TierOne Corporation Reports Financial Results for Fourth Quarter and Fiscal Year 2007

TierOne Corporation (NASDAQ: TONE) ("Company”), the holding company for TierOne Bank ("Bank”), reported a net loss of $18.0 million, or $1.05 per diluted share, for the three months ended December 31, 2007 compared to net income of $10.9 million, or $0.63 per diluted share, for the three months ended December 31, 2006. For the fiscal year ended December 31, 2007, the Company reported a net loss of $12.1 million, or $0.70 per diluted share, compared to net income for the year ended December 31, 2006 of $41.3 million, or $2.41 per diluted share. The results for the three- and twelve-month periods ended December 31, 2007 were primarily impacted by provisions for loan losses of $38.9 million and $68.1 million recorded for each respective period compared to $1.8 million and $6.1 million for the same periods in 2006. The provisions for loan losses recorded during 2007 were primarily attributable to an increase in nonperforming residential construction, land development and commercial construction loans. "Unprecedented pressures on the nation’s equity, housing, credit and economic markets in 2007 have significantly impacted much of the financial sector and TierOne has not been immune to these issues,” said Gilbert G. Lundstrom, chairman and chief executive officer. "We have taken a number of steps to address these challenges and will continue to adjust our business model as the current economic conditions warrant.” Synopsis of Fourth Quarter and Fiscal Year 2007 Performance Net Interest Income For the three months ended December 31, 2007, net interest income totaled $24.9 million, a decrease of 20.1 percent, compared to $31.2 million in net interest income for the comparable period in 2006. Net interest income for the year ended December 31, 2007 declined 7.7 percent to $116.1 million compared to $125.9 million in 2006. The decline in net interest income for the three-month period ended December 31, 2007 was primarily attributable to a reduction in interest income generated by net loan receivables as a result of a declining interest rate environment and increased levels of nonperforming loans. The decline in net interest income for the year ended December 31, 2007 was primarily related to the increased interest expense arising from increased time and core deposit balances and the interest rates paid on these deposits. Net interest margin and average interest rate spread for the three months ended December 31, 2007 were 3.04 percent and 2.63 percent, respectively, compared to 3.96 percent and 3.56 percent, respectively, for the same period in 2006. For the year ended December 31, 2007, net interest margin and average interest rate spread were 3.58 percent and 3.15 percent, respectively, compared to 4.07 percent and 3.72 percent, respectively, for 2006. The Bank’s increased core deposit balances and interest rates paid combined with the increased levels of nonperforming loans were the primary contributors to lower net interest margins and average interest rate spreads during 2007 as compared to 2006. Noninterest Income Noninterest income for the three months ended December 31, 2007 was $8.5 million, a decrease of 0.8 percent, compared to $8.6 million earned during the same period in 2006. Noninterest income in the fourth quarter of 2007 was positively impacted by a $461,000 increase in deposit and debit card-related fees and service charges combined with a $390,000 increase in gains on loans held for sale. These increases were offset by a quarter-over-quarter reduction in other noninterest income primarily related to a $1.0 million gain on the sale of two Kansas branch offices recorded during the three months ended December 31, 2006. For the year ended December 31, 2007, total noninterest income amounted to $30.3 million, an increase of 4.3 percent, compared to $29.1 million earned during 2006. The annual increase in noninterest income was primarily attributable to a $1.4 million increase in deposit and debit card-related fees and service charges combined with a $760,000 increase in gains on loans held for sale. These increases in 2007 were offset by a reduction in other noninterest income following a $1.0 million gain on sale of two Kansas branch offices in late 2006. Noninterest Expense For the three months ended December 31, 2007, noninterest expense increased 10.8 percent to $22.5 million compared to $20.3 million for the same period in 2006. The quarter-over-quarter increase in noninterest expense was primarily attributable to a $1.0 million increase in legal expenses, a $700,000 charge for the Bank’s proportionate share of potential liabilities in connection with a VISA U.S.A. Inc. antitrust lawsuit, an increase of $434,000 in advertising expenses, $400,000 