before income taxes 6,890 4,864 13,361 9,055
Income tax expense 2,487 1,723 4,823 3,215
------- ------- ------- -------
Net income $ 4,403 $ 3,141 $ 8,538 $ 5,840
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
4
TierOne Bank and Subsidiaries
Consolidated Statements of Changes in Retained Earnings and
Comprehensive Income
Six Months Ended June 30, 2002 (Unaudited) and
Year Ended December 31, 2001
(dollars in thousands)
Cumulative
other Total
Retained comprehensive retained
earnings income (loss) earnings
-------- ------------- ---------
Balance at December 31, 2000 $108,636 $ (764) $ 107,872
-------- ------- ---------
Comprehensive income:
Net income 13,042 - 13,042
Change in unrealized loss on
available-for-sale securities, net - 841 841
-------- ------- ---------
Total comprehensive income 13,042 841 13,883
-------- ------- ---------
Balance at December 31, 2001 121,678 77 121,755
-------- ------- ---------
Comprehensive income:
Net income 8,538 - 8,538
Change in unrealized gain on
available-for-sale securities, net - 116 116
-------- ------- ---------
Total comprehensive income 8,538 116 8,654
-------- ------- ---------
Balance at June 30, 2002 $130,216 $193 $130,409
======== ======= =========
See accompanying notes to consolidated financial statements.
5
TierOne Bank and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2002 and 2001
(dollars in thousands)
June 30,
--------------------------
2002 2001
------- ------
(unaudited)
Cash flows from operating activities:
Reconciliation of net income to
cash provided by operating activities:
Net income
$8,538 $5,840
Adjustments to reconcile net
income to net cash provided by
operating activities:
(Accretion) amortization of
investment and mortgage-backed
securities 192 (62)
Depreciation and amortization 1,112 912
Amortization on loans receivable, net 81 10
Deferred income tax benefit (292) (135)
Provision for loan losses 1,207 939
Proceeds from sales of loans held
for sale 170,090 134,429
Originations and purchases of
loans held for sale (165,342) (135,779)
Net (gain) loss on sales of:
Investment and mortgage-backed
securities available-for-sale - 5
Loans receivable held for sale (1,314) (736)
Real estate owned and held for
investment 1 (9)
Premises and equipment (6) 13
Changes in certain assets and
liabilities:
Accrued interest receivable (175) 625
Other assets (2,418) (1,598)
Accrued interest payable (2,025) (874)
Accrued expenses and other
liabilities (5,984) 2,785
------- ------
Total adjustments (4,873) 525
------- ------
Net cash provided by operating
activities 3,665 6,365
------- ------
Cash flows from investing activities:
Purchase of investment securities:
Held-to-maturity (24) (5)
Available-for-sale (39,981) (47,406)
Proceeds from maturity of investment
securities, available-for-sale 28,490 81,500
Proceeds from sale of investment
securities, available-for-sale - -
See accompanying notes to consolidated financial statements.
6
TierOne Bank and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Six Months Ended June 30, 2002 and 2001
(dollars in thousands)
June 30,
--------------------
2002 2001
-------- --------
(unaudited)
Proceeds from principal repayments of
investment and mortgage-backed
securities 15,980 13,464
Increase in loans receivable (16,492) (57,448)
Proceeds from sale of real estate
owned and held for investment 88 1,175
Additions to premises and equipment (6,156) (1,209)
Proceeds from sale of premises and equipment 33 -
Sale of Federal Home Loan Bank stock 3,002 5,138
Purchase of Federal Home Loan Bank stock (4,301) -
-------- --------
Net cash used in investing activities (19,361) (4,791)
-------- --------
Cash flows from financing activities:
Net increase in deposits 20,228 62,420
Net decrease in advances from
borrowers for taxes and insurance (3,727) (593)
Proceeds from Federal Home Loan
Bank long-term advances - 30,000
Repayment of Federal Home Loan
Bank long-term advances (16) (16)
Net paydowns on Federal Home Loan
Bank line of credit and Federal
Home Loan Bank short-term advances (9,900) (32,000)
-------- --------
Net cash provided by financing
activities 6,585 59,811
-------- --------
Net increase (decrease) in cash
and cash equivalents (9,111) 61,385
Cash and cash equivalents at
beginning of period 34,441 30,779
-------- --------
Cash and cash equivalents at end of period $ 25,330 $ 92,164
======== ========
Supplemental disclosure of cash flow
information - cash paid during
the period for:
Interest $ 24,071 $ 32,125
======== ========
Income taxes, net of refunds $ 4,907 $ 3,242
======== ========
Supplemental schedules of noncash
investing activities - transfers
from loans to real estate owned and
other assets through foreclosure $ 253 $ 360
======== ========
See accompanying notes to consolidated financial statements.
7
TierOne Bank and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
1. Basis of Presentation.
On April 3, 2002, TierOne Bank (the "Bank") (formerly known
as First Federal Lincoln Bank) incorporated TierOne Corporation,
a Wisconsin corporation (the "Company" or "registrant") to
facilitate the conversion of the Bank from a federally chartered
mutual savings bank to a federally chartered stock savings bank
(the "Conversion"). The Conversion is expected to be consummated
in early October 2002, at which time the Company will become the
holding company for the Bank and issue shares of its common stock
to the general public. The Company will own all the outstanding
common stock of the Bank upon completion of the Conversion. The
Company filed a Form S-1 with the Securities and Exchange
Commission ("SEC") on April 8, 2002, which, as amended, was
declared effective by the SEC on August 12, 2002. The registrant
is in organization and has engaged in no operations to date;
accordingly, no financial statements of the Company have been
included herein.
References in this document to "we," "our" or "us" refer to
the Company together with the Bank, unless the context requires
otherwise.
2. Basis of Consolidation
The consolidated financial statements include the accounts
of the Bank and its wholly owned subsidiary, TMS Corporation of
the Americas ("TMS"). TMS is the holding company of TierOne
Investments and Insurance, Inc., a wholly owned subsidiary that
administers the sale of insurance and securities products. In
April 2000, TMS created a new subsidiary, TierOne Reinsurance
Company, which reinsures credit life and accident and health
insurance policies.
The accompanying unaudited consolidated financial statements
as of June 30, 2002 and for the three and six month periods ended
June 30, 2002 and 2001 have been prepared in accordance with the
instructions to Form 10-Q and therefore do not include all
information and notes necessary for complete financial statements
in conformity with accounting principles generally accepted in
the United States of America. All significant intercompany
accounts and transactions have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation. The results of operations for interim
periods are not necessarily indicative of the results to be
expected for the entire year. These interim financial statements
should be read in conjunction with the Company's consolidated
audited financial statements and the notes thereto contained in
the Company's prospectus dated August 12, 2002.
8
TierOne Bank and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
3. Investment Securities
Investment securities at June 30, 2002 and December 31, 2001 are
summarized below:
Gross Unrealized
Amortized ----------------
June 30, 2002 Cost Gain Loss Fair Value
------------- --------- ------ ------ ----------
Held to Maturity: (dollars in thousands)
Municipal obligations $ 238 $ - $ - $ 238
Available for Sale:
Mortgage-backed securities 29,786 711 - 30,497
U.S. government agency
obligations 34,178 31 - 34,209
Corporate securities 16,053 5 449 15,609
Mutual fund 6,000 - - 6,000
------- ------ ----- ---------
$86,255 $ 747 $ 449 $ 86,553
======= ====== ===== =========
Gross Unrealized
Amortized ----------------
December 31, 2001 Cost Gain Loss Fair Value
----------------- --------- ------ ------ ----------
Held to Maturity: (dollars in thousands)
Municipal obligations $ 221 $ - $ - $ 221
Available for Sale:
Mortgage-backed securities 45,788 528 29 46,287
U.S. government agency
obligations 26,691 - - 26,691
Corporate securities 12,214 - 381 11,833
Mutual fund 6,000 - - 6,000
------- ------ ----- ---------
$90,914 $ 528 $ 410 $ 91,032
======= ====== ===== =========
9
TierOne Bank and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
4. Loan Portfolio Composition
Loans receivable at June 30, 2002 and December 31, 2001 are summarized
below.
June 30, 2002 December 31, 2001
-------------------- ---------------------
Amount % Amount %
---------- -------- --------- -------
(dollars in thousands)
Real estate loans:
One- to four-family
residential(1) $493,963 31.95% $502,502 33.13%
Multi-family residential 60,457 3.91 74,209 4.89
Commercial real estate and
land 331,037 21.41 258,277 17.03
Residential construction 135,659 8.77 113,300 7.47
Commercial construction 135,401 8.76 95,614 6.30
--------- ------ --------- ------
Total real estate loans 1,156,517 74.80 1,043,902 68.82
--------- ------ --------- ------
Commercial business 19,795 1.28 12,193 0.80
Warehouse mortgage lines of
credit 105,362 6.81 224,067 14.77
Consumer loans:
Home equity 42,526 2.75 45,398 2.99
Home equity line of credit 78,360 5.07 61,839 4.08
Home improvement 78,133 5.05 76,555 5.05
Automobile 54,572 3.53 42,547 2.80
Other 10,951 0.71 10,486 0.69
--------- ------ --------- ------
Total consumer loans 264,542 17.11 236,825 15.61
--------- ------ --------- ------
Total loans 1,546,216 100.00% 1,516,987 100.00%
========= ====== ========= ======
Less:
Unearned premiums and
discounts 960 558
Discounts on loans acquired
through merger (224) (270)
Undisbursed portion of
construction loans in
process (127,171) (109,852)
Deferred loan fees (483) (520)
Allowance for loan losses (14,319) (13,464)
---------- ----------
Net loans (1) $1,404,979 $1,393,439
========== ==========
________________
(1)Includes loans held for sale of $10.9 million and $14.4 million at
June 30, 2002 and December 31, 2001, respectively.
10
TierOne Bank and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
The following table sets forth the activity in the Bank's
allowance for loan losses during the periods indicated.