in expenses related to the proposed acquisition of the Company by CapitalSource Inc. ("CapitalSource”) and an increase of $390,000 in salaries and employee benefits. The fourth quarter increase in noninterest expense was partially reduced by a $1.6 million right-of-offset exercised by the Bank which thereby resulted in a recovery of previously charged-off receivables associated with TransLand Financial Services, Inc. ("TransLand”), a Florida-based mortgage brokerage firm. Noninterest expense for the year ended December 31, 2007 was $94.5 million, an increase of 15.6 percent, compared to $81.8 million in 2006. Contributing to the increase in annual noninterest expense were increases of $3.2 million in salaries and employee benefits; $3.1 million, net of recoveries, associated with a write-off of receivables due from TransLand; and $1.9 million of expense related to the proposed transaction with CapitalSource. Asset Quality The Bank maintains a corporate policy of not participating in subprime residential real estate lending or negative amortizing mortgage products. The Office of Thrift Supervision ("OTS”), the Bank’s federal regulatory agency, defines subprime loans as loans to borrowers displaying one or more credit risk characteristics including lending to a borrower with a credit bureau risk score ("FICO”) of 660 or below. Furthermore, the Bank has not participated in collateralized loan obligations ("CLO”), collateralized debt obligations ("CDO”), structured investment vehicles ("SIV”) or asset-backed commercial paper ("ABCP”). As a result of deteriorating economic conditions in the latter half of 2007, the Company experienced increasing issues with asset quality. At December 31, 2007, nonperforming loans totaled $128.5 million, or 4.32 percent of net loans, compared to $30.1 million, or 0.99 percent of net loans, at December 31, 2006. Nonperforming assets were $134.9 million, or 3.81 percent of total assets, at December 31, 2007 compared to $35.3 million, or 1.03 percent of total assets, at year-end 2006. The increase in 2007 nonperforming loans and assets primarily related to increased levels of nonperforming residential construction, land development and commercial construction loans. Due to the continued erosion of housing values and increased housing inventory in several markets throughout the country, especially in Florida, the Company began experiencing rising levels of nonperforming residential construction loans. As previously disclosed, the Company has a group of residential construction loans it purchased from TransLand which were primarily located in the Cape Coral area of southwest Florida. In the face of challenging economic conditions, the Bank was able to reduce its total residential construction loan disbursements for TransLand-related homebuyers by 49.1 percent to $58.5 million, prior to recording loan charge-offs, at December 31, 2007 compared to $114.9 million at year-end 2006. At December 31, 2007, nonperforming residential construction loans totaled $57.7 million of which $26.5 million related to TransLand. During the fourth quarter of 2007, the Bank charged off $25.5 million of TransLand residential construction loans, due in large part to a decline in the estimated fair value of undeveloped residential lots, and set up additional provisions for loan losses relating to the loans acquired from TransLand. To facilitate loan disposition, a team of Bank lending specialists has been assigned to work specifically on TransLand-related loans. These duties have included the coordination of construction activities, arranging financing and the initiation of loan recovery efforts. At the current time, the Bank is also pursuing all available legal remedies against delinquent borrowers. The Bank’s nonperforming land development loans at December 31, 2007 totaled $38.7 million (consisting of eight residential land development properties) compared to $4.7 million at December 31, 2006. Of the eight nonperforming development properties, three were located in the Las Vegas, Nevada area amounting to $30.4 million, one project in Colorado at $5.7 million, two projects in the Minneapolis, Minnesota area at $2.3 million and two projects in Florida at $300,000. The three Las Vegas properties were added to the nonperforming list in the fourth quarter of 2007. At the current time, the Bank is actively engaged in discussions with the developers or guarantors of these loans for purposes of bringing the loans current or developing workout solutions. Nonperforming commercial construction loans totaled $19.2 million at December 31, 2007 compared to $50,000 one year ago. The $19.2 million nonperforming commercial construction loans at year-end 2007 consisted of one upscale condominium construction project adjacent to a golf course located in