At or For the Six Months Ended June 30,
---------------------------------------
2002 2001
------------ ----------
(dollars in thousands)
Allowance for loan losses,
beginning of period $13,464 $ 9,947
Provision for loan losses 1,207 940
Charge-offs (378) (117)
Recoveries on loans previously
charged off 26 2
-------- --------
Allowance for loan losses, end
of period $ 14,319 $ 10,772
======== ========
Allowance for loan losses as a
percent of total loans receivable (1) .93% 0.83%
======== ========
Allowance for loan losses as a
percent of non-performing loans 329.32% 762.35%
======== ========
(1) Total loans receivable includes loans held for sale.
11
TierOne Bank and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
The following table sets forth information with respect to
non-performing 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 all
accrued interest. The Bank did not have any accruing loans 90
days or more past due at the dates shown.
June 30, December
2002 31, 2001
------------ ------------
(dollars in thousands)
Non-accruing loans:
One- to four-family residential $3,587 $ 898
Multi-family residential - -
Commercial real estate and land - -
Residential construction 131 -
Commercial construction - -
Commercial business - -
Warehouse mortgage lines of credit - -
Consumer 630 767
------- -------
Total non-accruing loans 4,348 1,665
Real estate owned, net (1) 231 168
------- -------
Total non-performing assets 4,579 1,833
Troubled debt restructurings 210 345
------- -------
Total non-performing assets and troubled
debt restructurings $ 4,789 $ 2,178
======= =======
Allowance for loan losses as a percent of
non-performing loans 329.32% 808.65%
======= =======
Non-performing loans as percent of total
loans receivable (2) 0.28% 0.11%
======= =======
Non-performing assets as a percentage
of total assets 0.29% 0.12%
======= =======
Allowance for loan losses as a percent of
total loans receivable (2) 0.93% 0.89%
======= =======
____________________________
(1) Real estate owned balances are shown net of related loss
allowances. Includes both real property and other
repossessed collateral consisting primarily of automobiles.
(2) Total loans receivable includes loans held for sale.
12
TierOne Bank and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
5. 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 is summarized
as follows for the following periods:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2002 2001 2002 2001
-------- -------- -------- --------
(dollars in thousands)
Beginning balance $5,398 $1,486 $4,577 $1,101
Mortgage servicing rights
capitalized 1,033 1,188 2,148 1,734
Amortization expense (307) (250) (601) (411)
------ ------ ------ ------
6,124 2,424 6,124 2,424
Valuation adjustment (460) - (460) -
------ ------ ------ ------
Ending balance $5,664 $2,424 $5,664 $2,424
====== ====== ====== ======
The activity of the valuation allowances on mortgage servicing
rights is summarized as follows for the following periods:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2002 2001 2002 2001
-------- -------- -------- --------
(dollars in thousands)
Beginning balance $350 $ - $350 $ -
Amounts charged to operations 460 - 460 -
---- ----- ---- -----
Ending balance $810 $ - $810 $ -
==== ===== ==== =====
The fair value of the Banks mortgage servicing rights totaled
approximately $5,798,000 at June 30, 2002, compared to $2,693,000
at June 30, 2001.
The following table compares the key assumptions used in
measuring the fair values of mortgage servicing rights at the
periods presented:
June 30, 2002 December 31, 2001
------------- -----------------
(dollars in thousands)
Fair value $5,798 $5,069
Prepayment speed 10.7% - 46.4% 8.7% - 37.8%
Weighted average prepayment speed 19.6% 14.0%
Discount rate 9.0% - 13.5% 10.5% - 15.0%
13
TierOne Bank and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
6. Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board
("FASB") issued Statement No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." This Statement addresses
financial accounting and reporting for the impairment or disposal
of long-lived assets and supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." However, the Statement retains the fundamental
provisions of Statement 121 for (a) recognition and measurement
of the impairment of long-lived assets to be held and used and
(b) measurement of long-lived assets to be disposed of by sale.
This Statement supersedes the accounting and reporting provisions
of APB Opinion No. 30, "Reporting the Results of Operations-
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business.
However, this Statement retains the requirement of Opinion 30 to
report discontinued operations separately from continuing
operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, by abandonment, or in
distribution to owners) or is classified as held for sale. This
Statement also amends APB No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a
temporarily controlled subsidiary. The provisions of this
Statement are effective for financial statements issued for
fiscal years beginning after December 15, 2001 and interim
periods within those fiscal years. The provisions of this
Statement generally are to be applied prospectively. The
adoption of Statement No. 144 did not have an impact on our
earnings, financial condition or equity.
In April of 2002, the FASB issued Statement No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." This
Statement rescinds FASB Statement No. 4, "Reporting Gains and
Losses from Extinguishment of Debt," and an amendment of that
Statement, FASB Statement No. 64, "Extinguishments of Debt Made
to Satisfy Sinking-Fund Requirements." This Statement also
rescinds FASB Statement No. 44, "Accounting for Intangible Assets
of Motor Carriers." This Statement amends FASB Statement No. 13,
"Accounting for Leases," to eliminate an inconsistency between
the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have
economic effects that are similar to sale-leaseback transactions.
This Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed
conditions. The adoption of Statement No. 145 is not expected to
have a material effect on our financial position or results of
operation.
14
TierOne Bank
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 2 - Managements Discussion and Analysis of Financial
Condition and Results of Operations.
General
The Company was formed by the Bank in connection with the
Bank's conversion and has not yet commenced operations. The
Company's results of operations initially will be primarily
dependent on the results of the Bank, which will be a wholly
owned subsidiary upon completion of the conversion. The Bank'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 portfolios and the cost of funds, consisting
of the interest paid on deposits and borrowings. Results of
operations are also affected by provisions for loan losses, loan
sale activities and loan servicing. Non-interest expense
principally consists of compensation and employee benefits,
office occupancy and equipment expense, data processing,
advertising and business promotion and other expense. Our
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 our financial
conditions and results of operations.
Critical Accounting Policies
We have identified the evaluation of the allowance for loan
losses as a critical accounting policy where amounts are
sensitive to material variation. This policy is significantly
affected by our judgment and uncertainties and there is a
likelihood that materially different amounts would be reported
under different, but reasonably plausible, conditions or
assumptions. We establish provisions for loan losses, which are
charges to our operating results, in order to maintain a level of
total allowance for losses that management believes covers all
known and inherent losses that are both probable and reasonably
estimable at each reporting date. Management performs reviews no
less than quarterly in order to identify these inherent losses
and to assess the overall collection probability for the loan
portfolio. Our reviews consist of a quantitative analysis by
loan category, using historical loss experience, and
consideration of a series of qualitative loss factors. For each
primary type of loan, we establish a loss factor reflecting our
estimate of the known and inherent losses in each loan type using
both the quantitative analysis as well as consideration of the
qualitative factors. Our evaluation process includes, among
other things, an analysis of delinquency trends, non-performing
loan trends, the levels of charge-offs and recoveries, prior loss
experience, total loans outstanding, the volume of loan
originations, the type, size, terms and geographic concentration
of loans held by us, the value of collateral securing loans, the
number of loans requiring heightened management oversight,
general economic conditions and loan loss information for other
institutions. The amount of the allowance for loan losses is
only an estimate and actual losses may vary from these estimates.
15
TierOne Bank
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Comparison of Financial Condition at June 30, 2002 and December 31, 2001
Our total assets were $1.6 billion at June 30, 2002, a $7.2
million, or .5%, increase from December 31, 2001. An increase in
investment securities available for sale was substantially offset
by decreases in cash and cash equivalents and mortgage-backed
securities available for sale. Cash and cash equivalents totaled
$25.3 million at June 30, 2002, a $9.1 million decrease from
December 31, 2001 as a portion of such assets was invested in
investment securities available for sale. Our available-for-sale
investment securities amounted to $55.8 million at June 30, 2002,
an $11.3 million increase from December 31, 2001. During the six
months ended June 30, 2002, we purchased $39.8 million in
investment securities which were partially offset by the sale or
maturity during the period of an aggregate of $28.5 million of
securities. Our mortgage-backed securities available for sale
decreased $15.8 million or 34.1%, to $30.5 million at June 30,
2002 compared to $46.3 million at December 31, 2001. This
decrease was primarily the result of the high level of mortgage
refinance activity experienced during the period due to the
current interest rate environment which resulted in an increased
rate of prepayments. Our loan portfolio increased by $601,000 to
$1.4 billion at June 30, 2002 compared to December 31, 2001.
However, the composition of the loan portfolio continued to
change reflecting our emphasis on originating or purchasing
commercial real estate, construction and consumer loans. As a
result, commercial real estate and land, construction (both
commercial and residential) and consumer loans increased by $72.8
million, $62.1 million and $27.8 million, respectively, at June
30, 2002 as compared to December 31, 2001. During the six months
ended June 30, 2002, we purchased for portfolio retention a total
of $252.1 million of loans, including $101.5 million of
adjustable-rate single-family residential loans, $54.4 million of
commercial real estate and land loans, $53.6 million of
construction loans and $42.6 million of consumer loans. A
substantial portion of the commercial real estate and land loans
purchased during this period consisted of our purchase of a 75%
to 80% participation interest in 25 loans originated by a
financial institution in Spokane, Washington from whom we have
periodically purchased loans during the past three years.
Our total deposits increased by $20.2 million to $1.1
billion during the six months ended June 30, 2002 as we continued
our efforts to increase the level of our core deposits,
especially checking accounts. At June 30, 2002, our interest-
bearing and non-interest-bearing checking accounts amounted to
$307.8 million in the aggregate, a $55.9 million, or 22.2%,
increase from the aggregate amount at December 31, 2001. In
addition, during the six-month period ended June 30, 2002, our
total certificates of deposit declined to $515.3 million, or
46.2% of total deposits, at June 30, 2002 compared to $535.3
million, or 48.8% of total deposits at December 31, 2001. Our
FHLB advances and other borrowings amounted to $293.4 million at
June 30, 2002 compared to $303.3 million at December 31, 2001.
Our total retained earnings increased by $8.7 million to
$130.4 million at June 30, 2002 compared to $121.8 million at
December 31, 2001 primarily reflecting $8.5 million in net income
earned for the six months ended June 30, 2002. Due to a change
in net unrealized gains/losses on securities, we had a cumulative
other comprehensive income of $193,000 at June 30, 2002 compared
to cumulative other comprehensive income of $77,000 at December
31, 2001.
16
TierOne Bank
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Comparison of Operating Results for the Three and Six Months
Ended June 30, 2002 and 2001
General. Our net income increased by $1.3 million, or
40.2%, to $4.4 million for the three months ended June 30, 2002
compared to $3.1 million for the three months ended June 30,
2001. For the six months ended June 30, 2002, our net income
increased by $2.7 million, or 46.2%, to $8.5 million compared to
$5.8 million for the same period in 2001. Our net income
increased during the 2002 periods due primarily to a lower cost
of funds which improved our net interest income. Our average
interest rate spread increased to 3.58% for the quarter ended
June 30, 2002 compared to 2.74% for the three months ended June
30, 2001. For the six months ended June 30, 2002, our average
interest rate spread was 3.44% as compared to 2.71% for the same
period in 2001. Our net interest margin improved to 3.88% and
3.76% for the three and six months ended June 30, 2002,
respectively, compared to 3.22% and 3.17% for the three and six
months ended June 30, 2001, respectively. Our ratio of average
interest-earning assets to average interest-bearing liabilities
remained essentially unchanged for the three- and six-month
periods ended June 30, 2002 compared to the same periods in 2001.
The improvement in the average interest rate spread and net
interest margin during the 2002 periods reflected the effects of
the significant decline in our cost of funds which substantially
exceeded the decline in the yields earned on our interest-earning
assets.
Interest Income. Our total interest income for the three
months ended June 30, 2002 was $25.5 million compared to $26.6
million for the three months ended June 30, 2001 while for the
six months periods ended June 30, 2002 and 2001, our total
interest income amounted to $50.0 million and $52.8 million,
respectively. The primary reason for the decrease in total
interest income during the 2002 periods was the decline in market
rates of interest throughout 2001. The average yield earned on
net loans receivable was 6.97% for the three months ended June
30, 2002 compared to 7.88% for the three months ended June 30,
2001 and was 6.95% for the six months ended June 30, 2002 as
compared to 7.98% for the same period in 2001. Average yields
also were lower on our investment securities and mortgage-backed
securities during the three months and the six months ended June
30, 2002 compared to the same periods in 2001.
Interest Expense. Our total interest expense for the three
and six months ended June 30, 2002 was $11.0 million and $22.0
million, respectively, compared to $15.4 million and $31.2
million for the three months and six months ended June 30, 2001,
respectively. The primary reason for the decrease in our
interest expense during the 2002 periods was a reduction in the
average rate on deposits to 2.90% and 2.97% during the three and
six months ended June 30, 2002, respectively, compared to 4.85%
and 5.04% during the same periods in 2001. The average rate on
our certificates of deposit was 3.92% and 4.03% for the three
months and the six months ended June 30, 2002, respectively,
compared to 6.06% and 6.10% for the same periods in 2001. The
average rates on our interest-bearing checking accounts, money
market accounts and savings accounts also declined during the
2002 periods compared to the same periods in 2001. Interest on
FHLB advances and other borrowings increased by $840,000 and $1.6
million during the three and six months ended June 30, 2002
compared to the same periods in 2001 as a result of a higher
average balance of borrowings in 2002 which more than offset a
reduction in the average rate paid.
17
TierOne Bank
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Average Balances, Net Interest Income, and Yields Earned and
Rates Paid. The following tables show for the periods indicated
the total dollar amount of interest from average interest-earning
assets and the resulting yields, as well as the interest expense
on average interest-bearing liabilities, expressed both in
dollars and rates, and the net interest margin. Tax-exempt
income and yields have not been adjusted to a tax-equivalent
basis. All average balances are based on month end balances.
Management does not believe that the monthly averages differ
significantly from what the daily averages would be.