a suburban area of Las Vegas, Nevada. The Bank provided funding to construct 33 units, of which 23 units are under contract for purchase, within the planned 113-unit development. The units funded by the Bank have been completed and the balance of the remaining units are in various stages of construction. Following the builder’s voluntary bankruptcy filing, a trustee was appointed by the court and the trustee is identifying local builders and sales agents to complete the project and sell the remaining units. Charged-off loans, net of recoveries, were $28.5 million and $32.0 million for the three- and twelve-month periods ended December 31, 2007, respectively, compared to $993,000 and $3.8 million for the same periods in 2006. Included within the loans charged off during the fourth quarter of 2007 were $25.7 million of residential construction loans primarily related to TransLand. The Company recorded provisions for loan losses of $38.9 million and $68.1 million for the three- and twelve-month periods ended December 31, 2007, respectively, compared to $1.8 million and $6.1 million for the comparable periods in 2006. The Company’s total allowance for loan losses was $66.5 million at December 31, 2007 compared to $33.1 million at year-end 2006. The allowance for loan losses as a percent of net loans was 2.24 percent at December 31, 2007 compared to 1.09 percent one year ago. In light of current market conditions, the Bank has taken a number of steps related to the realignment of certain credit administration functions, including the addition of personnel with extensive depth and expertise in credit analysis, and continues to tighten credit policies. Consolidated Statements of Financial Condition Total assets at December 31, 2007 were $3.5 billion, an increase of $107.0 million or 3.1 percent, compared to $3.4 billion at year-end 2006. The year-over-year increase in total assets was primarily attributable to a $154.7 million increase in cash and cash equivalents offset by a $74.0 million decline in net loan receivables. Total liabilities increased $114.3 million, or 3.7 percent, to $3.2 billion at December 31, 2007 compared to $3.1 billion one year ago. The increase in 2007 liabilities primarily resulted from a $378.2 million increase in total deposits offset by a $273.1 million decline in FHLBank advances and other borrowings. In anticipation of a possible acquisition by CapitalSource, the level of deposit growth achieved in 2007 was primarily generated by increased marketing efforts in the Company’s primary bank market area without the infusion of any brokered time deposits. The Bank has not had any brokered time deposits since October 2006. Stockholders’ equity totaled $345.9 million at December 31, 2007, a decrease of $7.3 million, or 2.1 percent, compared to $353.3 million at December 31, 2006. A $17.1 million decrease in retained earnings, resulting from a $12.1 million net loss for the year, offset by a $7.3 million increase in capital contributed to the overall 2007 decline in shareholders’ equity. During the three months ended December 31, 2007, the Company repurchased 1,256 shares of its common stock to support employee benefit programs. For the year ended December 31, 2007, the Company repurchased 8,367 total shares. When permissible under the provisions of the merger agreement and Securities and Exchange Commission guidelines, over 1.5 million shares remain eligible for repurchase under the Company’s Board-approved stock buyback plan. Shareholders of record at December 14, 2007 were paid an $0.08 per share quarterly cash dividend on December 31, 2007. The December payment brought total dividends paid in 2007 to $0.31 per share and represented the sixteenth consecutive quarterly cash dividend paid to shareholders. The Bank’s tangible, core and risk-based capital levels continue to exceed all federally mandated regulatory requirements. The Bank has consistently been recognized as "well capitalized” by the federal government; the highest rating awarded to federally insured financial institutions. Corporate Profile TierOne Corporation is the parent company of TierOne Bank, a $3.5 billion federally chartered savings bank and the largest publicly-traded financial institution headquartered in Nebraska. Founded in 1907, TierOne Bank offers customers a wide variety of full-service consumer, commercial and agricultural banking products and services through a network of 69 banking offices located in Nebraska, Iowa and Kansas and nine loan production offices located in Arizona, Colorado, Florida, Minnesota, Nevada and North Carolina. Statements contained in this news release 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 or other competitive factors which could affect net interest margins, 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, including