Three Months Ended June 30,
-------------------------------------------------------------------
2002 2001
--------------------------------- -------------------------------
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
------- -------- ---------- ------- -------- ----------
(dollars in thousands)
Interest-earning assets:
Federal funds sold $ 991 $ 4 1.61% $ 52,691 $ 551 4.18%
Investment securities 80,862 947 4.68 71,944 1,431 7.96
Mortgage-backed securities 32,850 497 6.05 63,931 993 6.21
Loans receivable 1,377,339 24,008 6.97 1,196,672 23,584 7.88
---------- ------- ---------- -------
Total interest-earning assets 1,492,042 25,456 6.82% 1,385,238 26,559 7.67%
------- ------ ------- ------
Non-interest-earning assets 63,791 33,816
---------- ----------
Total assets $1,555,833 $1,419,054
========== ==========
Interest-bearing liabilities:
Interest-bearing checking accounts $ 270,887 $1,267 1.87% $ 167,745 $1,207 2.88%
Regular savings accounts 14,549 48 1.32 10,674 41 1.54
Money market accounts 281,583 1,469 2.09 305,558 2,822 3.69
Certificate accounts 518,158 5,078 3.92 598,315 9,060 6.06
---------- ------- ---------- -------
Total interest-bearing deposits 1,085,177 7,862 2.90 1,082,292 13,130 4.85
FHLB advances and other borrowings 270,674 3,105 4.59 166,436 2,265 5.44
---------- ------- ---------- -------
Total interest-bearing liabilities 1,355,851 10,967 3.24 1,248,728 15,395 4.93
------- ------- ------- ------
Non-interest-bearing accounts 28,186 22,388
Other liabilities 43,827 27,952
---------- ----------
Total liabilities 1,427,864 1,299,068
Retained earnings 127,969 119,986
---------- ----------
Total liabilities and retained
earnings $1,555,833 $1,419,054
========== ==========
Net interest-earning assets $ 136,191 $ 136,510
========== ==========
Net interest income; average
interest rate spread $14,489 3.58% $11,164 2.74%
======= ====== ======= ======
Net interest margin 3.88% 3.22%
====== ======
Average interest-earnings assets
to average interest-bearing liabilities 110.04% 110.93%
====== ======
18
TierOne Bank
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Six Months Ended June 30,
-------------------------------------------------------------------
2002 2001
-------------------------------------------------------------------
Average Average Average Average
Balance Interest Yield/Rate Balance Interest Yield/Rate
------- -------- ---------- ------- -------- ----------
(dollars in thousands)
Interest-earning assets:
Federal funds sold $ 23,054 $ 197 1.71% $ 32,604 $ 713 4.37%
Investment securities 74,019 1,626 4.39 82,609 2,982 7.22
Mortgage-backed securities 36,678 1,067 5.82 65,450 2,093 6.40
Loans receivable 1,356,129 47,151 6.95 1,178,832 47,013 7.98
---------- ------- ---------- -------
Total interest-earning assets 1,489,880 50,041 6.72% 1,359,495 52,801 7.77%
------- ------ ------- ------
Non-interest-earning assets 48,410 42,696
---------- ----------
Total assets $1,538,290 $1,402,191
========== ==========
Interest-bearing liabilities:
Interest-bearing checking
accounts $ 254,860 $2,403 1.89% $ 157,015 $2,475 3.15%
Regular savings accounts 14,041 91 1.30 10,488 82 1.56
Money market accounts 286,901 2,973 2.07 309,601 6,346 4.10
Certificate accounts 523,472 10,555 4.03 587,152 17,920 6.10
---------- ------- ---------- -------
Total interest-bearing deposits 1,079,274 16,022 2.97 1,064,256 26,823 5.04
FHLB advances and other borrowings 263,961 6,024 4.56 170,627 4,421 5.18
---------- ------- ---------- -------
Total interest-bearing liabilities 1,343,235 22,046 3.28 1,234,883 31,244 5.06
------- ------- ------- ------
Non-interest-bearing accounts 27,153 20,683
Other liabilities 42,007 35,225
---------- ----------
Total liabilities 1,412,395 1,290,791
Retained earnings 125,895 111,400
---------- ----------
Total liabilities and retained
earnings $1,538,290 $1,402,191
========== ==========
Net interest earning assets $ 146,645 $ 124,612
========== ==========
Net interest income; average
interest rate spread $27,995 3.44% $21,557 2.71%
======= ====== ======= ======
Net interest margin 3.76% 3.17%
====== ======
Average interest-earnings assets
to average interest-bearing
liabilities 110.92% 110.09%
====== ======
19
TierOne Bank
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 volume of
interest-related assets and liabilities affected our interest
income and expense during the periods indicated. For each
category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to
(1) changes in rate (change in rate multiplied by prior year
volume) and (2) changes in volume (change in volume multiplied by
prior year rate). The combined effect of changes in both rate
and volume has been allocated proportionately to the change due
to rate and the change due to volume.
Three Months Ended June 30, Six Months Ended June 30, 2002
2002 vs. Three vs. Six
Months Ended June 30, 2001 Months Ended June 30, 2001
------------------------------ --------------------------------
Increase Increase
(Decrease) Due to (Decrease) Due to
----------------- Total ----------------- Total
Increase Increase
Rate Volume (Decrease) Rate Volume (Decrease)
------ ------ ---------- ------ ------ ----------
(dollars in thousands)
Interest income:
Federal funds sold $ (338) $ (209) $ (547) $ (434) $ (82) $ (516)
Investment securities (588) 104 (484) (1,167) (189) (1,356)
Mortgage-backed securities (26) (470) (496) (189) (837) (1,026)
Loans receivable, net (2,725) 3,149 424 (6,026) 6,164 138
------- ------ -------- ------- ------- --------
Total interest-earning assets (3,677) 2,574 (1,103) (7,816) 5,056 (2,760)
------- ------ -------- ------- ------- --------
Interest expense:
Interest-bearing checking accounts (422) 482 60 (995) 923 (72)
Savings accounts (6) 13 7 (14) 23 9
Money market accounts (1,228) (125) (1,353) (3,138) (235) (3,373)
Certificate accounts (3,196) (786) (3,982) (6,081) (1,284) (7,365)
------- ------ -------- ------- ------- --------
Total deposits (4,852) (416) (5,268) (10,228) (573) (10,801)
FHLB advances and other borrowings
(356) 1,196 840 (527) 2,130 1,603
------- ------ -------- ------- ------- --------
Total interest-bearing liabilities (5,208) 780 (4,428) (10,755) 1,557 (9,198)
------- ------ -------- ------- ------- --------
Increase in net interest income $ 1,531 $1,794 $ 3,325 $ 2,939 $ 3,499 $ 6,438
======= ====== ======== ======= ======= ========
20
TierOne Bank
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Provision for Loan Losses. We made a provision for loan
losses of $643,000 for the three months ended June 30, 2002
compared to $454,000 for the three months ended June 30, 2001.
For the six months ended June 30, 2002, our provision for loan
losses was $1.2 million as compared to $940,000 for the same
period in 2001. Our portfolios of commercial real estate and
land loans, construction loans, commercial business loans and
consumer loans, which generally are deemed to have higher
inherent levels of known and inherent losses than single-family
residential mortgage loans, due to, among other things, the
nature of the collateral, the areas in which the security
property is located and the dependency on economic conditions for
successful completion or operation of the project have continued
to grow, both in terms of total dollar amounts and as a
percentage of our total loan portfolio. At June 30, 2002, our
total non-performing assets amounted to $4.6 million compared to
$1.8 million at December 31, 2001. The increase in non-
performing assets was due primarily to a $2.0 million increase in
non-accrual single-family residential mortgage loans
substantially all of which related to loans we took possession of
from a broker participating in our mortgage warehouse line of
credit program. During the three and six months ended June 30,
2002, we charged-off an aggregate of $174,000 and $378,000,
respectively, of loans, primarily related to consumer loans, and
had $7,000 and $19,000, respectively, in recoveries of previous
charge-offs. At June 30, 2002, our allowance for loan losses
amounted to 329.32% of non-performing loans and 0.93% of total
loans outstanding.
Other Income. Our other income increased by $391,000, or
14.7%, to $3.0 million for the three months ended June 30, 2002
compared to $2.7 million for the three months ended June 30,
2001. For the six months ended June 30, 2002, such income
amounted to $6.3 million as compared to $5.3 million for the same
period in 2001, a 19.2% increase. The primary reason for the
increase in other income for the three months ended June 30, 2002
was a $796,000 increase in fee and service charges resulting
primarily from an increase in our transaction accounts that was
partially offset by a $460,000 increase to the valuation
allowance on our mortgage servicing rights. We increased our
mortgage servicing rights valuation allowance due to increased
prepayments in our loan servicing portfolio due to the current
low interest rate environment. For the six months ended June 30,
2002, the increase in other income of $1.0 million over the same
period in 2001 reflected an $836,000 increase in fee and service
charges due primarily to the increase in transaction accounts as
well as a $579,000 increase in gains on sale of loans, offset in
part by the $460,000 increase in the valuation allowance on our
mortgage servicing rights.
Other Expense. Our other expense increased by $1.5 million,
or 17.7%, to $10.0 million for the three months ended June 30,
2002 compared to $8.5 million for the three months ended June 30,
2001. The primary reasons for the increase in other expense for
the three months ended June 30, 2002 were a $524,000 increase in
advertising expense, a $381,000 increase in other operating
expense due in large part to expenses incurred in connection with
our name change to TierOne Bank in early 2002 and a $443,000
increase in salaries and employee benefits due to an increase in the
21
TierOne Bank
Management's Discussion and Analysis of Financial Condition
and Results of Operations
number of staff, increased health insurance costs and normal
salary increases. During the six months ended June 30, 2002, our
other expense increased $2.9 million, or 17.1%, to $19.7 million
compared to $16.9 million for the same period in 2001 in large
part due to the same reasons underlying the increase in the three
months ended June 30, 2002.
Income Tax Expense. Our income tax expense increased by
$764,000 to $2.5 million and by $1.6 million to $4.8 million for
the three and six months ended June 30, 2002, respectively,
compared to the same periods in 2001. The increases in income
tax expense in the three-and six-month periods ended June 30,
2002 over the prior year comparable periods primarily reflect the
increases in net income.
Liquidity and Commitments
Our primary sources of funds are from deposits, amortization
of loans, loan prepayments and the 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 prepayments can be greatly influenced by general
interest rates, economic conditions and competition. We also
maintain excess funds in short-term, interest-bearing assets that
provide additional liquidity. TierOne Bank also utilizes outside
borrowings, primarily from FHLBank Topeka (formerly known as the
Federal Home Loan Bank of Topeka), as an additional funding
source.