issues associated with the growth of a more diversified loan portfolio; unanticipated issues associated with increases in the levels of losses, customer bankruptcies, claims and assessments; unanticipated issues that may arise relative to loan loss provisions and charge-offs in connection with the Company’s loan portfolio and the resolution of the TransLand matter; issues affecting the Company’s proposed acquisition by CapitalSource Inc., including that conditions precedent to the merger (including receipt of regulatory approval) may not be satisfied or the merger agreement may be terminated pursuant to its terms, as well as 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 to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made. TierOne Corporation and Subsidiaries Consolidated Statements of Financial Condition December 31, 2007 (Unaudited) and December 31, 2006     (Dollars in thousands, except per share data)   December 31, 2007   December 31, 2006 ASSETS   Cash and due from banks $ 79,561 $ 86,808 Federal funds sold     161,900       -   Total cash and cash equivalents     241,461       86,808     Investment securities:   Held to maturity, at cost which approximates fair value 70 90 Available for sale, at fair value 130,481 105,000 Mortgage-backed securities, available for sale, at fair value 6,689 12,272   Loans receivable: Net loans (includes loans held for sale of $9,348 and $19,285 at December 31, 2007 and 2006, respectively) 2,976,129 3,050,160 Allowance for loan losses     (66,540 )     (33,129 ) Net loans after allowance for loan losses     2,909,589       3,017,031   FHLBank Topeka stock, at cost 65,837 62,022 Premises and equipment, net 38,028 39,821 Accrued interest receivable 21,248 23,023 Goodwill 42,101 42,228 Other intangible assets, net 6,744 8,391 Mortgage servicing rights (lower of cost or market), net 14,530 12,467 Other assets     61,346       22,016   Total assets   $ 3,538,124     $ 3,431,169     LIABILITIES AND STOCKHOLDERS' EQUITY   Liabilities:   Deposits $ 2,430,544 $ 2,052,343 FHLBank Topeka advances and other borrowings 689,288 962,376 Advance payments from borrowers for taxes, insurance and other escrow funds 30,205 27,203 Accrued interest payable 6,269 6,620 Accrued expenses and other liabilities     35,870       29,344   Total liabilities     3,192,176       3,077,886     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; 18,058,946 and 18,041,413 shares issued at December 31, 2007 and 2006, respectively 226 226 Additional paid-in capital 366,042 358,733 Retained earnings, substantially restricted 94,988 112,111 Treasury stock, at cost; 4,516,129 and 4,533,662 shares at December 31, 2007 and 2006, respectively (105,008 ) (105,406 ) Unallocated common stock held by Employee Stock Ownership Plan (10,159 ) (11,664 ) Accumulated other comprehensive loss, net     (141 )     (717 )   Total stockholders' equity     345,948       353,283     Total liabilities and stockholders' equity   $ 3,538,124     $ 3,431,169   TierOne Corporation and Subsidiaries Consolidated Statements of Income (Unaudited)         For the Three Months Ended For the Year Ended December 31, December 31, (Dollars in thousands, except per share data)   2007   2006 2007   2006 Interest income: Loans receivable $ 51,541 $ 56,394 $ 220,046 $ 214,727 Investment securities 2,857 2,474 11,134 9,075 Other interest-earning assets     1,512       6     2,841       85   Total interest income     55,910       58,874     234,021       223,887   Interest expense: Deposits 22,894 17,204 81,981 60,227 FHLBank Topeka advances and other borrowings     8,091       10,483     35,920       37,792   Total interest expense     30,985       27,687     117,901       98,019   Net interest income 24,925 31,187 116,120 125,868 Provision for loan losses     38,917       1,763     68,101       6,053   Net interest income (loss) after provision for loan losses     (13,992 )     29,424     48,019       119,815   Noninterest income: Fees and service charges 6,372 5,962 23,621 22,230 Debit card fees 928 733 3,420 2,736 Income (loss) from real estate operations, net 25 (148 ) (445 ) (268 ) Net gain (loss) on sales of: Investment securities - - - 21 Loss on impairment of securities (188 ) - (188 ) - Loans held for sale 908 518 2,844 2,084 Real estate owned (40 ) (69 ) (225 ) (135 ) Other operating income     480       1,558     1,310       2,416   Total noninterest income     8,485       8,554     30,337       29,084   Noninterest expense: Salaries and employee benefits 12,985 12,595 52,291 49,064 Occupancy, net 2,307 2,227 9,520 8,912 Data processing 636 552 2,443 2,200 Advertising 1,251 817 5,041 4,455 Other operating expense     5,344       4,130     25,202       17,138   Total noninterest expense     22,523       20,321     94,497       81,769   