We use our liquidity to fund existing and future loan
commitments, to fund maturing certificates of deposit and demand
deposit withdrawals, to invest in other interest-earning assets,
and to meet operating expenses. At June 30, 2002, we also had
certificates of deposit maturing within the next 12 months
amounting to $361.7 million. Based upon historical experience, we
anticipate that a significant portion of the maturing
certificates of deposit will be redeposited with us.
In addition to cash flow from loan and securities payments
and prepayments as well as from sales of available for sale
securities, we have significant borrowing capacity available to
fund our liquidity needs. We have increased our utilization of
borrowings in recent years as a cost efficient addition to
deposits as a source of funds. The average balance of our
borrowings was $270.7 million and $264.0 million for the three
and six months ended June 30, 2002, respectively, compared
to $166.4 million and $170.6 million for the same periods in
2001. To date, substantially all of our borrowings have
consisted of advances from FHLBank Topeka, of which we are a
member. Under terms of the collateral agreement with FHLBank
Topeka, we pledge residential mortgage loans and mortgage-backed
securities as well as our stock in FHLBank Topeka as collateral
for such advances.
22
TierOne Bank
Management's Discussion and Analysis of Financial Condition
and Results of Operations
We have not used, and have no intention to use, any
significant off-balance sheet financing arrangements for
liquidity purposes. 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. At June 30, 2002, the
maximum total amount of such recourse was approximately $4.5
million. Based on historical experience, at June 30, 2002, we
had established a reserve of $314,000 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 that could materially affect our liquidity or capital
resources. We have not, and do not intend to, trade in commodity
contracts.
We anticipate that we will continue to have sufficient funds
and alternative funding sources to meet our current commitments.
23
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.
For a discussion of the Bank's asset and liability
management policies as well as the methods used to manage its
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 Prospectus dated
August 12, 2002. There has been no material change in the Bank's
asset and liability position or the market value of the Bank's
equity since March 31, 2002.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities and Use of Proceeds:
(a), (b) and (c) Not applicable.
(d) The Companys Form S-1 (File No. 333-85838) was declared
effective by the SEC on August 12, 2002. The offering
commenced on August 22, 2002, and the offering
subscription period ended September 12, 2002. Sandler
O'Neill & Partners, L.P. was the underwriter. A total
of 22,575,075 shares of common stock were registered
solely for the account of the Company, for sale at an
aggregate offering price of $225,750,750. The
Conversion has not yet been completed.
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.
24
Item 6 - Exhibits and Reports on Form 8-K:
(a) List of exhibits: (filed herewith unless otherwise noted)
2.1 Plan of Conversion, as amended*
3.1 Articles of Incorporation of TierOne Corporation*
3.2 Bylaws of TierOne Corporation*
4.0 Form of Stock Certificate of TierOne Corporation*
10.1 Employment Agreement between TierOne Bank and
Gilbert G. Lundstrom*
10.2 Employment Agreement between TierOne Bank and
James A. Laphen*
10.3 Form of Proposed Employment Agreement between
TierOne Corporation and Gilbert G. Lundstrom*
10.4 Form of Proposed Employment Agreement between
TierOne Corporation and James A. Laphen*
10.5 Supplemental Retirement Plan*
10.6 Form of Proposed Change in Control Agreement
between TierOne Bank and certain executive officers*
10.7 Form of Proposed Change in Control Agreement
between TierOne Bank and certain executive officers*
10.8 Form of Proposed TierOne Bank Employee Severance Plan*
10.9 Form of Proposed Employee Stock Ownership
Plan Supplemental Executive Retirement Plan*
10.10 Form of Proposed 401(k) Plan Supplemental Executive
Retirement Plan*
10.11 Directors' Deferred Compensation Program*
10.12 Amended and Restated Consultation Plan for Directors*
10.13 Management Incentive Compensation Plan*
99.1 Certification Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
__________________
* Incorporated by reference from the Company's Registration
Statement on Form S-1, filed on April 3, 2002, as amended,
and declared effective on August 12, 2002 (File No. 333-
85838).
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant
during the quarter ended June 30, 2002.
25
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: September 26, 2002 By: /s/ Gilbert G. Lundstrom
-------------------------------
Gilbert G. Lundstrom
Chairman of the Board and Chief
Executive Officer
Date: September 26, 2002 By: /s/ Eugene B. Witkowicz
-------------------------------
Eugene B. Witkowicz
Executive Vice President and
Chief Financial Officer
26
CERTIFICATION PURSUANT TO RULE 13a-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gilbert G. Lundstrom, the Chairman of the Board and Chief
Executive Officer of TierOne Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
TierOne Corporation;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this quarterly report; and
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report.
Date: September 26, 2002 /s/ Gilbert G. Lundstrom
-------------------------------
Gilbert G. Lundstrom
Chairman of the Board and Chief
Executive Officer
27
CERTIFICATION PURSUANT TO RULE 13a-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Eugene B. Witkowicz, the Executive Vice President and Chief
Financial Officer of TierOne Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
TierOne Corporation;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this quarterly report; and
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report.
Date: September 26, 2002 /s/ Eugene B. Witkowicz
-------------------------------
Eugene B. Witkowicz
Executive Vice President and
Chief Financial Officer
28