Income (loss) before income taxes (28,030 ) 17,657 (16,141 ) 67,130 Income tax expense (benefit)     (10,006 )     6,768     (4,074 )     25,815   Net income (loss)   $ (18,024 )   $ 10,889   $ (12,067 )   $ 41,315     Net income (loss) per common share, basic   $ (1.07 )   $ 0.66   $ (0.72 )   $ 2.50     Net income (loss) per common share, diluted   $ (1.05 )   $ 0.63   $ (0.70 )   $ 2.41     Dividends declared per common share   $ 0.08     $ 0.07   $ 0.31     $ 0.27     Average common shares outstanding, basic (000's)     16,838       16,582     16,719       16,494     Average common shares outstanding, diluted (000's)     17,200       17,221     17,184       17,147   TierOne Corporation and Subsidiaries Selected Financial and Other Data           (Dollars in thousands)   December 31,2007   December 31,2006   Selected Financial and Other Data:   Total assets $ 3,538,124 $ 3,431,169 Cash and cash equivalents 241,461 86,808 Investment securities: Held to maturity, at cost which approximates fair value 70 90 Available for sale, at fair value 130,481 105,000 Mortgage-backed securities, available for sale, at fair value 6,689 12,272   Loans receivable: Loans held for sale 9,348 19,285 Total loans receivable 3,333,516 3,662,950 Unamortized premiums, discounts and deferred loan fees 9,451 5,602 Loans in process     (376,186 )     (637,677 ) Net loans 2,976,129 3,050,160 Allowance for loan losses     (66,540 )     (33,129 ) Net loans after allowance for loan losses     2,909,589       3,017,031     Deposits 2,430,544 2,052,343 FHLBank Topeka advances and other borrowings 689,288 962,376 Stockholders' equity 345,948 353,283   Nonperforming loans 128,490 30,050 Nonperforming assets 134,895 35,314 Allowance for loan losses 66,540 33,129 Nonperforming loans as a percentage of net loans 4.32 % 0.99 % Nonperforming assets as a percentage of total assets 3.81 % 1.03 % Allowance for loan losses as a percentage of nonperforming loans 51.79 % 110.25 % Allowance for loan losses as a percentage of net loans 2.24 % 1.09 %       Three Months Ended Year Ended December 31, December 31,   Selected Operating Ratios:   2007   2006 2007   2006   Average yield on interest-earning assets 6.83 % 7.47 % 7.21 % 7.24 % Average rate on interest-bearing liabilities 4.20 % 3.91 % 4.06 % 3.52 % Average interest rate spread 2.63 % 3.56 % 3.15 % 3.72 % Net interest margin 3.04 % 3.96 % 3.58 % 4.07 % Average interest-earning assets to average interest-bearing liabilities 111.10 % 111.39 % 111.80 % 110.95 % Total noninterest expense to average assets 2.56 % 2.42 % 2.72 % 2.48 % Efficiency ratio (1) 66.25 % 50.07 % 63.40 % 51.64 % Return on average assets -2.05 % 1.30 % -0.35 % 1.25 % Return on average equity -19.70 % 12.48 % -3.30 % 12.48 % Average equity to average assets 10.39 % 10.38 % 10.56 % 10.04 % Return on tangible equity (2) -22.56 % 14.45 % -3.78 % 14.59 % (1)   Efficiency ratio is calculated as total noninterest expense, less amortization expense of intangible assets, as a percentage of the sum of net interest income and noninterest income.     (2) Return on tangible equity is calculated as annualized net income as a percentage of average stockholders' equity adjusted for goodwill and other intangible assets. TierOne Corporation and Subsidiaries Average Balances, Net Interest Income, Yields Earned and Cost of Funds               Three Months Ended December 31, 2007 2006 Average Average Average Average (Dollars in thousands)   Balance   Interest   Yield/Rate     Balance   Interest   Yield/Rate   Interest-earning assets: Federal funds sold 132,883 1,512 4.55 % 478 6 5.26 % Investment securities (1) 211,744 2,783 5.26 173,450 2,340 5.40 Mortgage-backed securities (1) 7,300 74 4.05 13,412 134 4.00 Loans receivable (2)   2,924,805   51,541   7.05     2,965,929   56,394   7.61   Total interest-earning assets 3,276,732 55,910 6.83 % 3,153,269 58,874 7.47 % Noninterest-earning assets   246,457             209,350           Total assets   3,523,189             3,362,619             Interest-bearing liabilities: Interest-bearing checking accounts 312,907 885 1.13 % 342,269 996 1.16 % Savings accounts 168,801 1,542 3.65 46,444 57 0.49 Money market accounts 356,416 2,667 2.99 387,918 2,908 3.00 Time deposits   1,408,287   17,800   5.06     1,114,746   13,243   4.75   Total interest-bearing deposits 2,246,411 22,894 4.08 1,891,377 17,204 3.64 FHLBank Topeka advances and other borrowings   702,991   8,091   4.60     939,343   10,483   4.46   Total interest-bearing liabilities 2,949,402 30,985 4.20 % 2,830,720 27,687 3.91 % Noninterest-bearing accounts 139,956 123,185 Other liabilities   67,841             59,793           Total liabilities 3,157,199 3,013,698 Stockholders' equity   365,990             348,921           Total liabilities and stockholders' equity   3,523,189             3,362,619           Net interest-earning assets 327,330 322,549 Net interest income; average interest rate spread 24,925 2.63 % 31,187 3.56 % Net interest margin (3) 3.04 % 3.96 % Average interest-earning assets to average interest-bearing liabilities           111.10 %           111.39 % (1)   Includes securities available for sale and held to maturity. Investment securities also includes FHLBank Topeka stock.   (2) Includes nonperforming loans during the respective periods. Calculated net of unamortized premiums, discounts and deferred fees, loans in process and allowance for loan losses.   (3)   Equals net interest income (annualized) divided by average interest-earning assets. TierOne Corporation and Subsidiaries Average Balances, Net Interest Income, Yields Earned and Cost of Funds               Year Ended December 31, 2007 2006 Average Average Average Average (Dollars in thousands)   Balance   Interest   Yield/Rate     Balance   Interest   Yield/Rate     Interest-earning assets: Federal funds sold 59,189 2,841 4.80 % 1,934 85 4.40 % Investment securities (1) 199,199 10,748 5.40 167,587 8,422 5.03 Mortgage-backed securities (1) 9,309 386 4.15 16,200 653 4.03 Loans receivable (2)   2,976,069   220,046   7.39     2,904,606   214,727   7.39   Total interest-earning assets 3,243,766 234,021 7.21 % 3,090,327 223,887 7.24 % Noninterest-earning assets   225,003             205,289           Total assets   3,468,769             3,295,616             Interest-bearing liabilities: Interest-bearing checking accounts 326,545 3,692 1.13 % 361,056 4,147 1.15 % Savings accounts 90,036 2,427 2.70 51,643 263 0.51 Money market accounts 385,210 11,699 3.04 393,807 11,102 2.82 Time deposits   1,287,195   64,163   4.98     1,085,350   44,715   4.12   Total interest-bearing deposits 2,088,986 81,981 3.92 1,891,856 60,227 3.18 FHLBank Topeka advances and other borrowings   812,360   35,920   4.42     893,420   37,792   4.23   Total interest-bearing liabilities 2,901,346 117,901 4.06 % 2,785,276 98,019 3.52 % Noninterest-bearing accounts 135,617 119,394 Other liabilities   65,659             59,929           Total liabilities 3,102,622 2,964,599 Stockholders' equity   366,147             331,017           Total liabilities and stockholders' equity   3,468,769             3,295,616           Net interest-earning assets 342,420 305,051 Net interest income; average interest rate spread 116,120 3.15 % 125,868 3.72 % Net interest margin (3) 3.58 % 4.07 % Average interest-earning assets to average interest-bearing liabilities       111.80 %           110.95 % (1)   Includes securities available for sale and held to maturity. Investment securities also includes FHLBank Topeka stock.   (2) Includes nonperforming loans during the respective periods. Calculated net of unamortized premiums, discounts and deferred fees, loans in process and allowance for loan losses.   (3)   Equals net interest income divided by average interest-earning assets. TierOne Corporation and Subsidiaries Loan Portfolio Composition         The following table shows the composition of our loan portfolio by type of loan at the dates indicated.   December 31, 2007 December 31, 2006 (Dollars in thousands)   Amount   %   Amount   %   Real estate loans: One-to-four family residential (1) $ 314,623 9.41 % $ 339,080 9.21 % Second mortgage residential 95,477 2.86 120,510 3.27 Multi-family residential 106,678 3.19 148,922 4.05 Commercial real estate 370,910 11.10 396,620 10.77 Land and land development 473,346 14.16 494,887 13.44 Residential construction 513,560 15.36 780,991 21.21 Commercial construction 540,797 16.18 491,997 13.36 Agriculture     91,068     2.72       68,459     1.86   Total real estate loans     2,506,459     74.98       2,841,466     77.17   Business     252,712     7.56       220,669     5.99   Agriculture - operating     100,365     3.00       94,455     2.56   Warehouse mortgage lines of credit     86,081     2.58       112,645     3.06   Consumer loans: Home equity 72,517 2.17 71,476 1.94 Home equity line of credit 120,465 3.60 130,071 3.53 Home improvement 46,045 1.38 55,513 1.51 Automobile 87,079 2.60 87,575 2.38 Other     71,141     2.13       68,365     1.86   Total consumer loans     397,247     11.88       413,000     11.22   Total loans     3,342,864     100.00 %     3,682,235     100.00 % Unamortized premiums, discounts and deferred loan fees 9,451 5,602 Loans in process (2)     (376,186 )           (637,677 )       Net loans 2,976,129 3,050,160 Allowance for loan losses     (66,540 )           (33,129 )       Net loans after allowance for loan losses     2,909,589             3,017,031         (1) Includes loans held for sale   $ 9,348           $ 19,285         (2) Loans in process represents the undisbursed portion of construction and land development loans.